By Anna Hirtenstein Aug 5, 2014 11:14 PM GMT+0700
The largest oil producer in Iraqi Kurdistan is confident that the region will maintain independent pipeline exports unimpeded by the violence and political turmoil engulfing the country.
The Kurdistan regional government has loaded five cargoes in Ceyhan, Turkey, and two have been sold and paid for, Julian Metherell, chief financial officer at Genel Energy Plc (GENL), said in an interview today. One went to Singapore and one to Israel, he said. A third is docked off the U.S., where it’s the subject of a legal dispute with Iraq’s federal government.
Genel, the London-based explorer led by former BP Plc (BP/) Chief Executive Officer Tony Hayward, said that production rose to a record level in the first half and operations haven’t been affected by the fighting between Islamic militants and the Kurdish military known as Peshmerga. The company expects to export more than 20,000 barrels of oil a day through the pipeline in the second half of the year, about a third of its total production.
“Our operations remain safe and secure, pumping record volumes,” Metherell said. “We and all the other operators in the region are fully manned and operating at the highest levels. We remain confident that the exports are here to stay.”
Genel Energy reported first-half revenue today of $192 million that was within analysts’ estimates of $189 million to $230 million. Earnings per share topped projections, at 25 cents a share, compared with a range of 6 cents to 21 cents.
Genel Energy fell for a second day, dropping 3.2 percent to 936 pence at close in London.
Export Dispute
The Kurdistan regional government has been in a dispute with the Iraqi central administration for years over the semi-autonomous region’s desire to export oil independently.
The Kurds maintain they have “an exclusive authority to manage oil and gas in the Kurdistan Region extracted from fields that were not in production in 2005,” referring to a section in the Iraqi federal constitution. Nouri al-Maliki’s government disagrees, saying that the oil belongs to every citizen of Iraq and must be centrally managed.
“We’re seeing some progress on the political front in Iraq,” Metherell said. “There seems to be more cohesion in Baghdad.”
A deal to supply gas to neighboring Turkey is expected to be signed this year and could eventually account for about half of the value of Genel Energy’s business in Kurdistan, Metherell said. The company is set to supply 10 billion cubic meters of gas a year to Turkey by 2017 and infrastructure construction for the project is expected begin at the end of the year.
“In our view, the gas sales offtake agreement currently being negotiated between the KRG and Genel is a key catalyst for H2,” said James Thompson, an analyst at JPMorgan Securities Plc today in a note to clients. The development of the gas fields will “provide the longer term production and cash flow growth that should differentiate it from peers in the region.”
To contact the reporter on this story: Anna Hirtenstein in London at ahirtenstein@bloomberg.net
To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net Ana Monteiro
By Matt Craze Aug 6, 2014 1:47 AM GMT+0700
ConocoPhillips (COP), the third-largest U.S. energy company, agreed to study non-conventional oil and natural gas formations in southern Chile with state-owned energy company Empresa Nacional del Petroleo.
Houston-based ConocoPhillips will carry out geophysical and geological studies of the Patagonian region where Enap produces the South American country’s only oil and gas, according to an e-mailed statement today from Enap.
The Chilean company seeks to boost oil and gas output in Magallanes where it first produced oil and gas in 1945. Chile, the world’s largest copper producer, imports more than 90 percent of its fossil fuel needs.
With a focus on new drilling technology to tap tight-gas deposits, Enap spent more than $100 million exploring for oil and gas in 2013, the most in 15 years, according to the company’s website. Santiago-based Geopark Ltd. (GPRK) is also stepping up exploration efforts in the region.
Enap’s Chief Executive Officer Marcelo Tokman signed the agreement with David Jones, ConocoPhillip’s vice president of exploration for South America.
To contact the reporter on this story: Matt Craze in Santiago at mcraze@bloomberg.net
To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net Jim Efstathiou Jr., Robin Saponar
By Bradley Olson and Jennifer Oldham Aug 5, 2014 11:00 AM GMT+0700
Colorado’s compromise with drilling opponents has dealt a blow to environmentalists’ expanding battle to give local communities more control to limit fracking.
Governor John Hickenlooper and Representative Jared Polis agreed to a deal that weakened the prospects for two proposed ballot initiatives aimed at restricting oil and gas activity, the two men said at a news conference in Denver yesterday. Polis, who was expected to help finance the campaign for the measures, agreed to withdraw his support after Hickenlooper promised to create a task force to study the industry’s impact on local communities.
“Responsible oil and gas development in Colorado is critical to our economy, our environment, our health and our future,” said Hickenlooper. The Democrat, who told a Senate committee last year that he drank fracking fluid to prove its safety, has been a strong proponent of drilling. Colorado crude output grew faster than in any other state in 2013.
Ballot initiative proponents said they planned to proceed with their proposals to restrict fracking unless the backers of two competing measures supported by the energy industry agreed to drop their plans.
“Until we receive confirmation that the industry is withdrawing Initiatives 121 and 137, we are continuing to move forward,” said Mara Sheldon, a spokeswoman for the anti-drilling group, Safe. Clean. Colorado.
Expanding Battle
From Texas to North Dakota, companies are clashing with landowners and environmentalists over the local impact of expanded drilling in the U.S. as production has soared because of hydraulic fracturing, which uses sand, water and chemicals to free fossil fuels from shale rock.
The Colorado vote had been seen as a bellwether for “local control” concerns and other potential ballot initiatives to restrict fracking, including one in Denton, Texas, expected to reach voters in November. Communities nationwide have passed 430 measures against fracking, according to a running list kept by Food & Water Watch, a Washington-based public interest organization.
The stakes are greater in Colorado compared with elsewhere due to the amount of oil production at risk and the statewide nature of any regulations approved by voters. The local control initiatives, if passed, would have “severely” impacted hydraulic fracturing in Weld County, the core of new drilling activity, according to a July 29 report from Sanford C. Bernstein & Co.
Producers Benefit
Oil producers led by Noble Energy Inc. (NBL) and Anadarko Petroleum Corp. (APC) rose after the deal was announced. Noble led the Standard & Poor’s 500 Index, gaining 5.2 percent to $70.23 at the close in New York, after earlier having its biggest intraday rise in more than five years. Anadarko increased 4.8 percent to $110.73.
Environmental groups said they’re disappointed the ballot measures may never get to a vote.
“Colorado’s oil and gas oversight favors the oil and gas industry’s interests before the public interest,” Bruce Baizel, director of Earthworks’ Oil & Gas Accountability Project, said yesterday in a statement. “Impacted communities must have a real seat at the table, and must be allowed to determine that in some cases no fracking may be the right choice.”
No other major oil- or gas-producing states have put drilling regulations on the ballot. Other areas where activists are seeking bans or delays on new wells, such as in Santa Barbara County, California, haven’t seen the widespread use of fracking. Other proposed or approved bans have been in places such as New York, Vermont or France, where fracking hasn’t yet been put to significant use.
Sensible Victory
Polis, a Colorado Democrat, called the compromise “a victory for the people of Colorado and the movement to enact sensible fracking regulations.”
The 18-member task force will be made up of representatives from industry, local government and conservation groups and is expected to make recommendations to the state legislature on proposals to mitigate the impact of drilling.
The debate over fracking has escalated in Colorado as drilling moved closer to suburbs, raising concerns about water and air contamination. Five communities in the state have voted to ban or put a moratorium on such activity.
To contact the reporters on this story: Bradley Olson in Houston at bradleyolson@bloomberg.net; Jennifer Oldham in Denver at joldham1@bloomberg.net
To contact the editors responsible for this story: Susan Warren at susanwarren@bloomberg.net Andrew Hobbs
By Matthew Monks Aug 5, 2014 11:01 AM GMT+0700
Triangle Petroleum Corp. (TPLM), an energy company backed by NGP Energy Capital Management LLC, has begun seeking an adviser for the sale of its oilfield-services business, people familiar with the matter said.
Triangle, which in June said it may consider splitting off the business called RockPile Energy Services LLC, is interviewing investment banks to manage the sale, said the people, who asked not to be identified because the matter isn’t public. It may also sell or spin off pipeline operator Caliber Midstream Partners LP after RockPile, one person said.
RockPile, which provides pressure pumping services in the Williston Basin in the Midwestern U.S., generated revenue of about $194 million in the year through January -- including sales to other Triangle units, data compiled by Bloomberg show. The unit has an estimated market value of $572 million, the Denver-based company said in a May presentation, citing the relative value of its publicly-traded peers.
At the time, Triangle had a market value of almost $800 million. Triangle rose 8.4 percent to $11.08 in New York trading yesterday, giving the company a market value of about $954 million. Caliber, the pipeline unit, had an estimated value of $212 million in May, according to the same presentation.
“In my mind, these businesses are not getting full value in the stock,” Triangle Chief Executive Officer Jon Samuels said on a company earnings call in June, according to a transcript of the call. “Ultimately, it turns back to these businesses standing on their own and being separate.”
RockPile Growth
Exploration companies have been selling or spinning off oilfield services and pipeline units to focus on oil and gas drilling. By focusing on exploration, they can fetch higher valuations than those involved in multiple businesses. Chesapeake Energy Corp. spun off its services company, Seventy Seven Energy Inc., in July.
Since the third quarter of 2012, when RockPile started with 18,000 horsepower of equipment, the company has steadily grown its fleet of pressure-pumping trucks used to blast water, sand and chemicals underground to release trapped hydrocarbons. It’s expected to have 56,000 horsepower of gear in the U.S. this quarter and finish the year with 76,000, according to a May 16 report from PacWest Consulting Partners.
Justin Bliffen, Triangle’s Chief Financial Officer, didn’t return phone calls seeking comment on its plans.
Caliber Options
Triangle and buyout firm First Reserve Corp. each own half of the general partner of Caliber, which offers water transportation and crude oil and gas-gathering services in the Williston Basin, according to Triangle’s annual report. Its options for divesting Caliber include selling it to another pipeline company, taking it public or spinning it off to shareholders, one person said.
Its exploration arm, Triangle USA Petroleum Co., explores for oil in gas in the Bakken Shale formation
Natural Gas Partners LLC, the private-equity arm of Irving, Texas-based NGP Energy, controlled a 25 percent stake in Triangle as of May 2014, including through a convertible note, according to company filings.
To contact the reporter on this story: Matthew Monks in New York at mmonks1@bloomberg.net
To contact the editors responsible for this story: Mohammed Hadi at mhadi1@bloomberg.net Elizabeth Wollman
By Pietro D. Pitts and Anatoly Kurmanaev Aug 6, 2014 6:57 AM GMT+0700
Venezuela won’t accept less than $10 billion for its oil refining and marketing assets in the U.S., the head of state-owned Petroleos de Venezuela SA said.
“Their value is much, much more,” Rafael Ramirez, president of the oil producer known as PDVSA, told reporters today. PDVSA is receiving offers for Houston-based subsidiary Citgo Petroleum Corp. and will sell the company if an acceptable proposal is made, he said, without elaborating further.
“We are not a refining company, we’re an oil producing company,” Ramirez said during the commemoration of 100 years of Venezuelan oil production in Zulia state.
Citgo said PDVSA has put it up for sale in a July 29 bond prospectus. The company owns three refineries capable of handling about 749,000 barrels a day in Louisiana, Texas and Illinois. The company sells gasoline through about 6,000 stations and donates heating oil to 200,000 low-income families during winters.
Venezuela President Nicolas Maduro is seeking to sell foreign refineries to boost oil exports to China, raise cash and reduce the risk of having assets seized if it loses international lawsuits brought by former oil partners, GlobalSource Partners’ Ruth de Krivoy and Tamara Herrera said July 31 in an e-mailed report to clients.
Biggest Exporter
“Our situation is not like many analysts have said, claiming that we need fiscal revenues,” Ramirez said.“We are doing well with our fiscal revenues from the oil sector.”
Venezuela is Latin America’s biggest oil exporter, sending abroad 1.8 million barrels a day in 2013, according to the BP Statistical Review of World Energy.
Maduro has spent revenue from exports on social programs created by predecessor Hugo Chavez and debt repayments, pushing the country’s public sector deficit to 12.3 percent of gross domestic product last year, according Barclays Plc.
Citgo had sales of $42.3 billion last year and earnings before interest, taxes, depreciation and amortization of $1.8 billion, according to the bond prospectus.
To contact the reporters on this story: Pietro D. Pitts in Caracas at ppitts2@bloomberg.net; Anatoly Kurmanaev in Caracas at akurmanaev1@bloomberg.net
To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net
By Glen Carey and Khalid Al-Ansary Aug 5, 2014 11:14 PM GMT+0700
Islamic militants in Iraq are battling to seize two of the country’s largest dams as a breakaway al-Qaeda group seeks to consolidate control over the territory it took this year.
Fighting between militants from the so-called Islamic State and Kurdish security forces raged for a third day near the Mosul dam, Iraq’s largest, Hisham al-Brefkani, member of the Nineveh provincial council, said in a phone interview. About 350 kilometers (200 miles) to the south, Iraqi forces engaged militants in the farmland and villages near the Haditha dam, Khalid al-Hadithi, a city council chairman, said in an interview.
The Islamic State, which was previously known as Islamic State in Iraq and the Levant, has grabbed territory throughout Iraq and Syria and declared its own self-styled caliphate, highlighting the central government’s inability to ensure security under Prime Minister Nouri al-Maliki. Strengthened with weapons seized from the Iraqi army, the group this week took two oil fields and predominantly Kurdish towns in the north, forcing thousands to flee their homes.
Al-Qaeda’s Heirs
Kurdish forces, known as Peshmerga, launched a counterattack on Sinjar and Zummar, which were seized by militants during the past few days, al-Brefkani said. “The Kurdish military status has changed from a defensive one to an offensive one,” he said.
Kurdish Forces
In Sinjar, where part of The Exorcist was filmed about 40 years ago, the fighting overnight went back and forth, with the majority of the district still under the control of the militants, Sheikh Ahmed Al-Obaidi said in a phone interview from Mosul. “The Kurdish forces were able to control the entrance to the city twice last night, and then they withdrew.”
The Mosul dam, about 50 kilometers northwest of the city that the militants captured in June, is a major supplier of electricity and water. Germany’s Hochtief AG helped build the dam on the Tigris River in the 1980s. If it was sabotaged, it could flood Mosul and surrounding villages.
The fighting in the area hasn’t disrupted operations at the dam, Abdul Jaleel Sahib, deputy director general of Iraq’s state-run Commission for Dams, said in a phone interview. “The staff are working, and the dam is under the control of the Iraqi government.”
‘Resource War’
The Islamic State has enriched itself by seizing infrastructure and energy assets as its makes military gains in Iraq and Syria, where it is battling forces loyal to Syrian President Bashar al-Assad as well as other opposition groups.
“They have shown their capacity, skills and desire to fight a resource war,” Paul Sullivan, a Middle East specialist at Georgetown University in Washington, said by e-mail. “These dams will be part of that. The electricity and water from them are vital not only for the north, but all of Iraq.”
The militants are also attempting to seize the Haditha dam, on the Euphrates river in Anbar province northwest of Baghdad.
“They have intensified their attacks on Haditha town and the dam in the last four days,” Hameed Hashim, a member of the Anbar provincial council, said in a telephone interview. “Haditha dam is still under government forces’ control and there are military reinforcements around it.”
Islamic State fighters captured the town of Zummar and the Ain Zala and Batma oilfields, which together have an output of 30,000 barrels per day, in the past few days, according to the state-run Northern Oil Co.
The militant advance on Sinjar and other towns in the area displaced as many as 200,000 people, according to the UN Mission in Iraq. Most of the displaced are Yezidi, a Kurdish community whose faith includes features of the ancient Persian religion of Zoroastrianism.
To contact the reporters on this story: Glen Carey in Riyadh at gcarey8@bloomberg.net; Khalid Al-Ansary in Baghdad at kalansary@bloomberg.net
To contact the editors responsible for this story: Andrew J. Barden at barden@bloomberg.net Ben Holland, Jack Fairweather
By Sabrina Valle and Juan Pablo Spinetto Aug 6, 2014 3:37 AM GMT+0700
Petroleo Brasileiro SA’s (PBR) chances of meeting output targets for the first time in a decade are fading as a rush to dispatch new oil platforms creates headaches miles offshore.
A floating hotel anchored last month at its P-62 platform symbolizes the state-run producer’s predicament. The so-called floatel is housing hundreds of workers sent to fix the new unit that’s already months behind schedule after a fire and emergency maintenance. Other new platforms at the Roncador, Sapinhoa and Lula Nordeste fields have reported safety breaches and equipment delays from suppliers, slowing the output ramp-up.
Petrobras, as the top producer in waters deeper than 1,000 feet is known, is relying on platforms like P-62 to tap vast offshore deposits after missing output targets for 10 straight years. Last year, it said production would start increasing in the fourth quarter as nine new platforms added a million barrels a day capacity. Through June, it’s up 1.4 percent compared with a 7.5 percent annual growth target.
“We are less optimistic with Petrobras’s production growth this year,” Auro Rozenbaum, an analyst at the investment banking unit of Banco Bradesco SA, said by telephone from Sao Paulo. “It failed to boost output in the first four months of the year due to maintenance and equipment delays, making the target less reachable.”
Stock Rally
Petrobras said in an e-mailed reply to questions that 33 new wells will be connected in the second half at P-62 and sister platform P-55, each with the capacity to lift 180,000 barrels a day. The company is sticking with its growth target.
“New production systems will go on stream in 2014 to ensure sustained growth, as outlined in Petrobras’ 2014-2018 Business and Management Plan, which has set a 7.5 percent rise by the end of 2014, with a margin of tolerance of one percentage point upwards or downwards,” according to the Rio de Janeiro-based company’s May output report.
Petrobras, the worst performing stock in the past five years among 15 peers tracked by Bloomberg, has rallied 14 percent this year through yesterday, more than double the 6.2 percent average gain among peers. Brent crude has lost 4.9 percent in 2014.
The stock rose 1.3 percent to close at 19.70 reais in Sao Paulo today, the highest since July 30.
The extra yield, or spread, investors demand to own Petrobras bonds due in 2023 rather than U.S. treasuries fell to 281 basis points from 301 basis points at the end of last year. Brazil’s economic growth will slow to 1.3 percent this year before quickening to 1.7 percent and 2.6 percent in the next two years, respectively, according to estimates tracked by Bloomberg.
Rush Job
Investors aren’t counting on Petrobras meeting its targets this year, Eric Conrads, who helps oversee $500 million in Latin American stocks as a money manager at ING Groep NV, said. The stock has gained on speculation that October’s presidential elections will herald more investor-friendly policies.
“I don’t think the market is expecting the company to meet this guidance at all,” Conrads said by telephone from New York. “Fundamentals have taken a back seat.”
A rush to get P-62 and other platforms on the ocean last year contributed to delays, according to Jose Maria Rangel, a union leader and former board member who visited the platform on July 1 and said he witnessed difficulties connecting the 3rd of 24th wells. The company was also fixing equipment flaws and preparing to receive the vessel full of workers, he said.
It took more than four months to pump the first barrel at P-62, twice as long as initially planned. The floatel was leased to finish installing equipment that should have been done before it left shipyards, Rangel said by phone from Rio.
Trade Surplus
“The amount of repairs needed now aren’t small,” he said by telephone. “They were having problems connecting wells on both P-62 and P-55. Obviously if you have set backs this will reflect on production results.”
In Brazil, platforms are registered as export items and they helped the government post a trade surplus in 2013. The company started operations at P-55 just an hour and a half before the end of the year and sent P-62 offshore unfinished, Rangel said. P-61 also departed shipyards on Dec.31 en route to Campos Basin Papa Terra and missed a first-half production start date given in a January statement. Both P-55 and FPSO Cidade de Paraty at the Lula Nordeste field have suffered equipment delays. The units can cost more than $1 billion each to build.
Petrobras said concluding work when platforms are en route to fields is standard practice.
The company on July 19 shut Sapinhoa, Brazil’s seventh-biggest producing field, for six days to repair a natural gas cooling unit, Petrobras said in a separate e-mailed response to questions.
Target Jeopardized
Brazil’s Labor Ministry sanctioned the P-62 in March and fined Petrobras for five irregularities, including flaws in the gas-leak monitoring, fire fighting and alarm systems. The gas infrastructure still hasn’t been cleared to operate, the ministry said in an e-mailed response to Bloomberg. Officials are now looking into sister platform P-55, already sanctioned by the oil regulator for using inadequate equipment, it said.
Analysts from Banco Santander SA to Bradesco warn the slower-than-forecast expansion so far is putting this year’s goal at risk even though new wells and production vessels are expected to accelerate growth in the second half.
Production was almost unchanged in the first four months of the year and started rising in May when P-62 began extracting crude from Roncador. In June, domestic output surpassed 2 million barrels a day, although it still trailed 2011 levels, prompting Santander analysts to label the performance disappointing.
Natural Decline
Output growth probably will be capped at 5 percent this year because of project delays and natural decline rates at mature fields it has been exploiting for decades, Bernardo Wjuniski, an analyst at Medley Global Advisers, who does research on Brazil’s oil industry, said by phone from Sao Paulo.
At best, Petrobras will add 200,000 barrels a day each year on average, compared with about 300,000 in the company’s business plan, Wjuniski said. Petrobras overestimates how fast it will bring new fields on line and underestimates how much output will fall at older fields with depleting reserves, he said.
Bradesco cut its annual production growth estimate to 6.5 percent, the bottom end of the range forecast by Petrobras, from 8.5 percent.
The company’s decline rates are in line with international levels, Jose Formigli, who heads exploration and production, told reporters last month. Petrobras intends to double local output to more than 4 million barrels a day by the end of the decade.
‘Way Above’
Geology may help the company recover some of the losses, as production in some pre-salt fields beat expectations. Two wells at Sapinhoa are producing more than 30,000 barrels a day, according to regulator ANP. Petrobras reached capacity at FPSO Cidade de Sao Paulo with four wells compared with the six to eight it had estimated.
“Put a time delay on their own assumptions for the new projects, add all of the decline rates, and then you have a very different picture of how much they can add year over year,” Wjuniski said. “They are way, way above what I think they can do.”
To contact the reporters on this story: Sabrina Valle in Rio de Janeiro at svalle@bloomberg.net; Juan Pablo Spinetto in Rio de Janeiro at jspinetto@bloomberg.net
To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net Robin Saponar
By Isis Almeida Aug 6, 2014 12:36 AM GMT+0700
CME Group Inc. (CME) plans to start U.K. and Dutch natural gas futures while keeping the energy trading platform it agreed to buy from GFI Group Inc. (GFIG) independent.
The world’s biggest derivatives exchange may offer gas trading at the U.K.’s National Balancing Point and the Title Transfer Facility in the Netherlands as early as next month, Martin Fraenkel, CME’s managing director for International Energy, said yesterday. The expansion means the Chicago-based bourse will rival other exchanges that feed prices into the Trayport Ltd. system it agreed to buy last week.
More than 50 percent of U.K. gas trades and as much as 91 percent of those in the Dutch market were in June handled by over-the-counter brokers, according to Trayport data. CME has offered clearing of U.K. and Dutch OTC gas trades since last year on its European clearing house.
“We know from our client base that there’s interest in clearing gas contracts in major hubs and the most actively traded at the moment are NBP and TTF,” Fraenkel said by phone. “There’s client interest in having other clearing venues for those hubs and that’s why we prioritized them.”
CME agreed to buy Trayport’s owner GFI Group Inc. for $580 million, pitting itself against Intercontinental Exchange Inc., which operates Europe’s biggest energy market. While the bourse’s new futures contracts will be fed onto the Trayport screen, the energy business will remain independent with London-based Elliott Piggott keeping his position as Trayport’s chief executive officer, Fraenkel said.
Best Prices
“You have in the value chain brokers that today are providing the quotes and giving liquidity to this platform,” Diego Perfumo, an exchanges analyst at Equity Research Desk in Greenwich, Connecticut, said on July 30 by phone, the day CME announced it had agreed to buy Trayport. “Instead of fighting the established participant they buy them.”
London-based Trayport, founded in 1993, aggregates bids and offers from exchanges and brokers to show the best prices on one screen. The platform, which offers trading in markets from power to coal, displays prices from brokers including ICAP Plc (IAP) and Marex Spectron Group Ltd. to bourses such as ICE Futures Europe, Nasdaq OMX Group Inc. and Powernext SA.
“Trayport does not prioritize one exchange or clearing house over another,” Fraenkel said. “That will continue to be the case once this deal is completed in the first quarter of 2015.”
The European Commission imposed a requirement in 2012 for all over-the-counter derivatives transactions to be guaranteed through a central clearing house under the European Market Infrastructure Regulation.
Commercial Risk
Member states may choose to exempt companies from the bloc’s May 15 amended directive on Markets in Financial Instruments in cases where the sole purpose is to hedge the commercial risk of clients in the gas and electricity markets.
CME Europe’s U.K. and Dutch gas futures will be physically settled, which means the commodity will be delivered at the expiration of a contract, Fraenkel said. ICE Futures Europe already offers physically-settled contracts in U.K. gas, while Dutch gas trading is done on the ICE Endex market. Dutch gas trading on ICE accounted for 15 percent of all the market in June, a record since Trayport started gathering the data.
“It’s between CME and ICE for most commodities these days,” Trevor Sikorski, head of gas, coal and carbon at London-based consultants Energy Aspects Ltd., said July 30 by phone.
CME also plans to expand into other European gas markets this year with financially settled futures, Fraenkel said, declining to provide further details.
Coal Market
The acquisition of Trayport will help CME boost European gas trading in the same way it did for its coal market, according to Fraenkel. Buying and selling of CME’s international coal contracts rose to a record last month to 193,804 contracts, the bourse said yesterday. That’s a 19 percent increase from June.
The possibility of processing the whole trade cycle from transaction to clearing on one platform was “critical” to the growth in CME’s coal trading, he said.
“There’s an opportunity to replicate that model and we will replicate it. That’s certainly what we are looking to with the launch of our gas contracts,” Fraenkel said.
CME may also offer power trading as part of its drive to expand in energy outside North America, he said. European Energy Exchange AG and Nasdaq OMX’s commodity unit both offer electricity trading in Europe, also competing with brokers from Tullett Prebon Plc and BGC Partners Inc.
“We certainly are looking at power markets but we aren’t ready to make an announcement yet,” Fraenkel said. “We see energy markets globalizing around the world, de-regulating as far as power and gas are concerned, and we see opportunities to grow with those markets as those trends play out.”
To contact the reporter on this story: Isis Almeida in London at ialmeida3@bloomberg.net
To contact the editors responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net Dan Weeks
By Elena Mazneva and Grant Smith Aug 6, 2014 12:23 AM GMT+0700
Russia signed an accord that may turn it into the largest importer of oil from Iran, also isolated by international sanctions, in defiance of U.S. threats.
The two countries signed a five-year memorandum of understanding to expand trade cooperation, the Russian Energy Ministry said today in an e-mailed statement. Russia will help organize Iranian oil sales under the agreement including in Russia, as suggested by the Persian Gulf state, the ministry said in a later statement, without elaborating.
The U.S. and European Union are ratcheting up pressure on Russian President Vladimir Putin over his backing for Ukrainian rebels by boosting sanctions against individuals and companies deemed close to his administration. The U.S. is concerned about reports of a Russia-Iran oil deal and such an accord could lead to retaliation, U.S. Secretary of State John Kerry said in April.
The accord covers cooperation in oil and gas, construction of power plants and grids, supply of machinery, consumer goods and agriculture products, according to the ministry’s statement.
There’s a question “how substantive this memorandum is,” Richard Mallinson, an analyst at Energy Aspects Ltd. in London, said by e-mail. “There would be various practical limitations in terms of Iran’s current production capacity, geography and shipping logistics, as well as U.S. sanctions.”
500,000 Barrels
Russia may buy as many as 500,000 barrels of Iranian oil a day in return for goods, the Moscow-based Kommersant newspaper said in January, citing unidentified government officials. That’s about a fifth of Iran’s output in June and half of its exports, according to the International Energy Agency.
The U.S. Congress passed legislation in 2011 to deprive the Islamic state of its largest foreign-revenue earner and pressure leaders to accept constraints on a suspected nuclear weapons program by curtailing Iranian oil exports. The EU also approved an embargo on Iranian oil purchases by its members.
Russia complies with the United Nations, Finance Minister Anton Siluanov said in April. “Our U.S. partners have their own legislation that differs somewhat from the provisions set by the UN and they’re monitoring their own rules,” Siluanov said.
Planned cooperation with Iran doesn’t violate Russia’s international obligations and is important given the current foreign economic realities, Energy Minister Alexander Novak said today in the later statement.
To contact the reporters on this story: Elena Mazneva in Moscow at emazneva@bloomberg.net; Grant Smith in London at gsmith52@bloomberg.net
To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net Tony Barrett, Torrey Clark
By Sally Bakewell and Stephen Morris Aug 5, 2014 10:16 PM GMT+0700
Nuclear-fuel exporter Techsnabexport JSC’s plan to sign a $500 million loan with international lenders is at a standstill because of Russian sanctions, according to two people familiar with the matter.
The Moscow-based unit of Rosatom Corp., the state-run nuclear power company, is seeking a five-year facility from a group led by Deutsche Bank AG, said the people, who asked not to be identified because they’re not authorized to speak about it. Lenders sought provisions stipulating they’re repaid if Techsnabexport is sanctioned and the dispute is over whether the company can claim back banking fees in that event, the people said.
The U.S. and the European Union have imposed a wave of penalties on Russian companies, banks and its technology industry after travel bans and asset freezes aimed at President Vladimir Putin’s inner circle failed to end the conflict in Ukraine. Lending to Russian companies has slumped as banks weigh the risks of maintaining relationships in the country, with no loans in U.S. dollars, Swiss francs or euros last month, according to data compiled by Bloomberg.
Gael Gunubu, a London-based spokesman for Deutsche Bank, declined to comment on the loan. A Moscow-based spokesman for Techsnabexport, known as Tenex, couldn’t immediately comment when contacted by phone.
Tenex wasn’t targeted in sanctions imposed since July 16 that curbed access of Russia’s state-owned banks and some companies to the international capital markets. The company supplies uranium enrichment services to more than 30 utilities in 16 countries, according to its website.
VTB Loan
VTB Group’s planned $1.5 billion loan will probably be scrapped after the U.S. sanctioned Russia’s second-biggest bank and the European Union cut off state-owned lenders from capital markets, lawyers said last week.
Banks are unlikely to risk such loans after recent penalties paid by institutions for not complying with rules, said Jonathan Fisher, a barrister specializing in financial services at Devereux Chambers in London. The U.S. extracted an $8.97 billion fine from France’s BNP Paribas SA for deals that violated sanctions against Sudan, Iran and Cuba.
To contact the reporters on this story: Sally Bakewell in London at sbakewell1@bloomberg.net; Stephen Morris in London at smorris39@bloomberg.net
To contact the editors responsible for this story: Shelley Smith at ssmith118@bloomberg.net Michael Shanahan
Anupama Airy , Hindustan Times New Delhi, August 04, 2014
First Published: 23:53 IST(4/8/2014) | Last Updated: 07:47 IST(5/8/2014)
In a move aimed at ensuring India’s energy security, the Narendra Modi-led government plans to import huge volumes of natural gas from Russia. The Centre is working out the contours of a $40-billion (Rs 2.4 lakh-crore) mega onland pipeline project carrying gas from Russia to India, in one of India’s biggest energy projects till date.
Top government officials told HT that the move follows Prime Minister Narendra Modi’s recent meeting with Russian President Vladimir Putin in Brazil on the sidelines of the Brics summit.
The Prime Minister’s Office (PMO) along with the ministry of petroleum and natural gas are preparing a blueprint to examine the feasibility of this new project, they added.
An announcement on this initiative is expected to be made in December when the two leaders meet at the India-Russia annual summit to be held in New Delhi.
China has already finalised a similar gas pipeline deal with Moscow for importing gas. New Delhi, sources said, also plans to import crude oil from Moscow and the logistics for the same are being worked out.
“Russia so far has directed majority of its oil and gas supplies to the West… however, the scenario may be quiet different in the coming years especially in the wake of its gas pipeline to China and the one now proposed till India,” a senior oil ministry official said.
Two routes are being considered for the gas pipeline project. One is from Russia’s southern border to India via the Himalayas and the second from Russia - Astrakhan - Khazakstan — Uzbekistan and then along the Turkmenistan-Afghanistan-Pakistan route to India (TAPI gas pipeline).
The proposed project from Russia to India is almost four times the cost of the $10-billion (or Rs. 60,000-crore) Iran-Pakistan-India (IPI) gas pipeline project, also called the peace pipeline, which has failed to take off due to security concerns over the pipeline traversing through Pakistan and has been on the drawing board for the past many years.
“This government (under Modi) is taking all steps that will lead to a reduction in India’s oil import bill... apart from this proposed pipeline, reviving and pushing the other two projects — IPI and TAPI are also being looked into at the highest level,” he added.
The cost of the other onland gas pipeline project from Turkmenistan to India via Afghanistan and Pakistan (or the TAPI) project is also close to $8-10 billion.
GAIL India Ltd will be associated with this project along with a consortium of other state-owned oil and gas companies including Oil and Natural Gas Corp (ONGC), Oil India Ltd and Indian Oil, the official said.
By James Burgess | Tue, 05 August 2014 14:31 | 0
Benefit From the Latest Energy Trends and Investment Opportunities before the mainstream media and investing public are aware they even exist. The Free Oilprice.com Energy Intelligence Report gives you this and much more. Click here to find out more.
Crude Energy, an independent oil exploration and production company based in Dallas, TX, announced that is nearing completion of a well in Hardeman County, TX.
The announcement comes only a few weeks after the company released a press statement saying that it would begin drilling at its Cottonwood #1H site. Now, nearing completion, Crude Energy is pleased to report positive results from its drilling campaign.
Crude Energy drilled the Cottonwood #1H at a depth of 12,166 feet. It began encountering oil and gas at a depth of 10,497 feet, which continued down to a depth of 11,170 feet. In other words, the oil bearing section of the formation extended for 673 feet. Crude Energy used 3-D seismic imagery to target oil bearing fracture systems.
In last month’s press release, Crude Energy said that they would drill laterally for 2,600 feet. It appears that in the process, the company drilled through 8 fracture systems.
As the company nears completion of the well, it will use a system of fracturing called the Packers Plus QuickFrac system, which allows for a single well bore to fracture multiple stages of the formation. This technology allows for pressure to build up in specific sections of the well, allowing for fracturing to take place in multiple places.
This technique allows drillers to make many different entry points into the rock formation, and have the oil and gas flow out through a single well. As a result, Packers Plus allows for wells to be completed much faster; and it since it can hit multiple areas of the shale, it can extract more oil and gas from a given well in less time. It also allows for less fracking fluid to be used.
Crude Energy’s President Parker Hallam was pleased with the results. “Crude Energy is nearing completion of the Cottonwood #1H. Drilling our operations we encountered oil in multiple layers of the well bore. Time and time again we have demonstrated an ability to single out promising plays and effectively execute our drilling operations,” he said in a statement.
Crude Energy operates in several locations in the United States, but specializes in the Bakken and the Permian Basin in Texas.
Crude Energy’s higher profile assets are located in the Permian. Some of its neighbors include Occidental Petroleum (NYSE: OXY), Pioneer Natural Resources (NYSE: PXD), Apache Corporation (NYSE: APA), and Energen Corporation (NYSE: EGN). Occidental is the largest producer in the Permian, accounting for about 15% of the basin’s production. Pioneer has extensive acreage in the Wolfcamp/Sprayberry plays in West Texas which are fast becoming the most productive. Apache has about 37 active rigs throughout the Permian, targeting several different shale plays. Energen is more of a pure play on the Permian, with more than three-quarters of its proven reserves located in the basin.
Crude Energy is much smaller than these companies, and as such it has sought to drill in lesser known areas where costs are much lower. That has it targeting the Hardeman Basin, a little north of the frenzied activity by Crude’s larger peers.
The Cottonwood #1H project is one example of Crude Energy’s assets in lower cost regions. The Cottonwood #1H project is located on the border between Texas and Oklahoma in the Hardeman Basin. The Hardeman Basin shares some similar geological features with some neighboring basins but has not seen the same level of drilling activity. For example, the Fort Worth Basin to the south has seen a flurry of drilling activity targeting the Barnett Shale. The two regions share very similar geological history, but have been separated by tectonic movements.
Because the Hardeman Basin has great potential, Crude Energy is quietly pioneering the way in this lesser known area.
Crude Energy hopes to build on its success with the Cottonwood #1H well and has plans for other wells in the vicinity.
By. James Burgess of Oilprice.com
THE NEW KINGS OF CRUDE
At the 1955 Afro-Asian Relations Conference in Bandung, Indonesia, Jawaharlal Nehru wrote "Sudan" on his handkerchief to fashion a makeshift flag to celebrate the African nation's imminent independence. Nehru and Indira Gandhi had visited Port Sudan in 1938, while Mohandas Gandhi had dropped by three years before in 1935. India's first chief election commissioner, Sukumar Sen, oversaw Sudan's first multi-party elections in 1953, and India opened a liaison office in Khartoum two years later.
A half-century later, in 2003, then deputy prime minister L K Advani stood at the Mangalore harbour as the oil tanker Sea Falcon delivered 600,000 barrels of Nile blend crude from ONGC Videsh Ltd (OVL)'s oil block in Sudan. "This is not imported oil," Mr Advani reportedly said. "This is India's oil."
In The New Kings of Crude: China, India, and the Global Struggle for Oil in Sudan and South Sudan, Luke Patey details the corporate battles and diplomatic manoeuvring that made OVL and the China National Petroleum Corporation (CNPC) principal players in one of the world's most politically unstable oilfields and offers a nuanced perspective on India and China's global hunt for energy.
In 2013, India imported 3.86 million barrels per day of crude oil, overtaking Japan as the world's third largest importer. We import a little over 70 per cent of our crude oil requirements that cost us nearly $160 billion last year.
While Indian investment in Africa pales in comparison with China's ever-expanding engagement, the continent accounted for 16 per cent of India's oil imports last year. India is now the biggest buyer of Nigerian oil, and OVL has acquired exploration blocks in Nigeria, Libya, and a stake in Mozambique's recently discovered natural gas deposits.
In the coming decades, 700 million energy-deficient Indians are likely to transition from traditional fuels, such wood and biomass, to natural gas and electricity. Oil production in OVL's asset in South Sudan, however, ground to a halt in December last year against the backdrop of a brutal and protracted civil war. Mr Patey's account of OVL's Sudan experience is particularly useful in this context.
Mr Patey, a researcher at the Danish Institute of International Studies, focuses on the development of the petroleum sector in Sudan, China and India, using anecdotes, interviews and first-person accounts to sketch deft portraits of the principal personalities and institutions that shaped this unlikely alliance.
The first section focuses on the relation between petrodollars, United States policy and Sudan's measured descent into chaos; the second describes the political ascent of China's powerful oilmen from the oilfields of Daqing to the rarefied realm of the ruling party's Politburo. The India section profiles Atul Chandra, who served as the managing director of OVL at the time of the Sudan investment.
Mr Patey offers a balanced account of how CNPC and OVL eventually came to plumb the fields first developed in the 1970s by Chevron, the United States oil giant. While CNPC and OVL were mostly unaffected the by the global outrage over Sudanese President Omar al Bashir's genocide in Darfur, and the current civil war in South Sudan - which has claimed over 10,000 lives and displaced 1.5 million people since January - the Chinese and Indians helped Sudan build its own oil sector and refine its own crude, unlike Chevron that hoped to simply siphon off crude to its refineries abroad.
The oil revenues, Mr Patey notes, in all likelihood prolonged the conflict by propping up the tottering regime in Khartoum. Yet OVL and CNPC were no different from a host of other oil companies working with similarly repressive regimes.
In 2011, however, both countries had to re-calibrate their relationship with Al Bashir's regime when South Sudan declared independence after decades of civil war. The division left landlocked South Sudan with most of the region's oil reserves, while Sudan retained the pipelines, most of the refineries, and Port Sudan, where oil is loaded on to tankers and shipped across the world.
While OVL has a stake in the Unity fields in the south, it has also financed a 741-kilometre pipeline in the north from the Khartoum refinery to Port Sudan.
Mr Patey also defuses alarm that Chinese companies are locking up oil resources across the world, by pointing out that the oil extracted in Sudan is sold on international markets rather than shipped back home to India or China. This, he notes, has led some to wonder how OVL's investment's abroad actually contribute to India's energy security.
"It is difficult to assess how OVL's oil production in Sudan and other overseas ventures could measurably improve India's energy security," he writes, explaining that any oil brought back to India would be governed by international market prices. "At best, the profits generated from Sudan … helped the Indian government to use the parent company as a funding source for the subsidy programme to provide cheap fuel."
The New Kings of Crude is a clear-eyed account of the machinations of the newest players in the global oil business. The growth of India, China and the African continent is mirrored by the rise of a new and interesting rhetoric where deals, once delivered on the promise of "western technology" and know-how, are now forged on the anvil of "South-South" cooperation.
