Friday, May 31, 2019

Big Oil's Message to Permian Strugglers: We Won't Bail You Out

In this April 23, 2018, file photo, the logo for ExxonMobil appears above a trading post on the floor of the New York Stock Exchange. Exxon Mobil said Tuesday, March 5, 2019, that as soon as 2024 it expects to produce the equivalent of more than 1 million barrels of oil per day in the Permian Basin, which straddles western Texas and New Mexico, up from a forecast of 600,000 barrels by 2025. (AP Photo/Richard Drew, File)
  • Exxon, Conoco warn of would-be sellers asking for too much
  • Chevron walked away from Anadarko; Shell yet to strike deal
Big Oil probably won’t be buying up the Permian Basin’s struggling independent drillers any time soon.

Years of costly exploration and frantic buying sprees have gutted shareholder returns in the world’s largest shale basin. And management teams and their financial backers can’t count on shale-hungry, cash-rich supermajors to buy them out.

Exxon Mobil Corp., Royal Dutch Shell Plc, Chevron Corp. and ConocoPhillips are all on record saying they are wary of scooping up smaller rivals at a time when would-be sellers are demanding premium payouts and global crude prices are under pressure from ample supplies.

There is “not always alignment among buyers and sellers,” Exxon Chief Executive Officer Darren Woods said Wednesday. He suggested Permian drillers may have to be squeezed by weak prices for a bit longer before they dial down their expectations.

“That’s often the case in a market, particularly in one that’s in transition,” Woods said.

Conoco CEO Ryan Lance has a similar view. There are “a lot of bid-ask issues sitting in the market today,” he said on May 23. “Expectations change” is what’s needed to stoke acquisition activity.

Shell has been on the hunt to bulk up in the Permian for some months but has yet to seal a deal. The Anglo-Dutch major was said to be in talks with privately-owned producer Endeavor Energy Resources LP in January.

Chevron walked away from buying Anadarko Petroleum Corp. earlier this month after being outbid by Occidental Petroleum Corp. “We’re serious about being disciplined,” Chevron CEO Mike Wirth said.

Occidental may have ended up with a winner’s curse. Carl Icahn, the billionaire investor, sued Occidental on Thursday for its “fundamentally misguided and hugely overpriced” bid for Anadarko.

Thursday, May 30, 2019

There’s little excitement in Nigeria for Buhari’s presidential inauguration—unlike four years ago

Nigeria, Africa’s largest economy,  had a presidential inauguration today—but you would hardly be able to tell if you were in the country.

After winning re-election with 56% of the vote during February elections, Nigeria’s president Muhammadu Buhari has been sworn in for a second four-year term in office. But the inauguration is happening amid markedly low excitement in stark contrast to Buhari’s inauguration four years ago after he was sworn into office on the back of a finely executed campaign that pitted him as a reformed democrat keen to implement “change,” as he put it.

At the time, Buhari’s message of change comprised of fixing Nigeria’s insecurity problems, stamping out corruption and growing the economy. But four years later, none of those campaign points have been clear successes. While the government has notably hobbled terrorist sect Boko Haram, the group remains capable of carrying out bombings despite the government’s claims that it has been fully defeated. Even worse, brutal pastoral conflicts across Nigeria’s north and middle belt region have replaced Boko Haram as the country’s biggest internal security threat and have redefined local geopolitics.

Despite being renowned for a tough stance on corruption, Buhari’s anti-corruption drive has been consistently viewed as partisan and targeting opposition figures. And as for the economy, a full year of shrinkage in 2016 saw Nigeria record its first recession in two decades and the government’s ambitious plan to boost growth is well off-course. Amid a flailing economy, Nigeria’s unemployment rate has also increased in 13 consecutive quarters under Buhari. And as Quartz Africa has reported, Buhari appears unlikely to do things too differently with regard to his handling of the economy.

Buhari’s re-election has not been without challenge though: Atiku Abubakar, the main opposition candidate is still disputing the election results at the presidential tribunal. Meanwhile a petition by a smaller opposition party to have the inauguration stopped pending the tribunal’s conclusion has been declined. Buhari himself is familiar with the process of contesting polls in court having challenged the results of the three presidential elections he contested (2003, 2007 and 2011) before finally winning office in 2015.

Perhaps the lack of notable excitement is linked to growing political apathy among Nigerians: the 34% voter turnout during the February presidential elections was lower than the turnout during elections four years ago, despite a larger voter base.

But Buhari can still inspire goodwill depending on the selections for his next cabinet. The thing is no-one can be sure just how long it will take before the cabinet is in place: back in 2015, Nigerians endured a five-month long wait before Buhari’s cabinet was named and sworn in.

Wednesday, May 29, 2019

How Nigeria and its president are being held to ransom

Muhammadu Buhari
Nigeria President Muhammadu Buhari

Even one of the president's relations - a traditional ruler in Daura in northern Nigeria - is currently being held after he was seized from outside his house earlier this month by gunmen.

In March, a well-known Muslim cleric in Kano, who campaigned for Mr Buhari ahead of his re-election, was held for 12 days by kidnappers demanding $833,000 (£657,000) for his release.

"Eight young men were assigned to guard us. They would smoke cigarettes and marijuana and blow the smoke into the hut, abusing and threatening to kill us since our people didn't care to bring the ransom in time. They issued all sorts of threats," Ahmed Sulaiman told the Daily Trust newspaper, adding that his freedom was secured as part of a prisoner swap.

Gangs nationwide kidnap both rich and poor people, often collecting ransoms of up to $150,000 - and sometimes killing abductees whose families fail to pay.

Before a World Cup match last year, Nigeria and Middlesbrough footballer John Mikel Obi was told that his father had been abducted for a second time, and threatened with death.

"I thought that after the match I would probably find out they had decided to shoot him," he said. He reportedly paid $28,000 for his father's release.

A major highway out of Abuja, linking the capital to the city of Kaduna, has become so notorious for kidnapping that many travellers are opting to board trains instead, even though the service to Kaduna is limited and racketeers are selling tickets to commuters at inflated prices.

A top ruling party politician and his daughter were abducted on the highway in April, and their driver was shot dead at the scene. Relatives told the BBC that a ransom was paid to free them.

'Fear of farming'

What started as a money-making scheme about 15 years ago in the southern Niger Delta with the kidnapping of oil workers has mushroomed across the country. Syndicates have also been taking a leaf out of Boko Haram's books by using the tactics of the Islamist militants to raid whole communities on motorcycles, making off with their leaders.

When Mr Buhari took his oath of office in 2015, he promised to tackle the Boko Haram insurgency which has blighted the lives of hundreds of thousands of people in the north-east over the last decade.
The militants' power has diminished over the last four years, but they are still active. Many in the north-east remain homeless or in captivity, including more than 100 of the girls abducted from a school Chibok in 2014.

Now the high levels of insecurity elsewhere, especially in the north-western states of Zamfara, Kaduna and Katsina, has left many feeling terrorised.

The governor of Katsina, Mr Buhari's home state, told the BBC that he feared there would be a serious food crisis later this year because the fear of kidnapping was keeping so many farmers from their fields.

Insecurity: The surge of kidnappings and killings by bandits, especially in the north-west, coupled with the resurgence of a Boko Haram faction affiliated to the Islamic State group are his greatest headaches.

Economy: Dependent on oil for 70% of government revenues, fluctuating prices leave the country vulnerable. The World Bank has predicted sluggish growth this year at 2.2% - bad news with unemployment at more than 20% and nearly half the population living in extreme poverty.

Corruption: The president made some efforts in his first term to counter graft, which has seen tens of billions of dollars drain out of the exchequer. But he has been widely criticised for not taking action against some of his associates.

Infrastructure: Despite the billions of dollars being pumped into numerous building projects, the Securities and Exchange Commission has estimated that Nigeria's infrastructure deficit will hit $878bn by 2040, making it hard for businesses to prosper.

Last month, the Senate said more than 4,000 Nigerians and foreigners were currently being held by kidnappers. However, some MPs conceded that the figure was an estimate and the real tally was possibly higher.

Police chief Mohammed Adamu said that between January and April this year, at least 685 people were kidnapped across the country, 365 of them in the north-west.

Operation Puff Adder

Meanwhile, the police spokesman, Frank Mba, told the BBC that officers were being monitored after allegations that security personnel had been involved in the lucrative kidnapping trade - though he said there was no credible information to back up such accusations.

He said the spate of kidnappings had reduced thanks to Operation Puff Adder, a recent initiative to target the ringleaders. He added that 93 suspected kidnappers had been arrested in the last two weeks.

The Nigerian police's Twitter feed is full of posts about the crackdown. However, many are angered by the situation and feel the problem is not being taken seriously - a view apparently supported by headlines such as this from last week's Premium Times: "27 Nigerians were kidnapped from four states in 48 hours". 

A joke President Buhari made in response to a question about the kidnappings also misfired on social media. He said about the police chief: "I think he is losing weight; so, I think he is working very hard."

"It's like we're a joke to this president," one tweeter responded.
Nnamdi Obasi, a security analyst from the International Crisis Group think tank, points the blame at multiple failures of governance.

"Massive unemployment has created a growing army of unemployed youth, vulnerable to recruitment in the criminal industry," he said, adding that rural areas in the north were especially susceptible.

"Serious deficits in the security and rule of law sectors have created a growing culture of impunity, which is increasingly emboldening gangs and criminals.

"Continuing corruption by politicians at all levels has had a corrosive effect on the wider society, fostering a value system in which the end justifies the means," he added.

Indeed the government says its attempts to deal with the crisis have been stymied by some local rulers, who supply the bandits with intelligence for a cut in the profits.

Many cattle-rustlers have moved into kidnapping as well, especially in Zamfara.

Last week, a governor from one of the affected states told the BBC that those caught kidnapping or stealing cattle would receive the death sentence.

Mr Obasi feels more practical measures are needed, including the sacking of security chiefs and more training: "The government should improve police capacity to prevent, detect and investigate kidnappings.

"Secondly, courts should fast-track judicial arrangements for prosecuting... the thousands of suspected kidnappers awaiting trial over the years, and publicise convictions."

But in the longer term, improving the economy and tackling corruption were key, he said.

After his kidnapping ordeal, Mr Sulaiman agreed that offering kidnappers a better alternative was the only way to end the crisis: "The government should negotiate with their leaders and provide them with what they said they were lacking, in terms of farming and cattle rearing."

Tuesday, May 28, 2019

The Single Biggest Challenge For The Oil & Gas Industry

The World Map of Oil and Gas Exploitation

The string of new oil discoveries off the coast of Guyana has lifted spirits recently, creating the impression that the energy industry is back on its feet and making more and more discoveries. However, this may not be the case.

According to a report from Westwood Global Energy Group released earlier this month, for example, the success rate of exploration activity has fallen in the past five years, and it has fallen by a lot.
“In the downturn success rates had increased as companies high graded their portfolios to ensure that only the best prospects were drilled. Unfortunately, this didn’t last, and 2018 saw discovered volumes, average discovery size and success rates all decline.”

This development was most pronounced in the high-impact drilling segment, the company said. New oil and gas discovered through high-impact drilling fell by as much as 50 percent between 2014 and 2018. The slump was the result of a combination of factors, Westwood Global Energy Group said, including a 28-percent 

This may sound shocking given the abundance of new discovery announcements from different parts of the world—not to mention the invariably bullish forecasts about U.S. shale oil production in the medium term—but these are not the only discovery news stories out there.

Recently, for example, the Norwegian Petroleum Directorate warned crude oil production in the country could drop to a 30-year low precisely because of the lack of new discoveries despite a lot of exploration efforts.
Pakistan also recently announced the end of exploratory drilling in the Arabian Sea after the companies leading the project—Exxon and Eni—failed to find any commercial amounts of hydrocarbons.

Yet not everyone is pessimistic. Rystad Energy has calculated that new oil and gas discoveries in the first quarter of the year hit 3.2 billion barrels of oil equivalent. They also said that many more new wells are scheduled for drilling through the end of the year. However, more than a third of the first-quarter discoveries—38 percent to be precise—were made by Exxon and Hess in the Stabroek block off the Guyana coast. For new well drilling, Westwood Global Energy Group cautions that these have often yielded lower volumes of oil and gas than preliminary estimates suggested, and this may well continue to be the case.

“With oil companies planning to increase exploration drilling in 2019, the question is whether the global drilling portfolio for both near-field and high impact prospects is strong enough to sustain an increase in activity without sacrificing exploration performance,” the company said in its report.

On the other hand, "Majors are leading the charge in exploration, reporting more than 2.4 billion boe of discovered resources. The six largest discoveries by the majors each exceed 150 million boe, and the top three could even hold more than 300 million boe apiece," according to Rystad upstream analyst Taiyab Zain Shariff, As quoted by Forbes Gaurav Sharma. If this rate of new discoveries continues, Shariff added, the total will be 30 percent higher than discoveries made in 2018.

This dual information published by these research companies paint a mixed picture in new exploration. While there are still large discoveries being made, due to the very nature of hydrocarbon resources—that is, the fact they are finite—there are increasingly fewer untapped reservoirs left in the world. Many of these are in remote areas where exploration is hampered by harsh weather or a “difficult” rock structure: the Arctic and China’s shale formations are examples of these two, respectively.

What’s more, it seems increasingly clear that even the latest in exploration technology cannot guarantee a discovery even if it makes discoveries more likely. As per Westwood Global Energy Group’s data, exploration success rates last year were down to 33 percent from 48 percent in 2017. Interestingly, this was despite the fact—or probably because—energy companies became bolder with investments.

During the downturn, every E&P picked their new exploration projects carefully to make sure the returns would be as high as possible with the costs and risks as low as possible. This boosted the success rate of new discoveries considerably. Now that prices have stabilized and there is more money to spend on drilling, companies are taking greater risks with exploration and it is showing in the success rate. What we are seeing is yet another cycle in the oil and gas industry with the only difference that there are less resources left to discover.
By Irina Slav for

Friday, May 24, 2019

Another Greek tanker indicted for falsifying records

The Greek flag flying at the stern of a ship

A federal grand jury in Wilmington, Delaware, returned a four-count indictment charging Evridiki Navigation, Liquimar Tankers Management Services, and Nikolaos Vastardis with failing to keep accurate pollution control records, falsifying records, and obstruction of justice, the US Justice Department (DOJ) has announced.
According to the indictment, the charges stem from the falsification of records and other acts designed to conceal from the US Coast Guard inspectors illegal overboard discharges of oily bilge water from the Nigerian-flagged 2007-built Suezmax ‘Evridiki’.

On or about 11th March, 2019, Vastardis, who was the tanker’s Chief Engineer, failed to maintain an accurate oil record book, which fully recorded both the discharge overboard of bilge water that had accumulated in machinery spaces, and any failure of the ship’s oil filtering equipment.

In addition, when the ship’s pollution control equipment was inspected by the USCG, Vastardis made false statements concerning how the equipment was operated at sea, and demonstrated how the equipment was operated in a manner designed to trick the equipment into reporting the discharge of oily bilge water at permissible levels.

The vessel’s management company, Liquimar Tankers Management Services; the vessel’s owner, Evridiki Navigation; and Vastardis were all charged with failing to maintain an accurate oil record book as required by MARPOL. The defendants were also charged with falsification of records, obstruction of justice, and making false statements. 

An indictment is merely an accusation and defendants are presumed innocent unless and until proven guilty in a court of law, the DOJ pointed out. Investigative Service and is being prosecuted by Assistant US Attorney, Edmund Falgowski of the US Attorney’s Office for the District of Delaware, and Joel La Bissonniere, Trial Attorney with the DOJ’s Environmental Crimes Section.

Thursday, May 23, 2019

Summer gas prices: What to expect at the pump


The summer driving season kicks off this Memorial Day weekend and reflects not only the adventure-seeking spirit of most Americans, but also their mood about the economy.

The good news is that what we are seeing on the busy roads is signaling great things about the U.S. economy. The bad news is that U.S. refiners are struggling to keep up with the red-hot gasoline demand.
According to AAA, this long holiday weekend will see the second-highest travel volume on record, trailing only the high set in 2005. (AAA first began tracking national holiday travel volumes in 2000.) An additional 1.5 million people are expected to take to the nation’s roads, rails and runways compared with last year.

And it’s not just car travel that could keep the pressure on refiners. Another 3.25 million are expected to take to the skies, increasing air travel by 4.8 percent over last year, according to AAA.

The refiners have been building up supplies of those famous summer blends of gasoline to prepare. While the national average for gas prices this week sits at $2.84 a gallon, record demand and tight supply means there are risks that could still rocket higher.

U.S. refiners have their work cut out for them as a strong pre-holiday gasoline demand has left inventories 7 million barrels below year-ago levels. This is a concern because if refiners don’t keep up with the sizzling economy, gasoline prices will have to go up.

It is not like the refiners are not trying, but they have had a difficult time getting gasoline supply just back to the lower end of the average range this year. They have had to deal with OPEC production cuts that drove up crude prices for refiners, along with the loss of supply from one of their favorite exporters in Venezuela.

Recent Iran tensions have also added to the risk premium for oil. Risk premium is real and does impact prices. Because the risk of supply is high, insurance costs go up and that is tacked on to each barrel of oil that refineries must buy. 

When it comes to gasoline, the cost of crude matters to you. About 56 percent of what you pay at the pump for a gallon of gasoline is tied to the cost of crude oil.

The U.S. energy industry has done its part by increasing production levels to 12.2 million barrels of oil a day -- and this is perhaps the only reason that gasoline prices are not much higher than they were a year ago. And while the risk of a price spike for gasoline remains high, a cooling down of tensions with Iran and recent crude supply increases have stabilized prices for now.

So even though we are seeing gas prices that are somewhat high, summer is here and the worst of the price spike might be over.

As I have said many times before, the best way to measure the health of the U.S. economy is sometimes in miles per gallon. So with gasoline demand being as strong as it is, it is showing us that the economy is humming along and consumers are ready to spend money on the open road.

Phil Flynn is senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report. You can contact Phil by phone at (888) 264-5665 or by email at

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