trysail
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Cromarty Firth, Scotland
(a parking lot for idle rigs)
http://assets.bwbx.io/images/i9n4wIHRQMUo/v1/-1x-1.jpg
Awl Bidness
- Thread starter trysail
- Start date
Cromarty Firth, Scotland
(a parking lot for idle rigs)
http://assets.bwbx.io/images/i9n4wIHRQMUo/v1/-1x-1.jpg
trysail
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Daily production (petroleum and natural gas equivalents):
http://assets.bwbx.io/images/iyrOcdUNiBnw/v2/-1x-1.png
trysail
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Sub-paragraph ii
Line 6
Section (a)
Rule #342
Murphy's Law(s)
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When you hear some idiot predict the short term course of the stock market, interest rates, earnings or petroleum prices—
run away as fast as you can. You can rest assured of one thing: you are listening to a crook or a fool.
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Natural gas prices:
2003: $19.38/Mcf
2005: $15.78/Mcf
2008: $13.69/Mcf
2016: $1.88/Mcf
Number of rigs drilling for natural gas:
2008: 1,585
2016: 94
http://www.eia.gov/naturalgas/weekly/img/20160225_rigs.png
ht tp://www.eia.gov/naturalgas/weekly/
http://www.eia.gov/naturalgas/weekly/
Remember, ye of short memory and experience:
<I><b>It works both ways.</b></I>
<u>Natural gas prices:</u>
2003: $19.38/Mcf
2005: $15.78/Mcf
2008: $13.69/Mcf
2016: $1.88/Mcf
<u>Number of rigs drilling for natural gas:</u>
2008: 1,585
2016: 94
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trysail
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Novatek Said To Seek Permission To Export Gas To EU Via Gazprom
http://www.bloomberg.com/news/artic...ek-permission-to-export-gas-to-eu-via-gazprom
Novatek OJSC, Russia’s second-biggest natural gas producer, renewed attempts to get the right to export its gas to Europe, according to a government official.
Novatek seeks to ship fuel to Europe, paying a commission to state-run gas export monopoly Gazprom PJSC, in a plan to compete with Norwegian gas in the region, the official said, asking not to be identified as the information isn’t public. No decision has been made, Kremlin spokesman Dmitry Peskov told reporters on a conference call. Novatek and Gazprom declined to comment.
The request was sent to President Vladimir Putin, Vedomosti reported earlier Wednesday. Novatek could boost the nation’s gas exports by 2.4 billion cubic meters (85 billion cubic feet) a year, or about 1.5 percent of Gazprom’s current supplies to the European Union, worth about 9.4 billion rubles ($127 million) in export duties for the budget, the newspaper said, citing a letter from Energy Minister Alexander Novak to Putin Feb. 18.
In Europe, Russia is competing with Norway, which shipped record volumes of gas to the region last year, as well as with the fuel delivered by tanker from destinations such as Qatar. More LNG may come to Europe as Cheniere Energy Inc. started exports from the U.S. last month and Asia becomes a less attractive destination after prices and demand there fell.
German Supplies
Novatek proposed to let it export gas produced by a Russian joint venture with Gazprom’s oil arm Arktikgaz OJSC, the official said. The company has a contract to supply German utility EnBW Energie Baden-Wuerttemberg AG since 2012, sourcing fuel in Europe.
Novatek Gas & Power GmbH, the company’s trader, contracted 3.1 billion cubic meters of gas last year, with only 0.7 billion cubic meters of gas initially produced in Russia, Vedomosti reported. Novatek’s exports from Russia could compete with Norwegian fuel supplied to German gas trader Verbundnetz Gas AG, 74 percent of which EnBW agreed to acquire late last year, the paper said.
Novatek and other Russian gas producers, including state-run Rosneft OJSC, have challenged Gazprom’s decade-long monopoly on gas exports. They partially succeeded in 2013 when Putin allowed other companies to ship Russian liquefied natural gas abroad. The government is concerned ending the pipeline monopoly would cut prices amid competition between Russian suppliers and cut budget revenue from gas exports, which was about $10.3 billion last year.
Rosneft also seeks to gain access to European exports via Gazprom, spokesman Mikhail Leontyev said today.
Officials in Moscow are discussing options to meet the interests of Gazprom and its domestic rivals. They include obliging the monopoly to buy some fuel from other producers at a price close to the export alternative, at least for a planned link to China, the Energy Ministry said last year. The government will prepare proposals on the issue by May 15.
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After Chevron's Mega-Project, Smaller Is Better in Energy
by James Paton
http://www.bloomberg.com/news/artic...ega-project-smaller-is-better-in-energy-realm
(Bloomberg) Chevron Corp.’s Gorgon natural gas project off Australia’s northwest coast boasts the world’s biggest carbon dioxide storage facility, a jetty more than a mile long and enough steel to build the Sydney Harbour Bridge four times. The cost: $54 billion.
With Australia’s largest resource development starting to produce liquefied natural gas, industry leaders and analysts say a venture this ambitious won’t be replicated any time soon.
http://assets.bwbx.io/images/iMR7xznp.CMs/v2/-1x-1.jpg
Oil’s worst slump in a generation underscores the risk of investing in mega-projects like Gorgon. Expected to cost $37 billion when construction began more than six years ago, Chevron’s development with partners Royal Dutch Shell Plc and Exxon Mobil Corp. has suffered from cost blowouts, delays and bad timing. Oil and gas producers in the future will look to spread out their investments in phases, according to Australia’s Woodside Petroleum Ltd.
“The industry got too caught up in ‘bigger is better,’ and I think what bigger became was more complex and had more risk associated with it,” Woodside Chief Executive Officer Peter Coleman said in a Feb. 18 interview in Sydney. “They certainly didn’t feed in disruptive events like oil price crashes.”
Challenging Qatar
Located on Barrow Island, an isolated, tropical nature reserve about 60 kilometers (37 miles) off the coast of Western Australia, Gorgon is helping the country fulfill its ambition of becoming an energy superpower and overtaking Qatar as the world’s biggest supplier of LNG.
Dotted with termite mounds and spiky spinifex grass, the 200-square kilometer (50,000-acre) island is now the site of a jungle of metal and pipe that will chill natural gas to a liquid so it can be transported by ship to customers in countries including Japan and China. First cargoes are due to leave next week.
Chevron’s investment is part of a $180 billion wave of LNG developments in Australia that competed for labor and resources, and ultimately faced delays and budget increases. LNG projects in the U.S., an emerging energy exporter, will come under pressure to secure financing and long-term contracts, according to Daniel Yergin, vice chairman of consultant IHS Inc.
Crude Slump
Worldwide, more than 90 percent of joint ventures costing $1 billion or more have hit snags or cost blow-outs, according to Ernst & Young LLP.
The plunge in crude oil prices is reducing revenue from projects across the industry, including LNG ventures whose long-term contracts are tied to crude. Brent oil, the global benchmark, is down more than 60 percent from a 2014 peak, even after topping $40 a barrel this week for the first time since December. Average LNG contract prices this year are forecast to fall to $7.54 per million British thermal units, less than half 2014 levels, according to a Goldman Sachs Group Inc. report last month.
Standard & Poor’s lowered its Brent price assumptions last month to $40 for the rest of 2016 and $45 for 2017, and predicted that the world’s major oil and gas companies are unlikely to cover capital expenditure and dividends.
‘Calling Cards’
“One of the majors’ key calling cards for many years has been ‘we have the capital and technical know-how to develop the most challenged resources,”’ said Angus Rodger, a Singapore-based analyst at energy consulting firm Wood Mackenzie Ltd. “While certainly true, most of these projects subsequently failed to hit timing and budgetary targets, or anticipated returns on capital.”
More than $400 billion of proposed energy projects have been delayed since mid-2014 and pushed into 2017 and beyond due to the decline in oil prices, according to Wood Mackenzie. Shell last year scrapped its Carmon Creek oil sands development in Canada -- the first project in the downturn to be shelved after being sanctioned -- and abandoned its Arctic drilling program indefinitely.
The price rout has prompted oil and gas producers to switch gears. Companies today are “rethinking” large projects by opting to invest more gradually, rather than spending big amounts of money upfront, or by scaling back the size of their developments, Rodger said in an e-mail.
80,000 Homes
Chevron, based in San Ramon, California, has agreements with buyers covering more than 80 percent of its LNG from its Gorgon and Wheatstone ventures in Australia. It said in January that it expects Gorgon to generate “substantial earnings” over at least four decades.
The start of the LNG plant will bring relief to Chevron and its partners, even in a weaker market. Gorgon would generate about $1.5 billion in net cash for Chevron in its first year if Brent oil prices average about $53 a barrel, said Luana Siegfried, an analyst at Raymond James Financial Inc. in Houston, in an e-mail. That could rise to about $2.6 billion a year in 2018 and beyond assuming oil rebounds to $75, Siegfried said.
Gorgon is huge by any measure. Chevron estimates it will contribute A$440 billion ($328 billion) to Australia’s gross domestic product through 2040. A single tanker loaded with Gorgon LNG has enough fuel to supply 80,000 Japanese homes a year. Those ships will head to Asia every year from a 2.1 kilometer-long jetty that stretches into the sea.
The project had to attract thousands of workers to a remote strip of land where maximum temperatures can top 40 degrees Celsius (104 Fahrenheit). A village built by the companies offers gyms, pools, cricket nets, soccer fields, a BBQ area and air-conditioned units. When they aren’t toiling under the blazing sun, workers can take advantage of yoga, boxing or movie nights.
The developers plan to inject as much as 4 million tons of carbon dioxide a year deep beneath the island to reduce the plant’s greenhouse gas emissions. They also needed to adhere to a strict quarantine program to protect the native plants and animals on Barrow Island, including two dozen species not known to exist anywhere else.
After Gorgon, mega-projects will remain “an important -- and necessary -- way forward for companies,” Axel Preiss, Ernst & Young’s global oil & gas advisory leader, wrote in an e-mail. “Market instability is, however, changing the way companies approach capital projects” and prompting them to focus more on sharing the risk with partners.
In Australia, a surge in the local dollar during construction and higher labor expenses are among the factors that drove up costs of gas-export developments. Globally, regulatory changes, geopolitical challenges, ineffective relationships with contractors and lack of planning have hurt some projects, he said.
“Ultimately, the capital is no longer available to fund overruns as a result of poor planning and execution,” Preiss said.
by James Paton
http://www.bloomberg.com/news/artic...ega-project-smaller-is-better-in-energy-realm
(Bloomberg) Chevron Corp.’s Gorgon natural gas project off Australia’s northwest coast boasts the world’s biggest carbon dioxide storage facility, a jetty more than a mile long and enough steel to build the Sydney Harbour Bridge four times. The cost: $54 billion.
With Australia’s largest resource development starting to produce liquefied natural gas, industry leaders and analysts say a venture this ambitious won’t be replicated any time soon.
http://assets.bwbx.io/images/iMR7xznp.CMs/v2/-1x-1.jpg
Oil’s worst slump in a generation underscores the risk of investing in mega-projects like Gorgon. Expected to cost $37 billion when construction began more than six years ago, Chevron’s development with partners Royal Dutch Shell Plc and Exxon Mobil Corp. has suffered from cost blowouts, delays and bad timing. Oil and gas producers in the future will look to spread out their investments in phases, according to Australia’s Woodside Petroleum Ltd.
“The industry got too caught up in ‘bigger is better,’ and I think what bigger became was more complex and had more risk associated with it,” Woodside Chief Executive Officer Peter Coleman said in a Feb. 18 interview in Sydney. “They certainly didn’t feed in disruptive events like oil price crashes.”
Challenging Qatar
Located on Barrow Island, an isolated, tropical nature reserve about 60 kilometers (37 miles) off the coast of Western Australia, Gorgon is helping the country fulfill its ambition of becoming an energy superpower and overtaking Qatar as the world’s biggest supplier of LNG.
Dotted with termite mounds and spiky spinifex grass, the 200-square kilometer (50,000-acre) island is now the site of a jungle of metal and pipe that will chill natural gas to a liquid so it can be transported by ship to customers in countries including Japan and China. First cargoes are due to leave next week.
Chevron’s investment is part of a $180 billion wave of LNG developments in Australia that competed for labor and resources, and ultimately faced delays and budget increases. LNG projects in the U.S., an emerging energy exporter, will come under pressure to secure financing and long-term contracts, according to Daniel Yergin, vice chairman of consultant IHS Inc.
Crude Slump
Worldwide, more than 90 percent of joint ventures costing $1 billion or more have hit snags or cost blow-outs, according to Ernst & Young LLP.
The plunge in crude oil prices is reducing revenue from projects across the industry, including LNG ventures whose long-term contracts are tied to crude. Brent oil, the global benchmark, is down more than 60 percent from a 2014 peak, even after topping $40 a barrel this week for the first time since December. Average LNG contract prices this year are forecast to fall to $7.54 per million British thermal units, less than half 2014 levels, according to a Goldman Sachs Group Inc. report last month.
Standard & Poor’s lowered its Brent price assumptions last month to $40 for the rest of 2016 and $45 for 2017, and predicted that the world’s major oil and gas companies are unlikely to cover capital expenditure and dividends.
‘Calling Cards’
“One of the majors’ key calling cards for many years has been ‘we have the capital and technical know-how to develop the most challenged resources,”’ said Angus Rodger, a Singapore-based analyst at energy consulting firm Wood Mackenzie Ltd. “While certainly true, most of these projects subsequently failed to hit timing and budgetary targets, or anticipated returns on capital.”
More than $400 billion of proposed energy projects have been delayed since mid-2014 and pushed into 2017 and beyond due to the decline in oil prices, according to Wood Mackenzie. Shell last year scrapped its Carmon Creek oil sands development in Canada -- the first project in the downturn to be shelved after being sanctioned -- and abandoned its Arctic drilling program indefinitely.
The price rout has prompted oil and gas producers to switch gears. Companies today are “rethinking” large projects by opting to invest more gradually, rather than spending big amounts of money upfront, or by scaling back the size of their developments, Rodger said in an e-mail.
80,000 Homes
Chevron, based in San Ramon, California, has agreements with buyers covering more than 80 percent of its LNG from its Gorgon and Wheatstone ventures in Australia. It said in January that it expects Gorgon to generate “substantial earnings” over at least four decades.
The start of the LNG plant will bring relief to Chevron and its partners, even in a weaker market. Gorgon would generate about $1.5 billion in net cash for Chevron in its first year if Brent oil prices average about $53 a barrel, said Luana Siegfried, an analyst at Raymond James Financial Inc. in Houston, in an e-mail. That could rise to about $2.6 billion a year in 2018 and beyond assuming oil rebounds to $75, Siegfried said.
Gorgon is huge by any measure. Chevron estimates it will contribute A$440 billion ($328 billion) to Australia’s gross domestic product through 2040. A single tanker loaded with Gorgon LNG has enough fuel to supply 80,000 Japanese homes a year. Those ships will head to Asia every year from a 2.1 kilometer-long jetty that stretches into the sea.
The project had to attract thousands of workers to a remote strip of land where maximum temperatures can top 40 degrees Celsius (104 Fahrenheit). A village built by the companies offers gyms, pools, cricket nets, soccer fields, a BBQ area and air-conditioned units. When they aren’t toiling under the blazing sun, workers can take advantage of yoga, boxing or movie nights.
The developers plan to inject as much as 4 million tons of carbon dioxide a year deep beneath the island to reduce the plant’s greenhouse gas emissions. They also needed to adhere to a strict quarantine program to protect the native plants and animals on Barrow Island, including two dozen species not known to exist anywhere else.
After Gorgon, mega-projects will remain “an important -- and necessary -- way forward for companies,” Axel Preiss, Ernst & Young’s global oil & gas advisory leader, wrote in an e-mail. “Market instability is, however, changing the way companies approach capital projects” and prompting them to focus more on sharing the risk with partners.
In Australia, a surge in the local dollar during construction and higher labor expenses are among the factors that drove up costs of gas-export developments. Globally, regulatory changes, geopolitical challenges, ineffective relationships with contractors and lack of planning have hurt some projects, he said.
“Ultimately, the capital is no longer available to fund overruns as a result of poor planning and execution,” Preiss said.
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Russia's Novatek to launch 1st Yamal LNG train with no additional financing
Reuters
MOSCOW, March 10 (Reuters) - Russia's Novatek plans to launch its first train with 5.5 million tonnes of annual LNG capacity in Yamal in 2017, and this will require no additional financing, Stanislav Shevkunov, a department head at Novatek, told reporters on Thursday.
Yamal LNG is trying to raise above $10 billion in external financing, mainly from China, for the project, Russia's only second LNG plant. All in all, Yamal LNG should consist of three trains - with a total annual capacity of 16.5 million tonnes.
Yamal LNG is trying to raise above $10 billion in external financing, mainly from China, for the project, Russia's only second LNG plant. All in all, Yamal LNG should consist of three trains - with a total annual capacity of 16.5 million tonnes.
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http://assets.bwbx.io/images/iP_TCMAaQqRI/v2/750x-1.png
...Gazprom still dwarfs Rosneft in terms of output. It produces oil and natural gas equivalent to about 8 million barrels a day, while Rosneft pumps roughly 5 million. The gas company is expected to report earnings before interest, taxes, depreciation and amortization for 2015 of $29.7 billion, compared with $18.9 billion...
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Petrobras Reports Loss
Petroleo Brasileiro SA, the oil producer at the center of Brazil’s largest corruption scandal, reported a record loss that surprised analysts and sent shares tumbling in after-hours U.S. trading.
The fourth quarter net loss of 36.9 billion reais ($10.2 billion), caused by unprecedented asset writedowns linked to falling oil prices... At 46.4 billion reais, the impairments equated to more than a third of Petrobras’s market capitalization and exceeded the equity value of 97 percent of publicly-traded firms in Brazil.
The writedowns mark the latest blow in a stunning fall from grace for a state-run oil producer that ranked among the world’s five largest companies as recently as 2008 and was a symbol of national pride for many Brazilians. While Petrobras has slashed investment plans and announced asset sales to weather an expanding pay-to-play scandal, the company is getting battered by oil’s 58 percent slide over the past two years and a recession at home that has curbed demand for its fuel.
***
The company’s American depositary receipts fell 5 percent to $5.36 as of 7:57 p.m. in New York. Petrobras doesn’t plan to pay any dividends from 2015 after reporting an annual loss, Chief Executive Officer Aldemir Bendine said at a press conference in Rio on Monday.
Lower Reserves
The bulk of the impairments are from oil fields currently in production, Petrobras said. Some of the writedowns could reverse if prices improve, and the company continues to cut costs and sell assets to endure the downturn, said Bendine, a former banker who took the helm at Petrobras just over a year ago to guide the company through the corruption scandal and a mountain of debt.
“This is a four to five-year project to put Petrobras on more solid footing,” he said. “Naturally, variables like Brent prices and currency variation are not within our control.”
Petrobras cut its proven reserves by 20 percent last year after lower oil prices made some of its fields uneconomical. Proven oil, condensate and natural gas reserves totaled 13.279 billion barrels of oil equivalent in 2015, down from 16.612 billion a year before. The majority of Petrobras’s oil fields are in the deep waters of the Atlantic Ocean, making them more costly to develop than deposits in countries like Venezuela and Iran where most production is on land.
The company... also wrote down the value of drilling rigs, refineries and some fertilizer projects...
Petrobras cut investments 12 percent in 2015 to 76.3 billion reais, and continues to negotiate with suppliers to curb outlays. The company will continue to review it’s five-year business plan and will present a new version in mid-2016, Bendine said.
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Lukoil Cash Pile Mounts Even as Crude Collapse Erodes Profit
by Stephen Bierman
(Bloomberg) Lukoil PJSC, Russia’s second-largest oil producer, saw its cash pile triple last year even as profit sank.
Free cash flow totaled 248 billion rubles ($3.7 billion), the company said Monday in a statement. That compares with 76 billion rubles a year earlier, ... the growth to gains in Iraq and a weaker ruble.
“Free cash flow was very impressive,... Lukoil seems to be in a position to increase final dividends.”
The cash pile is a boon to a company that’s seen profit dragged lower by sliding oil prices. Moscow-based Lukoil, which said in November it expected to pay a bigger dividend on 2015 profit than a year earlier, is among Russian oil producers prioritizing shareholder payouts after benefiting from declines in the ruble that reduced costs.
Lukoil is capable of generating free cash and paying dividends as planned with oil at $30 a barrel, billionaire Vice President Leonid Fedun said on a conference call. The board of directors will consider a new dividend policy at an April 26 meeting, he said.
Production Gains
Net income dropped 26 percent last year to 291 billion rubles, Lukoil said in the statement. Oil and natural-gas output rose 2.8 percent to 2.38 million barrels a day as an increase in so-called compensation oil in Iraq countered a decline in West Siberia.
The West Qurna-2 project in Iraq contributed 137 billion rubles to earnings before interest, taxes, depreciation and amortization, up from 117 billion rubles the previous year, according to Lukoil, which said it received almost twice as much oil in compensation for past investments at the field. Once those investments are compensated, the company will receive a per-barrel fee.
“Qurna obviously helped,... Lukoil started to get full compensation and stopped large capex there.”
Total capital spending will fall by about 20 percent to 25 percent in dollar terms in 2016, according to Fedun. Capex was 607 billion rubles in 2015, Lukoil said in the statement.
Accounting Shift
The earnings statement is Lukoil’s first to conform to International Financial Reporting Standards, bringing its reporting into line with a 2012 law for publicly traded companies. Lukoil previously published results according to Generally Accepted Accounting Principles.
Oil prices have tumbled to less than $40 a barrel following a 2014 decision by the Organization of Petroleum Exporting Countries to defend market share amid a worldwide glut. Other Russian oil producers have also been hurt by crude’s collapse, with Rosneft OJSC, the largest, reporting lower quarterly profit last week.
Lukoil recognized 161 billion rubles of impairments in 2015, of which 141 billion rubles were related to exploration and production, particularly in Africa. While Lukoil has had successful drilling results on the continent, projects there aren’t profitable at $30-a-barrel oil, Fedun said. Money written off may be recovered if crude rises back to $50, he said.
In Kazakhstan, the company remains in dispute with the government over cost recovery at the Karachaganak oil field. The state is claiming as much as $1.6 billion from the project partners, Lukoil said in the statement, estimating its own exposure at $214 million. Its press service said separately that talks are continuing and the dispute hasn’t gone to court.
Free cash flow totaled 248 billion rubles ($3.7 billion), the company said Monday in a statement. That compares with 76 billion rubles a year earlier, ... the growth to gains in Iraq and a weaker ruble.
“Free cash flow was very impressive,... Lukoil seems to be in a position to increase final dividends.”
The cash pile is a boon to a company that’s seen profit dragged lower by sliding oil prices. Moscow-based Lukoil, which said in November it expected to pay a bigger dividend on 2015 profit than a year earlier, is among Russian oil producers prioritizing shareholder payouts after benefiting from declines in the ruble that reduced costs.
Lukoil is capable of generating free cash and paying dividends as planned with oil at $30 a barrel, billionaire Vice President Leonid Fedun said on a conference call. The board of directors will consider a new dividend policy at an April 26 meeting, he said.
Production Gains
Net income dropped 26 percent last year to 291 billion rubles, Lukoil said in the statement. Oil and natural-gas output rose 2.8 percent to 2.38 million barrels a day as an increase in so-called compensation oil in Iraq countered a decline in West Siberia.
The West Qurna-2 project in Iraq contributed 137 billion rubles to earnings before interest, taxes, depreciation and amortization, up from 117 billion rubles the previous year, according to Lukoil, which said it received almost twice as much oil in compensation for past investments at the field. Once those investments are compensated, the company will receive a per-barrel fee.
“Qurna obviously helped,... Lukoil started to get full compensation and stopped large capex there.”
Total capital spending will fall by about 20 percent to 25 percent in dollar terms in 2016, according to Fedun. Capex was 607 billion rubles in 2015, Lukoil said in the statement.
Accounting Shift
The earnings statement is Lukoil’s first to conform to International Financial Reporting Standards, bringing its reporting into line with a 2012 law for publicly traded companies. Lukoil previously published results according to Generally Accepted Accounting Principles.
***
Oil prices have tumbled to less than $40 a barrel following a 2014 decision by the Organization of Petroleum Exporting Countries to defend market share amid a worldwide glut. Other Russian oil producers have also been hurt by crude’s collapse, with Rosneft OJSC, the largest, reporting lower quarterly profit last week.
Lukoil recognized 161 billion rubles of impairments in 2015, of which 141 billion rubles were related to exploration and production, particularly in Africa. While Lukoil has had successful drilling results on the continent, projects there aren’t profitable at $30-a-barrel oil, Fedun said. Money written off may be recovered if crude rises back to $50, he said.
In Kazakhstan, the company remains in dispute with the government over cost recovery at the Karachaganak oil field. The state is claiming as much as $1.6 billion from the project partners, Lukoil said in the statement, estimating its own exposure at $214 million. Its press service said separately that talks are continuing and the dispute hasn’t gone to court.
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http://www.bloomberg.com/news/artic...in-russia-even-after-sanctions-added-to-risks
BP Reaping Rewards in Russia Even After Sanctions Added to Risks
by Rakteem Katakey
(Bloomberg) Two years ago, BP Plc said international sanctions against Russia could hurt its business there.
Didn’t happen.
Instead, London-based BP has found a haven in Russia, buttressed by a falling ruble, lower taxes and the lowest operating costs among the world’s biggest oil companies. BP earned 22 percent of adjusted pretax profit from its share in Moscow-based OAO Rosneft last year, the most since it acquired a 19.75 percent stake in the Russian oil giant in 2013.
“There’s a lot of oil, and as long as the majors can extract it efficiently, Russia can be a hedge against price downturns,” said Ildar Davletshin, a London-based analyst at Renaissance Capital. “Lower oil means lower taxes in Russia and the weak ruble helps reduce costs. That’s the real cushion for BP in this downturn.”
Outside Russia, companies are having a tough time. BP, which produced about 28 percent of its oil and gas in the U.S. last year, reported a $1.6 billion adjusted loss before interest and tax from its upstream business in the country. West Texas Intermediate crude, the U.S. benchmark, dropped 30 percent in 2015 and natural gas declined 19 percent. Oil has increased 12 percent this year.
International Sanctions
The trade restrictions on Russia, imposed over its incursion in Ukraine, struck just as tumbling crude prices weakened its most lucrative industry. The risks inherent in the sanctions have seen some investors, including BP competitor ConocoPhillips, exit Russia as the country endures its longest recession in two decades.
Nevertheless, Rosneft’s net income grew last year, making BP a winner.
The ruble averaged 61.25 against the dollar in 2015 compared with 38.62 the previous year. That boosted BP’s adjusted earnings before tax and interest from its Rosneft stake to the equivalent of about 80 billion rubles from 72 billion rubles in 2014, according to Bloomberg calculations based on company data.
BP earns its share of profit from Rosneft in rubles and converts that to dollars to report its results. In dollar terms, BP’s adjusted pretax income in Russia fell 30 percent to $1.3 billion. The company posted a 51 percent decline in total profit as operations from the U.S. to Australia were hurt by oil’s slump.
“We remain committed to our strategic investment in Rosneft,” Scott Dean, a company spokesman, said by e-mail, adding that BP complies with all relevant European and U.S. sanctions. “In the low oil-price environment, Rosneft continues to deliver solid operational and financial performance, demonstrating the resilience of its business model.”
The weakening ruble, which has also cut companies’ costs for services and rigs, has helped Russian producers outperform peers in Europe and the U.S. The world’s five biggest oil majors -- Exxon Mobil Corp., Royal Dutch Shell Plc, Chevron Corp., Total SA and BP -- all reported lower profits last year, while Rosneft’s earnings rose 2 percent.
The company’s capital spending climbed 12 percent to 595 billion rubles in the period as it funded new projects to prevent a decline in output. The other majors reduced investments to protect their balance sheets from crude’s collapse.
On April 11, Rosneft became Russia’s most valuable company as its market capitalization exceeded that of natural-gas exporter Gazprom PJSC for the first time. BP’s shares increased as much as 2.9 percent to 367.35 pence on Wednesday and traded up 2.8 percent as of 8:55 a.m. in London. The stock has gained 3.7 percent this year.
Replacing Reserves
Russia was the only major country where BP replaced all the reserves it produced last year, according to Barclays Plc. The company’s global reserve-replacement ratio was 61 percent and would have been just 34 percent without the boost from Russia, the bank said in a March report. BP’s Russian reserves were swelled by its purchase of a stake in Taas-Yuriakh Neftegazodobycha LLC, which has a field in the country’s Far East, from Rosneft.
BP’s share of output from Rosneft accounted for almost a third of its total oil and gas production during the year. The U.K. company’s global output increased 1.1 percent to 3.3 million barrels of oil equivalent a day, with 1 million barrels from Rosneft.
Low Cost
That reflects the comparatively low cost of pumping oil in Russia, which has 6 percent of the world’s proven oil reserves and more than 17 percent of its gas, according to BP data. Rosneft’s operating expense was $2.60 a barrel last year, the lowest among its global peers, according to Bloomberg Intelligence data. Shell’s was $6.80 a barrel, Total’s $7.80 and BP’s $10.30.
Russia’s low cost of production is attractive to companies scaling back in more expensive areas and allows them to add new reserves to sustain future output, Renaissance Capital’s Davletshin said.
And for BP, the benefits of that environment outweigh the risks.
“BP’s Rosneft stake is seen as risky but it’s also very prolific,” said Philipp Chladek, a London-based energy analyst with Bloomberg Intelligence. “At times of low prices, companies just need to go to the lowest-cost areas, even if the above-ground risks are considerable.”
Didn’t happen.
Instead, London-based BP has found a haven in Russia, buttressed by a falling ruble, lower taxes and the lowest operating costs among the world’s biggest oil companies. BP earned 22 percent of adjusted pretax profit from its share in Moscow-based OAO Rosneft last year, the most since it acquired a 19.75 percent stake in the Russian oil giant in 2013.
“There’s a lot of oil, and as long as the majors can extract it efficiently, Russia can be a hedge against price downturns,” said Ildar Davletshin, a London-based analyst at Renaissance Capital. “Lower oil means lower taxes in Russia and the weak ruble helps reduce costs. That’s the real cushion for BP in this downturn.”
Outside Russia, companies are having a tough time. BP, which produced about 28 percent of its oil and gas in the U.S. last year, reported a $1.6 billion adjusted loss before interest and tax from its upstream business in the country. West Texas Intermediate crude, the U.S. benchmark, dropped 30 percent in 2015 and natural gas declined 19 percent. Oil has increased 12 percent this year.
International Sanctions
The trade restrictions on Russia, imposed over its incursion in Ukraine, struck just as tumbling crude prices weakened its most lucrative industry. The risks inherent in the sanctions have seen some investors, including BP competitor ConocoPhillips, exit Russia as the country endures its longest recession in two decades.
Nevertheless, Rosneft’s net income grew last year, making BP a winner.
The ruble averaged 61.25 against the dollar in 2015 compared with 38.62 the previous year. That boosted BP’s adjusted earnings before tax and interest from its Rosneft stake to the equivalent of about 80 billion rubles from 72 billion rubles in 2014, according to Bloomberg calculations based on company data.
BP earns its share of profit from Rosneft in rubles and converts that to dollars to report its results. In dollar terms, BP’s adjusted pretax income in Russia fell 30 percent to $1.3 billion. The company posted a 51 percent decline in total profit as operations from the U.S. to Australia were hurt by oil’s slump.
“We remain committed to our strategic investment in Rosneft,” Scott Dean, a company spokesman, said by e-mail, adding that BP complies with all relevant European and U.S. sanctions. “In the low oil-price environment, Rosneft continues to deliver solid operational and financial performance, demonstrating the resilience of its business model.”
The weakening ruble, which has also cut companies’ costs for services and rigs, has helped Russian producers outperform peers in Europe and the U.S. The world’s five biggest oil majors -- Exxon Mobil Corp., Royal Dutch Shell Plc, Chevron Corp., Total SA and BP -- all reported lower profits last year, while Rosneft’s earnings rose 2 percent.
The company’s capital spending climbed 12 percent to 595 billion rubles in the period as it funded new projects to prevent a decline in output. The other majors reduced investments to protect their balance sheets from crude’s collapse.
On April 11, Rosneft became Russia’s most valuable company as its market capitalization exceeded that of natural-gas exporter Gazprom PJSC for the first time. BP’s shares increased as much as 2.9 percent to 367.35 pence on Wednesday and traded up 2.8 percent as of 8:55 a.m. in London. The stock has gained 3.7 percent this year.
Replacing Reserves
Russia was the only major country where BP replaced all the reserves it produced last year, according to Barclays Plc. The company’s global reserve-replacement ratio was 61 percent and would have been just 34 percent without the boost from Russia, the bank said in a March report. BP’s Russian reserves were swelled by its purchase of a stake in Taas-Yuriakh Neftegazodobycha LLC, which has a field in the country’s Far East, from Rosneft.
BP’s share of output from Rosneft accounted for almost a third of its total oil and gas production during the year. The U.K. company’s global output increased 1.1 percent to 3.3 million barrels of oil equivalent a day, with 1 million barrels from Rosneft.
Low Cost
That reflects the comparatively low cost of pumping oil in Russia, which has 6 percent of the world’s proven oil reserves and more than 17 percent of its gas, according to BP data. Rosneft’s operating expense was $2.60 a barrel last year, the lowest among its global peers, according to Bloomberg Intelligence data. Shell’s was $6.80 a barrel, Total’s $7.80 and BP’s $10.30.
Russia’s low cost of production is attractive to companies scaling back in more expensive areas and allows them to add new reserves to sustain future output, Renaissance Capital’s Davletshin said.
And for BP, the benefits of that environment outweigh the risks.
“BP’s Rosneft stake is seen as risky but it’s also very prolific,” said Philipp Chladek, a London-based energy analyst with Bloomberg Intelligence. “At times of low prices, companies just need to go to the lowest-cost areas, even if the above-ground risks are considerable.”
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Gazprom Dividend Wagers Help Lift Russian Stocks Toward Record
Gazprom Dividend Wagers Help Lift Russian Stocks Toward Record
by Vladimir Kuznetsov
April 20, 2016
-Natural-gas export monopoly climbs after 50% payout order
(Bloomberg) Russian stocks climbed for a second day as the possibility of a bigger dividend payout at Gazprom PJSC stoked appetite for the natural-gas export monopoly’s shares, helping offset the impact of a 1.6 percent retreat in oil prices.
Gazprom jumped as much as 3.9 percent to 162.10 rubles per share, the highest intraday level in more than a year. The 50-stock Micex Index, where Gazprom has the biggest weighting at 16 percent, added 0.5 percent to 1,943 at 1:30 p.m. in Moscow, trading 1.4 percent off a record high. The ruble reversed losses.
Confronted by the biggest budget deficit in six years and grappling with a second year of economic contraction, the Russian government has instructed state-controlled companies to pay out at least 50 percent of their income in dividends. While oil fell on Wednesday, stocks and the ruble in the world’s biggest energy exporter have been supported by crude’s rebound from a 12-year low since January.
Gazprom’s 29 percent rally since Jan. 18 has allowed it to reclaim the position of the largest Russian company by market capitalization, which it ceded to Rosneft on April 11.
According to the government order issued on Tuesday, state companies must pay out half their income under Russian or international accounting standards, whichever produces the higher figure. Gazprom’s management has already recommended a 2015 dividend at 7.40 rubles per share, which is 50 percent of income according to Russian standards. Should the company pay out the same proportion under IFRS, then last year’s dividend will jump to 15 to 20 rubles per share, implying a 10 percent yield...
Gazprom may show the best dividend yield among common stocks in the sector as a result...
The ruble strengthened 0.2 percent against the dollar to 65.748. The currency has received support even as crude declines because Russian companies will need to pay 580 billion ($8.8 billion) rubles in taxes by April 25...
Gazprom jumped as much as 3.9 percent to 162.10 rubles per share, the highest intraday level in more than a year. The 50-stock Micex Index, where Gazprom has the biggest weighting at 16 percent, added 0.5 percent to 1,943 at 1:30 p.m. in Moscow, trading 1.4 percent off a record high. The ruble reversed losses.
Confronted by the biggest budget deficit in six years and grappling with a second year of economic contraction, the Russian government has instructed state-controlled companies to pay out at least 50 percent of their income in dividends. While oil fell on Wednesday, stocks and the ruble in the world’s biggest energy exporter have been supported by crude’s rebound from a 12-year low since January.
Gazprom’s 29 percent rally since Jan. 18 has allowed it to reclaim the position of the largest Russian company by market capitalization, which it ceded to Rosneft on April 11.
According to the government order issued on Tuesday, state companies must pay out half their income under Russian or international accounting standards, whichever produces the higher figure. Gazprom’s management has already recommended a 2015 dividend at 7.40 rubles per share, which is 50 percent of income according to Russian standards. Should the company pay out the same proportion under IFRS, then last year’s dividend will jump to 15 to 20 rubles per share, implying a 10 percent yield...
Gazprom may show the best dividend yield among common stocks in the sector as a result...
The ruble strengthened 0.2 percent against the dollar to 65.748. The currency has received support even as crude declines because Russian companies will need to pay 580 billion ($8.8 billion) rubles in taxes by April 25...
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Russia Wins $50 Billion Ruling in Decade-Old Fight With Yukos
Russia Wins $50 Billion Ruling in Decade-Old Fight With Yukos
by Jake Rudnitsky
April 20, 2016
Russia succeeded in its battle to overturn a $50 billion arbitration ruling after a Dutch court ruled that the panel of judges who issued the record-setting award to the former owners of Yukos Oil Co. had no right to review the dispute.
The ruling by a court in the Hague Wednesday was a sweeping victory for the country in its more than decade-old fight with the owners of what was once Russia’s biggest oil company. The court said that the arbitration panel misinterpreted a treaty that Russia signed, but never ratified, according to a copy of the judgment.
The decision may free up accounts and property belonging to state companies targeted by GML Ltd., a holding company belonging to four former Yukos owners, in attempts to collect the award. Russia’s legal team will file a motion to overturn asset seizures in Belgium and France, said Andrey Kondakov, the general director of the International Center for Legal Protection, which is coordinating Russia’s defense.
“This will make Russian companies operating in foreign countries feel more comfortable...”
The ruling by a court in the Hague Wednesday was a sweeping victory for the country in its more than decade-old fight with the owners of what was once Russia’s biggest oil company. The court said that the arbitration panel misinterpreted a treaty that Russia signed, but never ratified, according to a copy of the judgment.
The decision may free up accounts and property belonging to state companies targeted by GML Ltd., a holding company belonging to four former Yukos owners, in attempts to collect the award. Russia’s legal team will file a motion to overturn asset seizures in Belgium and France, said Andrey Kondakov, the general director of the International Center for Legal Protection, which is coordinating Russia’s defense.
“This will make Russian companies operating in foreign countries feel more comfortable...”
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Gazprom 2015 Profit Jumps As Kremlin Demands Higher Dividend
by Elena Mazneva
28 April, 2016
http://www.bloomberg.com/news/artic...ofit-jumps-as-kremlin-demands-higher-dividend
https://assets.bwbx.io/images/i1hg68qX_VAU/v2/-1x-1.png
(Bloomberg) Gazprom PJSC, the world’s biggest natural gas producer, said full-year profit jumped almost five-fold, signaling the possibility of a higher dividend payout just as the Russian government needs more funds to plug its budget gap.
Net income rose to 787 billion rubles ($12.2 billion) in 2015 from 159 billion rubles a year earlier, the state-controlled company said Thursday in a statement. That was more than an average estimate of 758 billion rubles by 10 analysts in a Bloomberg News survey. Gazprom’s 2014 profit was hurt by foreign currency losses after exceeding 1 trillion rubles in the previous three years.
The Russian government last week issued an order that state companies must pay out at least half their income under Russian or international accounting standards, whichever produces the higher figure. The move stoked appetite for the gas producer’s shares.
Gazprom gained 2.3 percent to close at 164.75 rubles a share in Moscow, the highest level since September 2012.
‘Main Intrigue’
“Gazprom dividends is the main intrigue now,” said Elchin Mammadov, a London-based analyst at Bloomberg Intelligence. “Still, there’s no clarity how much the payments may increase.”
Gazprom’s management had recommended to increase the dividend payment by 2.8 percent to 7.4 rubles per share, or 175 billion rubles in total, before the state order was published. That would equal 50 percent of the company’s profit under Russian accounting standards after adjustments.
Under international financial reporting standards, half of net income would come out to 16.62 rubles a share, according to Bloomberg calculations.
The Moscow-based producer, which meets about 30 percent of Europe’s gas demand, will probably pay less than the state rule, as the plunge in oil dragged down the price for gas, according to eight of 11 analysts in a Bloomberg survey. The average forecast is 30 to 35 percent of international profit. That would be 9.97 rubles to 11.64 rubles a share.
Gazprom will make its dividend decision based on the government’s directive, Igor Shatalov, first deputy head of the company’s finance department, said today on a conference call. The board will review its dividend recommendation May 19, he said.
While dividend policies should “balance the interests” of a company and its shareholders, Gazprom’s board will be guided by the government’s directives, Shatalov said.
Gazprom’s domestic rival, state-run Rosneft OJSC, plans to pay out 35 percent of its profit after its board approved the recommendation on Friday, a decision seen as a compromise by analysts including Raiffeisen Bank and Aton LLC. The Economy Ministry sought half the profit, while the Energy Ministry demanded to keep 25 percent, citing risks to the company’s investment plans and production, Interfax reported last week.
‘Deteriorating’ Earnings
Gazprom faces “deteriorating” earnings amid falling gas prices abroad, “potentially resulting in negative free cash flows in 2016,” Moody’s Investors Service said in a statement on Tuesday.
Free cash flow amounted to 390 billion rubles last year, according to calculations based on Gazprom’s financial report. The company doesn’t make it a goal to have positive free cash flow all the time, Shatalov said.
While Gazprom has been boosting gas exports to its most lucrative market, Europe and Turkey, its dollar-denominated revenue from the region may drop this year to lowest since 2014 as most of contracts linked to oil with a time lag of as much as nine months. Sales may slip more than 35 percent to about $25 billion, according to Bloomberg calculations based on price estimates from the Russian Economy Ministry.
Revenue climbed 8.6 percent last year to 6.07 trillion rubles, according to its report. Earnings before interest, taxes, depreciation and amortization fell 4.5 percent to 1.87 trillion rubles, in line with the analyst estimate of 1.89 trillion rubles.
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http://assets.bwbx.io/images/users/iqjWHBFdfxIU/ivH_gynZphJ0/v1/-1x-1.jpg
Unfortunately, the author did not define the "y" and "x" axis labels. I presume the "y" axis label of "operating cost" means direct/variable cost while the "x" axis label of "Break-even price" means full cost accounting.
I have a very hard time believing that the Russian break-even price is over $100/barrel. In fact, I have such a hard time believing it that I don't. How could there possibly be such an enormous disparity between Russian "break-even price" and Russian "operating cost" said to be ~$5/barrel ? That make no sense to me.
Original article "It's Saudi Arabia's World; Big Oil Just Live In It"
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Lukoil First Quarter Profit Drops 59% After Crude Prices Slump
http://www.bloomberg.com/news/artic...-after-crude-prices-slump?cmpid=yhoo.headline
by Stephen Bierman
June 6, 2016
* Second-biggest Russian producer beat analyst profit estimates
* Free cash flow decline is weakest part of results
(Bloomberg) Lukoil PJSC, Russia’s second-largest oil producer, said first-quarter profit dropped 59 percent as crude prices declined to a 12-year low.
Net income fell to 42.8 billion rubles ($651 million) from 104 billion rubles a year earlier, the Moscow-based company said in a statement on Monday. That beat the 41.3 billion-ruble estimate of six analysts surveyed by Bloomberg. Free cash flow declined 43 percent to 36 billion rubles.
Free cash flow “is the weakest point in the entire first-quarter report,” said Alexander Kornilov, an oil and gas analyst at Aton. “Free cash flow is the key thing investors watch in Lukoil numbers, making judgments about the company’s capability to increase its dividend payments in ruble terms.”
Russian producers have been partially buffered against the rout in crude by a weaker ruble, which has reduced costs, and taxes that decline with lower prices. While higher output helped smaller rivals Bashneft PJSC and Gazprom Neft PJSC boost profit in the first quarter, Lukoil’s production in Russia has dropped.
Lukoil rose 1 percent to 2,613 rubles as of 11:31 a.m. in Moscow trading as Brent crude climbed to more than $50 a barrel. Rosneft OJSC, Russia’s largest producer, advanced 1.7 percent, while third-ranked OAO Surgutneftegas gained 1.8 percent.
Output Declines
Oil and gas output fell to 2.35 million barrels of oil and gas a day, Lukoil said. Production at the company’s largest Western Siberia unit dropped 8.4 percent to 865,000 barrels a day as the fields age and Lukoil invests in higher return projects, it said.
Output increased in Iraq, where Lukoil has so far received $5.6 billion of oil in compensation for project costs of $7.07 billion, according to the statement. The company was also paid a further $231 million in Iraq.
Lukoil spent 4.5 billion rubles on exploration and production in Nigeria, where the company could eventually pump 6 million to 7 million tons of oil a year, Chief Executive Officer Vagit Alekperov told Russian state television station Rossiya-24.
Earnings before interest, taxes, depreciation and amortization fell to 145 billion rubles, missing the 158 billion-ruble estimate of seven analysts. Revenue fell to 1.18 trillion rubles, Lukoil said.
Net income fell to 42.8 billion rubles ($651 million) from 104 billion rubles a year earlier, the Moscow-based company said in a statement on Monday. That beat the 41.3 billion-ruble estimate of six analysts surveyed by Bloomberg. Free cash flow declined 43 percent to 36 billion rubles.
Free cash flow “is the weakest point in the entire first-quarter report,” said Alexander Kornilov, an oil and gas analyst at Aton. “Free cash flow is the key thing investors watch in Lukoil numbers, making judgments about the company’s capability to increase its dividend payments in ruble terms.”
Russian producers have been partially buffered against the rout in crude by a weaker ruble, which has reduced costs, and taxes that decline with lower prices. While higher output helped smaller rivals Bashneft PJSC and Gazprom Neft PJSC boost profit in the first quarter, Lukoil’s production in Russia has dropped.
Lukoil rose 1 percent to 2,613 rubles as of 11:31 a.m. in Moscow trading as Brent crude climbed to more than $50 a barrel. Rosneft OJSC, Russia’s largest producer, advanced 1.7 percent, while third-ranked OAO Surgutneftegas gained 1.8 percent.
Output Declines
Oil and gas output fell to 2.35 million barrels of oil and gas a day, Lukoil said. Production at the company’s largest Western Siberia unit dropped 8.4 percent to 865,000 barrels a day as the fields age and Lukoil invests in higher return projects, it said.
Output increased in Iraq, where Lukoil has so far received $5.6 billion of oil in compensation for project costs of $7.07 billion, according to the statement. The company was also paid a further $231 million in Iraq.
Lukoil spent 4.5 billion rubles on exploration and production in Nigeria, where the company could eventually pump 6 million to 7 million tons of oil a year, Chief Executive Officer Vagit Alekperov told Russian state television station Rossiya-24.
Earnings before interest, taxes, depreciation and amortization fell to 145 billion rubles, missing the 158 billion-ruble estimate of seven analysts. Revenue fell to 1.18 trillion rubles, Lukoil said.
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LUKOIL SPUDS FIRST DEVELOPMENT WELL AT FILANOVSKY FIELD
Today President of PJSC LUKOIL Vagit Alekperov and Governor of the Astrakhan Region Alexander Zhilkin visited Vladimir Filanovsky field in the Caspian Sea where development drilling has just begun. The well is being drilled from an ice-resistant fixed platform (LSP-1).
First commercial production at the field is scheduled for the second half of 2016.
First commercial production at the field is scheduled for the second half of 2016.
Background information:
V. Filanovsky is the largest of all fields discovered in Russia in the past 25 years. It is located in the northern part of the Caspian Sea, 220 km away from Astrakhan. The water depth in this area ranges from 7 to 11 meters. Recoverable reserves amount to 128 million tons of oil and over 41 billion cubic meters of natural and associated gas.
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http://www.bloomberg.com/news/artic...r-seeks-stronger-russia-sanction-to-stop-line
Naftogaz Seeks Stronger Sanctions on Russia to Stop Pipeline
by Brian Wingfield
Mark Drajem
June 17, 2016
* Naftogaz seeks sanctions to kill Nord Stream 2 gas pipeline
* CEO says fracking may erase Ukraine’s need for gas imports
(Bloomberg) The U.S. and the European Union should impose stronger sanctions against Russia to kill the country’s plan for a natural gas pipeline supplying Germany because it would raise prices for consumers and jeopardize energy security, said Andriy Kobolyev, chief executive officer of National JSC Naftogaz of Ukraine.
Naftogaz, Ukraine’s state oil and gas company, is calling on the U.S. to increase sanctions on Russia to halt work on the Nord Stream 2 twin-pipeline system led by Moscow-based Gazprom PJSC. The 28-nation EU should investigate whether the project, which would link Russia’s gas supplies to Germany via the Baltic Sea, violates the trading bloc’s energy-market legislation, Kobolyev said during an interview at Bloomberg’s Washington offices.
“We believe Nord Stream 2 should have financial sanctions so they will not be able to draw financing from an international bank,” he said. “You are killing other routes in exchange for the route which will go through Germany.”
Complex Relationship
The dispute lays bare the complex relationship between Ukraine and Russia, which has been particularly tense since Russia invaded Ukraine and annexed the Crimea region following pro-European demonstrations in Kiev in 2014. While confronting Russia -- the world’s largest natural-gas supplier -- over the Baltic pipeline, Ukraine is also negotiating with Gazprom for potential supplies of the heating fuel for delivery later this year.
In addition to Gazprom, shareholders in Nord Stream 2 AG, the company developing the pipeline system, include Netherlands-based Royal Dutch Shell Plc and France’s Engie SA. The group in March announced suppliers for the pipes, and Gazprom is expected to hold its tender for pipe-laying soon.
“Nord Stream 2 completely complies with national law and international law, including EU legislation,” Jens Mueller, a spokesman for the project, said in a phone interview. He said the infrastructure work is needed for energy security and that it falls outside of the scope of sanctions. It meets the permitting requirements of five countries, Mueller said.
Cheap Route
Russia may limit natural gas transit through Ukraine after the Nord Stream 2 project is complete because it would provide the cheapest and most direct route to European consumers, Gazprom Chief Executive Officer Alexey Miller said in St. Petersburg on Thursday.
Nord Stream 2 would “deepen the rift between East and West” and “endanger the economic viability of Ukraine and Slovakia,” Amos Hochstein, the U.S. State Department’s special envoy for international energy affairs, said on a May 6 call with reporters.
The U.S. prefers the development of a southern pipeline route and floating terminals for liquefied natural gas in Croatia and Greece, Hochstein said.
If built, Nord Stream 2 must operate within a legal framework that takes into account EU energy-market rules, European Commission Vice President Maros Sefcovic said in Brussels on April 6.
‘Important Asset’
Nord Stream 2 is probably Russia’s “most important asset” for access to the European market, Ira Joseph, head of global gas and power at PIRA Energy in New York, said in a phone interview. “The more gas that Russia can reroute around Ukraine, the more vulnerable position Ukraine is in.”
Naftogaz will decide by the end of June whether to obtain supplies for delivery later this year from either Russia or Europe, and European suppliers have offered to sell the power plant fuel for $170 per thousand cubic meters, according to Kobolyev.
“So Gazprom will need to be competitive with this,” he said. Kobolyev declined to comment on the identity of potential European suppliers and possible purchase and storage amounts.
Ukraine’s storage facilities were 31 percent full as of June 16, compared with a two-year average of 39 percent, according to Gas Infrastructure Europe in Brussels.
Naftogaz is looking to horizontal drilling and hydraulic fracturing, or “fracking,” as a way to reduce Ukraine’s dependence on imports in general. The company is seeking to attract foreign investment to provide technical drilling assistance and may conduct as many as 100 fracking exercises this year, according to Kobolyev.
“By 2020 Ukraine can become self-sufficient in terms of gas production” with the help of fracking, he said.
Naftogaz, Ukraine’s state oil and gas company, is calling on the U.S. to increase sanctions on Russia to halt work on the Nord Stream 2 twin-pipeline system led by Moscow-based Gazprom PJSC. The 28-nation EU should investigate whether the project, which would link Russia’s gas supplies to Germany via the Baltic Sea, violates the trading bloc’s energy-market legislation, Kobolyev said during an interview at Bloomberg’s Washington offices.
“We believe Nord Stream 2 should have financial sanctions so they will not be able to draw financing from an international bank,” he said. “You are killing other routes in exchange for the route which will go through Germany.”
Complex Relationship
The dispute lays bare the complex relationship between Ukraine and Russia, which has been particularly tense since Russia invaded Ukraine and annexed the Crimea region following pro-European demonstrations in Kiev in 2014. While confronting Russia -- the world’s largest natural-gas supplier -- over the Baltic pipeline, Ukraine is also negotiating with Gazprom for potential supplies of the heating fuel for delivery later this year.
In addition to Gazprom, shareholders in Nord Stream 2 AG, the company developing the pipeline system, include Netherlands-based Royal Dutch Shell Plc and France’s Engie SA. The group in March announced suppliers for the pipes, and Gazprom is expected to hold its tender for pipe-laying soon.
“Nord Stream 2 completely complies with national law and international law, including EU legislation,” Jens Mueller, a spokesman for the project, said in a phone interview. He said the infrastructure work is needed for energy security and that it falls outside of the scope of sanctions. It meets the permitting requirements of five countries, Mueller said.
Cheap Route
Russia may limit natural gas transit through Ukraine after the Nord Stream 2 project is complete because it would provide the cheapest and most direct route to European consumers, Gazprom Chief Executive Officer Alexey Miller said in St. Petersburg on Thursday.
Nord Stream 2 would “deepen the rift between East and West” and “endanger the economic viability of Ukraine and Slovakia,” Amos Hochstein, the U.S. State Department’s special envoy for international energy affairs, said on a May 6 call with reporters.
The U.S. prefers the development of a southern pipeline route and floating terminals for liquefied natural gas in Croatia and Greece, Hochstein said.
If built, Nord Stream 2 must operate within a legal framework that takes into account EU energy-market rules, European Commission Vice President Maros Sefcovic said in Brussels on April 6.
‘Important Asset’
Nord Stream 2 is probably Russia’s “most important asset” for access to the European market, Ira Joseph, head of global gas and power at PIRA Energy in New York, said in a phone interview. “The more gas that Russia can reroute around Ukraine, the more vulnerable position Ukraine is in.”
Naftogaz will decide by the end of June whether to obtain supplies for delivery later this year from either Russia or Europe, and European suppliers have offered to sell the power plant fuel for $170 per thousand cubic meters, according to Kobolyev.
“So Gazprom will need to be competitive with this,” he said. Kobolyev declined to comment on the identity of potential European suppliers and possible purchase and storage amounts.
Ukraine’s storage facilities were 31 percent full as of June 16, compared with a two-year average of 39 percent, according to Gas Infrastructure Europe in Brussels.
Naftogaz is looking to horizontal drilling and hydraulic fracturing, or “fracking,” as a way to reduce Ukraine’s dependence on imports in general. The company is seeking to attract foreign investment to provide technical drilling assistance and may conduct as many as 100 fracking exercises this year, according to Kobolyev.
“By 2020 Ukraine can become self-sufficient in terms of gas production” with the help of fracking, he said.
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Press Release
IRVING, Texas--(BUSINESS WIRE)--
Exxon Mobil Corporation (XOM) today said that drilling results from the Liza-2 well, the second exploration well in the Stabroek block offshore Guyana, confirm a world-class discovery with a recoverable resource of between 800 million and 1.4 billion oil-equivalent barrels.
“We are excited by the results of a production test of the Liza-2 well, which confirms the presence of high-quality oil from the same high-porosity sandstone reservoirs that we saw in the Liza-1 well completed in 2015,” said Steve Greenlee, president of Exxon Mobil Exploration Company. “We, along with our co-venturers, look forward to continuing a strong partnership with the government of Guyana to further evaluate the commercial potential for this exciting prospect.”
The Liza wells are located in the Stabroek block approximately 120 miles (193 kilometers) offshore Guyana. Data from the successful Liza-2 well test is being assessed.
The Liza-2 well was drilled by ExxonMobil affiliate Esso Exploration and Production Guyana Ltd., approximately 2 miles (3.3 km) from the Liza-1 well. The Liza-2 well encountered more than 190 feet (58 meters) of oil-bearing sandstone reservoirs in Upper Cretaceous formations. The well was drilled to 17,963 feet (5,475 meters) in 5,551 feet (1,692 meters) of water.
“This exploration success demonstrates the strength of our long-term investment approach, as well as our technology leadership in ultra, deepwater environments,” said Greenlee.
The Stabroek block is 6.6 million acres (26,800 square kilometers). Esso Exploration and Production Guyana Limited is operator and holds 45 percent interest in the Stabroek block. Hess Guyana Exploration Ltd. holds 30 percent interest and CNOOC Nexen Petroleum Guyana Limited holds 25 percent interest.
Exxon Mobil's Guyana Oil Discovery May Be Twice The Size Previously Thought
(Bloomberg) Exxon Mobil Corp.’s oil discovery off the coast of Guyana may hold as much as 1.4 billion barrels, twice the size of the previous estimate, making it worth as much as $69.5 billion based on current prices.
The Liza field 120 miles (193 kilometers) from the coast of Guyana is a “world-class discovery” that probably will yield the equivalent of 800 million to 1.4 billion barrels of crude, the Irving, Texas-based company said in a statement on Thursday. Hess Corp., a partner in the field, will see a a 39 percent boost in current proved reserves at the upper end of the estimate.
Exxon’s announcement comes as the oil industry emerges from the worst market slump in decades. Since dipping to a 12-year low in January, the international benchmark for crude has risen nearly 80 percent to about $50 a barrel. The Liza discovery may not add to global oil supplies for years as deepwater finds can take half a decade or more to bring into production.
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Holy shit! The entire population of Guyana is way less than one million people. If this doesn't make them a very, very prosperous country something's wrong.
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