Wednesday, August 29, 2018

Crude Oil Imports At China’s Independent Refiners Rebound

Shandong's teapot refinery hubs and capacities


Following four consecutive months of declining oil imports, China’s independent refiners boosted crude oil imports in August by 40 percent from July, as many returned from maintenance to prepare for winter fuel demand amid recovering refining margins, according to data by Thomson Reuters Oil Research and Forecasts.

Crude oil imports for Chinese independent refiners—the so-called teapots—have averaged 1.4 million bpd so far in August, up by 40 percent compared to July and up by 10 percent from August last year, Thomson Reuters Oil Research reported.

For now, this rebound in imports could ease concerns that slumping teapot imports, which represent around one-fifth of China’s total crude oil imports—could affect oil demand in the world’s biggest oil-importing country.

Under the stricter tax regulations and reporting mechanisms effective March 1, the teapots can no longer avoid paying consumption taxes on refined oil product sales—as they have over the past three years. In other words, their profit bonanza is coming to an end.

Despite ample government-approved crude import quotas, independent refiners have started losing money on refining, prompting a cut in utilization rates and closures for maintenance in order to reduce exposure to unfavorable market conditions.

With higher oil prices this year and the taxes, the teapots are expected to reduce their imports, threatening China’s oil demand growth, and ultimately, global oil demand growth.

Now many teapots are back from maintenance, and during the extended period of shutdowns the Chinese diesel and gasoline glut was erased, boosting fuel prices and improving refining margins.

The higher oil product prices encouraged more independent refiners to come back from maintenance, a manager at a Dongying-based teapot refiner told Reuters, noting that the refiner he works with finally managed to book a small profit in August.

Analysts who spoke to Reuters expect crude oil demand next month to further firm up, as the teapots will be preparing to boost fuel production in Q4.

However, executives warn that teapot profits--if any--are still looking slim this year, and some smaller, poorly-managed independent refiners might go out of business, while the larger players are expected to survive.

By Tsvetana Paraskova for Oilprice.com

Trinidad to close oil refinery

Logo of United Petrotrin

https://www.stabroeknews.com/2018/news/guyana/08/28/trinidad-to-close-oil-refinery-report/

The Trinidad Government has decided to shut down the refinery of State oil company Petrotrin.

The country can no longer afford to continue to refine oil and lose billions of dollars in this process, a senior Cabinet source told the Express yesterday.

The company will instead be expanding its operations in oil exploration and production, the source said.

The source said Oilfields Workers’ Trade Union (OWTU) president general Ancel Roget was told “in no uncertain terms that the major restructuring at Petrotrin will be that Trinidad and Tobago would be moving out of the refinery business because it does not have oil to refine”.

Tuesday, August 28, 2018

Meet The 38 Year-Old Entrepreneur Who Built A $1 Billion Oil Company In Ghana

Kevin Okyere


Even in the bloated-budget world of oil exploration, $70 million is a lot of money. And yet that’s how much Kevin Okyere, one of Ghana’s savviest yet understated entrepreneurs, has personally expended in developing the highly promising West Cape Three Points Block 2 offshore Ghana (WCTP2). Springfield Group, the energy conglomerate he founded and controls, owns an 82% interest and operatorship in the block which covers 673 square kilometers in the Gulf of Guinea's Tano Basin. It’s the first time a homegrown Ghanaian company is exploring for oil, and the stakes are high.

“We can’t afford to fail,” Kevin Okyere quips while nibbling on squid karaage at a swanky Japanese restaurant in downtown Accra, and ignoring the gently buzzing phone on the table. “I mean, we’re the first Ghanaian company to venture into oil exploration. We are in a unique position to set a precedent for indigenous companies looking to participate in the upstream sector. If we succeed, then we’d have sent a strong message – that Ghanaians are just as capable. That’s really important to me.”

He is breaking bread with a couple of team members on this chilly August evening. Garbed in an untucked official shirt, khaki pants and black sneakers, Okyere looks more like the CEO of a Silicon Valley startup than the head of one of West Africa’s most successful energy conglomerates. His look may be modest; his ambitions are anything but. In just 12 years, Kevin Okyere, only 38, has built his company, Springfield Group, into a $1 billion (annual revenues) multi- faceted Ghanaian energy behemoth. Springfield Group is involved in trading and transporting hydrocarbons, terminalling and storage, gas stations, and recently, oil exploration. The company employs hundreds of people in Ghana and Nigeria.

Kevin Okyere was born in 1980 to an affluent family in Ghana’s gold-rich Ashanti region. His father had built a substantial fortune in construction, steel manufacturing and large-scale cocoa farming, before he was enstooled as a traditional chief. Okyere displayed entrepreneurial promise at a very young age. By the time he was 11, he was already selling iced water to football supporters in the Kumasi Sports Stadium to make extra pocket money. During his family’s annual summer vacation trips to London, he would take on jobs with textile companies in the U.K.

“Our family house was not too far from the stadium. I would often put water in our chest freezers at home, and then sell the iced water to the supporters watching the games in the Stadium. Everyone used to call me ‘Eddie Murphy’ in reference to the movie, ‘Coming To America’. The movie was quite recent in Ghana at the time. They used to wonder why I was working when my father was wealthy,” he recalls.

After completing his High School education in Ghana, he proceeded to the United States where he studied Accounting at the George Mason University in Virginia. While studying, Okyere worked several jobs at varying points – caring for mentally challenged patients at their homes, working as a security guard, and at one point working in the mail room at AOL. “Anything legitimate that could earn me money, I took it,” he says.

At the later stages of his Accounting degree, he was able to secure more prestigious jobs. He was one of the earliest employees of XM Satellite radio now (Sirius XM Holdings) where he worked as a radio programmer. He also had a stint at Sprint where he worked in the customer service department. By the time he had completed his degree, he had gotten a job offer from one of the leading commercial banks in the U.S. The job was to pay him $72,000 a year. As tempting as the offer was, Okyere decided to return home to Ghana.

“Unlike the U.S, Ghana was virgin territory for a lot of businesses. There were too many opportunities to explore in Ghana and I knew I could be more successful home than abroad. I knew I wanted to run my own business, but I wasn’t even sure of what I was going to do. My two previous jobs in the U.S had been in telecom so I was more inclined towards launching a business telecom sector,” he says.

Okyere moved backed to Ghana in 2004 and joined his elder sister in her business in order to understand how the country worked. A year after working for his sister, he put together a small team of investors and established Westland Alliance Ltd, a telecoms company that provided international call routing services for AT&T and several international calling card companies. Westland Alliance and its subsidiaries eventually diversified into cell towers and value-added services (VAS) for mobile phone companies. The company was extremely successful, but it wasn’t long before he got tired of the telecoms business and decided to opt out.

“The company was doing very well, but there was a lot of uncertainty with our core business – the call routing business. My contracts with our clients were revisited every year and I realized that my destiny was in the hand of the telecom companies who reserved the right to terminate my contract at any time. I also couldn’t own a mobile telecom company because the license alone cost hundreds of millions of dollars – which was clearly out of my reach. I started planning my exit and looking for the next big opportunity,” he recalls.

In 2006, while still running Westland Alliance, Okyere started working with a business acquaintance who supplied crude oil and condensates to the Tema refinery. As Okyere interacted frequently with this associate, he learned that there was a shortfall of storage facilities for petroleum products in Tema. Flush with cash from his telecom adventures, he acquired land and began building a storage tank farm in Tema, close to the refinery. When he invited officials from Ghana’s National Petroleum Authority to inspect his construction project, they were so surprised that someone so young – he was 26 at the time – was undertaking such a capital-intensive project, and employing scores of indigenous Ghanaians. The officials were so impressed with what he was building, so much that they asked him to apply for a Petroleum Product import license.

That marked the genesis of Springfield Energy’s flagship trading business. Eversince 2008, Springfield Energy has imported refined petroleum products such as gasoline, dual-purpose kerosene, gasoil, naphtha and jet fuel to Ghana. The company is now the dominant importer of fuel products into Ghana with revenues of more than $1 billion in its trading business alone. In those days, only locally owned trading companies were permitted to import fuel products. International oil companies who were looking to do business in Ghana had to partner with locally owned companies. When BP PLC came to Ghana in 2010 and was looking for a trading company they could partner with, the British multinational partnered with Springfield – a partnership that still exists today. Springfield Group has consistently ploughed its profits from its core trading business into building and acquiring other businesses within the energy value train and now co-owns gas stations in Ghana, storage facilities, an oilfield services subsidiary and a haulage company.

In 2011, looking to expand their business beyond Ghana, Okyere and his partner, Geena Malkani, decided to visit neighboring Nigeria to explore opportunities in the downstream space. They formed a new company, Springfield Ashburton, and applied to the state-owned oil corporation, the Nigerian National Petroleum Corporation (NNPC), to be included among the international companies to be awarded the lucrative crude oil lifting contracts. For two years – in 2012 and 2013, Springfield Ashburton tried without success make the cut. In 2014 - three years after Springfield Ashburton had been registered in Nigeria – and after partnering with BP PLC, they were enlisted for the 2014/2015 Crude Oil Term Contract. It was the first time a Ghanaian company – an unknown trading house in Nigerian circles, was awarded the highly coveted long-term oil contract. Nigerian media questioned the selection of a Ghanaian company for the contracts and insinuated that Okyere was a close business associate of Nigeria’s former powerful Petroleum minister, Diezani Alison-Madueke. Okyere is quick to deny any association with her and notes that the newspapers that wrote the stories linking him to the former minister retracted their stories after Springfield successfully sued them in court. Okyere also won financial judgments as well.

“I was not the minister’s associate or acquaintance and we did not have any sort of relationship. Springfield Ashburton was awarded the contract strictly on merit, and because of our sheer persistence. For 3 years since 2011 we had been visiting the NNPC offices every week, liaising with officials of the Crude Oil Marketing department, demonstrating our capacity. They saw our track record in Ghana; we had a turnover of more than $800 million in 2012 even before we won the Nigerian contracts and the records are there. We had the financial capacity and a strategic partnership with BP that gave us an edge to win after our first two attempts. Those media stories were sponsored by our competitors who were unhappy with us,” he says.

Springfield Ashburton still does business in Nigeria and in 2015 was shortlisted by the NNPC for the Offshore Processing Agreements (OPA) – a contract whereby oil traders or refining companies lift crude, refine it abroad and deliver the resulting products back to the NNPC. NNPC subsequently discontinued the entire Offshore Processing Agreements discontinued the Offshore Processing Arrangement, adopting direct trading of Nigeria’s oil instead.

In 2012 Okyere applied for an oil block in Ghana, setting his sights on WCTP2, an oil block with proven reserves on it. Kosmos Energy, a Dallas, Texas-based Oil Company and Tullow Oil, which are currently producing oil from the Jubilee oil field, had just relinquished WCTP2 which was carved out of the West Cape Three Points block, following the delineation of the Jubilee unitization area. The Ghanaian government, worried that Okyere could simply flip the block for a profit, compelled him to set up a full-fledged E&P unit before they could award the block to Springfield Group. The government also required Okyere to commit at least $100 million over a 7-year period in developing the block. Okyere set up Springfield E&P in 2012, but it wasn’t until 2016 – four years later, that the government awarded Springfield the rights to explore for oil on WCTP2 and it was ratified by parliament. Okyere subsequently hired oil veteran Bernard Vigneaux, a former executive of Total and Perenco, to lead exploration efforts.

The block, WCTP2, is located in an enviable position, with Tullow Oil/ Kosmos Energy’s prolific Jubilee field immediately to the west, Hess’ Greater Pecan project to the south and Eni’s Sankofa-Gye Nyame field to the east. The previous operator of the block, Kosmos Energy, drilled five exploration wells in WCTP2 including the Odum and Banda oil discoveries which are substantial. Based on vintage seismic 3D data inherited from Kosmos Energy, Springfield has been able to identify a number of large Campanian-age leads and prospects on the block. The company is currently evaluating about 800-square kilometers of fresh 3D broadband seismic data that PGS’ Ramform Titan vessel acquired on the deep-water block earlier this year, whilst simultaneously conducting exploration activities for new leads and prospects. It’s a ridiculously expensive venture, and so far, Okyere has pumped in $70 million of his own funds into the project. According to him, the entire block is sitting on 3.5 billion barrels of oil and 5 trillion cubic feet of gas. Springfield E&P is set to drill a debut well in January 2019.

“For me, the most important reason we are pursuing this is to prove that Ghanaians can do it. We have a trading business that is doing well, and I could easily take the safe route to making more money by investing in real estate or something less tedious. But we look at ourselves as the indigenous pacesetters in this industry. If we are successful – and we will be, new local players will come up, and that’s very important for the ecosystem,” he says.

When he is not building Springfield Group into Ghana’s dominant energy company, Okyere devotes his time to philanthropy. His Kevin Okyere Foundation in partnership with the Springfield Group supports programmes in education and health across Ghana. The Foundation has a standing agreement with the largest government-owned hospital in the country whereby the foundation funds the hospital bills of poor patients who cannot afford to foot their bills. The foundation pays the school fees of hundreds of Primary school children in Ghana, and he sends some of the country’s brightest students to Universities in North America and Europe.

“I’ve been fortunate in business and in life, and giving back is the least I can do. In the end, I don’t think I want to be remembered as one of the wealthiest Ghanaians; I’d like to be remembered as one of the biggest givers.”

Drop me a line at mfon.nsehe @ gmail.com. Follow me on Twitter @MfonobongNsehe

Aramco to lose "Forever-Right" to Saudi oil resources

aramco

https://oilprice.com/Energy/Crude-Oil/Aramco-To-Lose-Forever-Right-To-Saudi-Oil-Resources.html

In what could be a power struggle between Saudi Aramco and the Saudi government, the Kingdom has altered the concession contract with the oil giant to 40 years with an option for renewal from a previous deal for oil and gas rights ‘in perpetuity’, the Financial Times reported on Monday, quoting three people briefed on the issue.

The changes were reportedly made as Saudi Arabia was making procedural, tax, and governance changes in preparation of the initial public offering (IPO) of Saudi Aramco, which now, it seems, is indefinitely postponed, or even called off.

Last Wednesday, reports emerged that Saudi Arabia had called off its highly anticipated, US$100-billion IPO, Reuters sources said, with even plans to list the state-run oil company on its domestic bourse, Tadawul, being scrapped. The listing was expected to be the world’s largest IPO, and the Saudis pegged a large part of the Vision 2030 economic agenda on proceeds from the IPO.

Saudi Arabia immediately denied the reports that the listing was canceled, with Energy Minister Khalid al-Falih saying in a statement carried by the Saudi Press Agency:

“The Government remains committed to the IPO of Saudi Aramco at a time of its own choosing when conditions are optimum. This timing will depend on multiple factors, including favorable market conditions, and a downstream acquisition which the Company will pursue in the next few months, as directed by its Board of Directors.”

In that same statement, al-Falih said that in order to prepare for Aramco’s listing, the Saudi government had taken several steps in that direction, including “reissuing a long-term exclusive concession,” without specifying details.

According to FT’s sources, cutting the concession period from ‘forever’ to 40 years—but still well over the typical 20-year concession contracts that international oil companies have with other countries—is now pointless with the IPO stalled, and has only served to exert control over the oil giant that has tried to keep its ‘in perpetuity’ concession.

The government has sought to have a shorter concession period, closer to the 20-year concessions that Big Oil have, but this would have meant changes in what Aramco could count as oil reserves, and would have had impact on its valuation, according to FT.

By Tsvetana Paraskova for Oilprice.com

Monday, August 27, 2018

U.S. judge lets Canadian company pursue assets from Venezuela’s Citgo



TORONTO - A U.S. judge has granted a Canadian company the right to go after prized U.S. assets belonging to Venezuela, in a bid to get paid on an $1.4 billion award tied to the 2008 nationalization of its gold mining operations by the now cash-strapped South American country.

U.S. District Judge Leonard Stark in Delaware on Thursday granted a so-called writ of attachment to Crystallex International Corp in shares of Citgo Holding, which owns a U.S.-based oil refiner controlled by state-owned Petroleos de Venezuela SA (PDVSA).

Stark also imposed a temporary stay on Crystallex enforcing the writ to give other parties a chance to weigh in.

The judge ruled on Aug. 9 that Citgo Holding assets were subject to attachment. PDVSA said it would appeal.

Other companies may also lay claims on the assets, and the writ does not mean Crystallex will take over Citgo and run its refineries.

On Wednesday, lawyers for Rosneft Trading SA, a unit of Russia’s largest oil company, which had been pledged about half the Citgo Holding shares, in a letter urged a hearing on how to “structure a robust appraisal and sale process” for the shares.

Holders of PDVSA bonds maturing in 2020 were pledged the other half, the Rosneft lawyers said.

Crystallex has been seeking to recoup losses from a decade ago, when Venezuela nationalized its gold mining operations under then-President Hugo Chavez.

The $1.4 billion amount comprised roughly $1.2 billion plus $200 million of interest awarded by a World Bank arbitration tribunal in 2016.

OPEC member Venezuela has few offshore assets, which has encouraged creditors such as Crystallex to pursue Houston-based Citgo, its most valuable asset outside the country.

Venezuela last week devalued its currency by an effective 96 percent, as part of an economic overhaul to combat a myriad of problems including U.S. sanctions, debt defaults, hyperinflation, emigration and food shortages.

Stark said PDVSA should file a motion and post a bond if it wants to stop Crystallex from enforcing the writ, but can still appeal if it loses the motion or cannot post the bond.

The case is Crystallex International Corp v Bolivarian Republic of Venezuela, U.S. District Court, District of Delaware, No. 17-mc-00151.

Venezuela Agrees to Pay $2 Billion Over Seizure of Oil Projects

An oil-field worker for Petróleos de Venezuela. Nearly bankrupt, the company agreed to pay a $2 billion judgment to compensate ConocoPhillips over the 2007 seizure of properties in Venezuela.CreditCreditCarlos Garcia Rawlins/Reuters

https://www.nytimes.com/2018/08/20/business/energy-environment/conocophillips-venezuela-oil.html

HOUSTON — More than a decade ago, Venezuela seized several oil projects from the American oil company ConocoPhillips without compensation. Now, under pressure after ConocoPhillips carried out its own seizures, the Venezuelans are going to make amends.

ConocoPhillips announced on Monday that the state oil company, Petróleos de Venezuela, or Pdvsa, had agreed to a $2 billion judgment handed down by an International Chamber of Commerce tribunal that arbitrated the dispute. Pdvsa will be allowed to pay over nearly five years, but as it is nearly bankrupt, even those terms may be hard to meet.

After winning the arbitration ruling in April, ConocoPhillips seized Pdvsa oil inventories, cargoes and terminals on several Dutch Caribbean islands. The move seriously hampered Venezuela’s efforts to export oil to the United States and Asia, and emboldened other creditors to seek financial retribution.

“What they did was choke the exports and made it clear to Pdvsa that the cost of not coming to an agreement would be higher than actually settling on a payment schedule,” said Francisco J. Monaldi, a Venezuelan oil expert at Rice University.

Mr. Monaldi said Pdvsa would be forced to pay ConocoPhillips with money it would have paid other creditors and would probably delay some oil shipments to China it owes in separate loan agreements. He added that “there is not a negligible probability” that at some point it will discontinue payments for lack of money.

Mr. Monaldi said Pdvsa would be forced to pay ConocoPhillips with money it would have paid other creditors and would probably delay some oil shipments to China it owes in separate loan agreements. He added that “there is not a negligible probability” that at some point it will discontinue payments for lack of money.

Hyperinflation, corruption and growing starvation have crippled the Venezuelan economy, as the socialist government is forced to choose between buying food and medicine and satisfying the demands of creditors. Over the last few days, the government has scrambled to deal with its economic crisis by sharply devaluing its currency, raising wages and promising to shave energy subsidies.

Venezuela has the largest oil reserves in the world. Its crisis has tightened global oil markets at a time when threatened United States oil sanctions against Iran could drive up prices.

The settlement with ConocoPhillips over the 2007 seizure resolves a drawn-out legal struggle, at least for the time being.

“As a result of the settlement, ConocoPhillips has agreed to suspend its legal enforcement actions of the I.C.C. award, including in the Dutch Caribbean,” ConocoPhillips said in a statement.

Pdvsa, which did not comment on the agreement, is to pay the first $500 million within 90 days.

ConocoPhillips is pursuing a separate arbitration case over the same seizure against the government of Venezuela before the World Bank’s International Center for Settlement of Investment Disputes, which could result in another large settlement award, perhaps as high as $6 billion.

That amount would probably be unpayable, experts say, but it could put ConocoPhillips in a strong position to obtain access to Venezuelan oil fields in the future if the current government eventually falls.

Pdvsa’s problems with creditors are far-reaching, putting its American Citgo assets, including three large refineries and a pipeline network, in jeopardy. A federal judge in Delaware recently ruled that Crystallex, a Canadian gold mining company, could seize over $1 billion in shares of Citgo as compensation for a 2008 nationalization of a mining operation in Venezuela.

Citgo is appealing. If it loses, that may open the way for more claims on Citgo assets by companies whose investments have been expropriated in Venezuela, including Exxon Mobil.

PDVSA to Resume Use of Caribbean Oil Terminal Under NuStar Deal


pdvsa


NuStar had suspended PDVSA several times since 2017 from using its St. Eustatius facility over millions of dollars in missed payments.

The terminal played a role in a legal dispute between PDVSA and ConocoPhillips, which earlier this year tried to enforce a $2 billion arbitration award by seizing some of the Venezuelan firm’s assets in the Caribbean.
 
“We can confirm that we have signed an agreement with PDVSA, which brings their account current,” NuStar spokesman Chris Cho said in an email. “This agreement improves the earnings outlook for our St Eustatius terminal for the remainder of 2018.”

NuStar and PDVSA also signed a new contract that reduces the storage available to PDVSA at the facility, while securing fees for about one year’s worth of storage, he added.
 
In May, when Conoco started legal actions to seize PDVSA’s assets on several islands where it rents or owns terminals and refineries, over 4 million barrels of Venezuelan heavy crude stored at Statia were temporarily retained under a court order.

Conoco tried to seize the inventory, but the dispute for missing storage fees between PDVSA and NuStar added complications to the case.

In 2017, a similar legal fight between PDVSA and the conglomerate of shipping companies Sovcomflot led to an auction in which an inventory of Venezuelan crude stored in Statia was sold to a trading firm for satisfying a portion of the Russian firm’s claim.