Brazil's Oil & Gas Production Hits Record Highs

By Alex Kimani - Aug 30, 2023

Brazil's oil and gas production hit the highest level ever for a single month in July, with production totaling 4.48 million barrels of oil equivalent per day in the period, data from oil regulator ANP has revealed. According to ANP, oil output increased 18.6%Y/Y to 3.51 million barrels per day while natural gas production grew 13.6%Y/Y to 154.08 million cubic meters per day.

Previously, global research and consultancy group Wood Mackenzie predicted that Brazil’s private oil companies will increase oil production by 75% from 1.221Mb/d to 2.123Mb/d by 2030. According to WoodMac, international oil companies such as Shell Plc (NYSE:SHEL), Equinor ASA, (NYSE:EQNR), TotalEnergies SE (NYSE:TTE), Repsol Sinopec Brasil S.A. and Petrogal will be among the top producers thanks to their partnership with federal oil firm Petrobras (NYSE:PBR) in the pre-salt and fields under development. 

Petrobras is also expected to grow production at an impressive clip, with output expected to increase 61% from 2.15Mb/d this year to 3.46Mb/d in 2030. Last year, the oil and gas supermajor announced that it will increase 2023-2027 investments by about 15% to $78 billion over the company’s 2022-2026 projected spending. Of the $78 billion planned for capex, 83% or $64 billion is earmarked for E&P activities while 67% of the E&P capex budget will go to pre-salt activities. 

The company also plans to boost spending to reduce carbon emissions to ~6% of the total compared with 4% in the previous plan, and will see its decarbonization fund  more than double the current $248M.

Earlier, Petrobras CEO Jean Paul Prates reaffirmed those targets but said the company is preparing to preview updates to its business plan next month, including a greater focus on renewable energy sources. Unfortunately, Prates said that investors should not expect the kind of huge dividend payments they enjoyed last year, with the company’s dividend policy likely to undergo adjustments to reflect the reality of a company investing in the future. Petrobras will also continue to focus on its strengths in offshore oil exploration, especially in the "pre-salt" fields off Brazil's coast, but it "will gradually transform itself," Prates said.

By Alex Kimani for Oilprice.com

Brazil Struggles With An Energy Tax Dilemma

By Tsvetana Paraskova - Aug 31, 2023

The energy ministry in Brazil wants newly proposed tax incentives for energy infrastructure to include oil projects and refineries in a renewed debate over whether the energy transition or Brazil’s massive oil and gas industry should take priority.  

The administration of Brazilian President Luiz Inacio Lula da Silva is looking to accelerate the energy transition, but it is also betting on continued development of the oil and gas industry, to pay for more incentives for green initiatives.

Now the Brazilian Mines and Energy Ministry is pushing for the proposed tax incentives for electricity generation, power grids, and natural gas facilities to extend to refineries and oil projects, Reuters reported on Thursday, citing a senior official and a document it has seen.

“Oil refining will continue to be fundamental for guaranteeing supply for a long time, so it is essential that projects aimed at decarbonizing refining be a priority, as they are adhering to energy transition and energy security,” Mines and Energy Ministry officials wrote in the document seen by Reuters.

The Brazilian government is considering an emissions cap and protection for indigenous communities involved in carbon offsetting as part of a new carbon market, Rafael Dubeux, a senior coordinator of the country’s energy transition plan, told Reuters in an interview earlier this month.

Despite the efforts to accelerate emissions reductions, the Brazilian administration has signaled that there isn’t a discrepancy in Brazil’s efforts to advance the energy transition and its state oil company Petrobras pursuing drilling in domestic frontier areas.

“There is no contradiction. You indicate where you want to get and then you'll need resources for that,” Lula’s chief of staff Rui Costa said in a radio interview this week carried by Reuters.

“We are going to build a sustainable, renewable energy matrix, but it's obvious that we need to fund that transition process,” Costa added.

Brazil’s Petrobras Seals Cooperation Deal With Chinese Oil Giant

By Charles Kennedy - Aug 29, 2023

Brazil’s state energy major Petrobras has inked a strategic cooperation deal with China’s state oil major CNOOC.

The deal, Reuters reports, citing a China-backed outlet, would focus on refining and chemical engineering, but also oilfield services and low-carbon energy projects.

The Chinese company, which almost exclusively focuses on overseas projects, already has a modest presence in Brazil, Reuters notes, with a minority stake in the Buzios field—one of the promising new developments in Brazil’s presalt offshore zone.

The Buzios field, operated by Petrobras, was discovered in 2010 and production began eight years later.

CNOOC recently reported an 11% decline in its net profit for the first half of the year as, like everyone else in the industry, it suffered the consequences of lower oil prices.

“In the first half of 2023, macroeconomy stayed complex and volatile, while international oil prices saw fluctuations in a downward trend,” CNOOC’s chairman Wang Dongjin said in a statement to shareholders.

At the same time, CNOOC boasted production growth both at home and overseas during the first half of the year, with daily net production reaching an all-time high. The company plans to book a record-high daily production for the full year as well, at 650 to 660 million barrels of oil equivalent daily.

Petrobras saw a much steeper drop in profits for the first half, at almost 33%. Yet it was the company with the third-highest profits for the period on a global scale, booking a net result of $13.17 billion, after only Aramco and Exxon, the Rio Times reported earlier this month.

Also earlier in August, media reported that the Brazilian state energy major was looking for opportunities to expand overseas in the upstream segment. The expansion would take the form of acquisitions, the chief financial officer of the company, Sergio Caetano Leite, told Bloomberg.

By Charles Kennedy for Oilprice.com

Water Shortages In Central Asia Puts Historic Alliance To The Test

By RFE/RL staff - Aug 26, 2023

• Severe droughts in Central Asia have led to significant water shortages, affecting farming in the region and causing tensions between Kyrgyzstan and Kazakhstan.
• 
  
• Despite claims by the Kyrgyz Agriculture Ministry of fulfilling its water obligations, many in Kazakhstan feel they are being unfairly punished.
• 
  
• The situation has escalated, leading to extended delays at key border crossings, further straining the relationship between the two nations.
• 
  

The video recorded on a Kazakh farmer's smartphone reached the Internet like a distress signal.

"Zhambyl Province. Sugar beet. There is no water. The beet has died," the voice said over footage of failed crops in this traditionally fertile corner of southern Kazakhstan.

As a baking July segued into August, beet farmers in the province were indeed without water -- irrigation water that they would otherwise have received from a reservoir in neighboring Kyrgyzstan.

Though not all the farmers were blaming Kyrgyzstan.

Some were aiming their complaints at local authorities, an alarming development for authorities in the Kazakh capital, Astana.

"Why do we need this kind of governor?" vented one farmer, during a visit by RFE/RL correspondents to the area.

The Kyrgyz Agriculture Ministry argues it has fulfilled all its obligations to its downstream neighbor but maintains that in a year of extended droughts and high summer temperatures, there simply isn't any extra water to share.

The Kirov water reservoir in its northwestern Talas region is carrying a fraction of last year's volume, the ministry said, and is only 3 percent of its capacity.

Satellite images of Kirov from this year and last year appear to support that assertion, while farmers in northern Kyrgyzstan, too, have been complaining about a lack of water.

But many Kyrgyz feel Kazakhstan has decided to punish them anyway.

Since August 20, a queue of hundreds of cargo-carrying vehicles has formed at the Ak-Tilek border crossing, with another 100-plus line emerging at the Ken-Bulan border crossing in the days that followed.

Truckers at Ak-Tilek say Kazakh border officials are slowing the passage of vehicles to around six per day. The usual pace is about 20 per hour.

Kazakh Deputy Prime Minister and Finance Minister Yerulan Zhamaubaev told journalists on August 23 that Kazakhstan's Committee for National Security had been conducting anti-narcotics operations on the country's shared border.

He did not say how long the delays at the border might last.

As if that were not enough, on August 24 the office of Kazakh President Qasym-Zhomart Toqaev suddenly announced that Toqaev would host Emomali Rahmon, the leader of Kyrgyzstan's bitter regional rival, Tajikistan, on August 25-26.

A coincidence? Perhaps.

But past form suggests that when Astana is not happy with Bishkek, it makes its feelings known.

'When There Is Not Enough Water, Tensions Arise'

Tensions over water in Central Asia are not new, although regional cooperation as a whole has improved since 2016, when Shavkat Mirziyoev came to power in Uzbekistan.

Mirziyoev's predecessor, Islam Karimov, had been notoriously prickly on the subject, even warning of the potential for military conflict over access to transboundary resources such as water.

But this year's droughts have stretched existing arrangements to their limits while hammering farming in the region.

It was Mirziyoev's office that sounded the alarm in April, with a presidential decree rolling out emergency water-saving measures in lieu of forecasts that the region's Amu Darya and Syr Darya rivers would see their water levels drop between 10 percent and 20 percent this year.

At the beginning of the year, there had been expectations of relatively strong inflows into the region's mountain rivers, but "they did not come to pass," according to Yevgeny Simonov, international coordinator of the Rivers without Boundaries Coalition, a nonprofit formerly based in Russia.

Although "the trend toward a reduction in the volume of rivers is common to all river basins" in the region, several rivers rising in Kyrgyzstan's mountains and flowing into Kazakhstan -- the Syrdarya, Chu, and Talas rivers -- seem to have notably reduced flows, Simonov told RFE/RL.

"Perhaps in the first half of the year, [Central Asian] countries spent more water than they could afford in such a drought," Simonov argued.

"Almost always when there is not enough water, tensions arise between neighbors. The mechanisms for their resolution leave much to be desired," he added.

At least one Kyrgyz official, irrigation expert Ulan Chortombaev, has already linked the stoppages at the border to the water issue.

But on August 23, Kyrgyz Agriculture Ministry official Almazbek Sokeyev claimed his Kazakh colleagues "viewed [the situation] with understanding" after talks and had assured him the problem at the border was completely unrelated to the water cutoff.

Bishkek had warned Astana in negotiations earlier in the summer that water would be a problem, but maintains it had fulfilled its quota for the provision by early August, triggering the end of outflows from the parched reservoir.

Kazakhstan has stopped short of accusing Kyrgyzstan of playing water games, but an August 9 Ecology Ministry statement highlighted the discrepancy between volumes in the Kirov water reservoir this year (32.48 million cubic meters on August 9) and last year -- some 144.8 million cubic meters more than that total.

"According to the 2022 schedule, Kazakhstan's requirements from the Talas River in August were 45 cubic meters [of water] per second. [Now] no water is effectively being supplied," the ministry said at the time, pledging to continue negotiations with Kyrgyzstan.

In Zhambyl Province, which sources 80 percent of its water from Kyrgyzstan, authorities have declared emergency situations in six districts while pledging compensation to farmers set to lose 25 percent to 30 percent more of their harvest compared to last year.

On the Kyrgyz side of Ak-Tilek, meanwhile, where truckers working between the two countries have been offered tents by Kyrgyz officials, there were few doubts that the flow of water and the flow of goods were interlinked.

"The Kyrgyz side is working perfectly. The Kazakh side is a real pain," said a driver named Igor, speaking to RFE/RL's Kyrgyz Service.

"It's not official. But [people] say [the border delay] is because Kyrgyzstan has stopped sending water."

2017 Redux?

In terms of language, culture, and tradition, Kazakhs and Kyrgyz are two of Central Asia's most similar peoples. But the relationship at the political level is not particularly warm.

The nadir for bilateral ties in recent times was in 2017, when Kyrgyzstan's outgoing leader Almazbek Atambaev launched a spectacular tirade at Kazakhstan's first president, Nursultan Nazarbaev, whom he accused of interfering in the country's upcoming election.

The then-Kyrgyz president depicted Nazarbaev as an aging autocrat in the vein of a Mongol khan and said Kazakhstan's elite was robbing its population.

The response was swift, and -- just like this week -- long lines soon began appearing on the Kyrgyz side of the pair's shared border as the Kazakh side announced an extended operation to combat smuggling.

Atambaev rather carelessly suggested the logjams would soon disappear if Kyrgyzstan "turned off" Kazakhstan's water for two or three days.

But the erratic politician did not carry through with the threat, and even he may have realized he had overplayed his hand.

Kyrgyzstan's border crossings with Kazakhstan are an economic lifeline for exporters in the north of the country, and the logical jumping-off points for goods heading even further north to Russia.

The fact that both countries are members of the Moscow-led Eurasian Economic Union has never prevented Kazakhstan throttling trade at the frontier in the past.

This might explain why Kyrgyz social media users have expressed anger at notions their country is using water to exert leverage over a more powerful neighbor.

One article published on the Asia Times website on July 31 and subsequently translated and republished by Kazakh media suggested exactly that, linking so-called Kyrgyz "pressure" to Russia's desire for Kazakhstan to do more to help it evade sanctions over the Ukraine war.

Yet that somewhat fanciful argument is undermined by images not just of Kirov, but of Kyrgyzstan's largest reservoir, Toktogul, which services the vital Toktogul hydropower plant.

To be sure, water in Central Asia is not well managed. But this year, there is simply less to go around.

By RFE/RL

China Eyes Partnership With Gulf Countries For Space Exploration

By Oxford Business Group - Aug 27, 2023

• Saudi Arabia and the UAE are leading initiatives in space exploration, with the former transforming its Space Commission into the Saudi Space Agency and the latter successfully sending a probe to Mars.
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• Investments in space technology, including satellite development and aerospace partnerships, aim to enhance defense, tourism, technology sectors, and communications in Gulf nations.
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• China seeks collaboration with Gulf countries on space projects, emphasizing remote sensing, astronaut training, and aerospace infrastructure.

In the push to embrace emerging technologies and harness their potential commercial opportunities, Gulf countries are launching new initiatives to bolster their domestic space industries.

In June Saudi Arabia’s Council of Ministers approved the transformation of the Saudi Space Commission, which was launched in 2018, into a full government agency known as the Saudi Space Agency (SSA), underscoring the Kingdom’s commitment to the space sector and exploration activities.

The move followed the successful launch of Saudi Arabia’s first space mission in May to the International Space Station (ISS). The trip was sponsored by the Saudi government and included two Saudi astronauts, one of whom – a stem cell researcher – was the Arab world’s first female Arab astronaut. The trip was overseen by Houston-based Axiom Space, which is seeking to build the first commercial space station after detaching from the ISS.

The UAE has also forged major inroads in space. Since releasing its National Space Strategy 2030 in 2019, it has opened four space research and development centres, established national space laws and regulations, and launched its own Hope Probe, which orbited Mars in 2021, making the UAE the sixth country globally and the first in the Arab world to reach the planet.

Cross-sector diversification

Developing the space sector and engaging in ambitious exploration plans requires massive upfront capital expenditure for projects that may not pay off for several years. These are investment time horizons with which Gulf countries not only have significant experience from oil and gas, but also match their long-term strategies to diversify their economies.

The expansion of space activities is accelerating across the region thanks to advances in the technologies that constitute the Fourth Industrial Revolution (4IR) – blockchain, artificial intelligence, 3D printing, materials science, nanotechnology and biotechnology – that have decreased satellite launch costs and increased the capabilities of smaller satellites.

The 4IR represents what could be a SR1trn ($266.6bn) opportunity for Saudi Arabia that dovetails with the Kingdom’s Vision 2030.

More concretely, investing in space helps Gulf countries develop technical capabilities and expertise in aerospace engineering, satellite manufacturing, and advanced research and development to bolster their defence, tourism and technology sectors and diversify their economies.

Alongside the SSA, in March the Public Investment Fund, Saudi Arabia’s largest sovereign wealth fund, launched Riyadh Air, a low-cost start-up airline that aims to compete with other regional carriers, and placed an order for 72 Boeing 787 aircraft. The carrier will have a sustainability advantage due to its fleet of newer, more efficient planes and the use of sustainable aviation fuel. It targets launching operations in 2025.

In June the SSA held meetings with French aircraft manufacturer Airbus about enhancing cooperation in the space sector and other potential investment projects.

On the defence end, Saudi Arabian Military Industries (SAMI), which was launched in 2017, has accumulated more than $10bn in contracts with foreign companies in a bid to localise over 50% of defence spending by 2030. Last year SAMI announced a joint venture with Boeing to provide maintenance, repair, and overhaul and sustainment services for military rotary platforms operating in the Kingdom.

Also in June, in a deal that signals the possible synergies between aerospace and defence, SAMI subsidiary SAMI-AEC announced a partnership to make Saudi Arabia the home to US defence manufacturer Lockheed Martin’s Sniper Advanced Targeting Pod Repair Centre for line-replaceable units for helicopters in the Middle East.

Satellite imaging

In their foray into the space sector, Gulf countries have prioritised the development of domestic capacities to build satellites in an aim to bolster communications and monitoring systems.

Bahrain, Kuwait and Oman have all launched satellites in recent years, with Oman constructing a satellite of its own, while Qatar’s Es’hailSat satellite company signed a strategic partnership with Axess Networks in January to provide teleport and very small aperture terminal (VSAT) services to bolster satellite communications networks.

The UAE has been at the forefront in this regard through its National Space Strategy 2030. Last year the UAE created a $817m fund to support international and Emirati companies co-operating in space sector engineering, sciences and research applications, with a near-term goal of developing and launching a constellation of advanced imaging satellites.

Last year the Dubai Electricity and Water Authority (DEWA) launched the world’s first nanosatellite in collaboration with spacecraft engineering company NanoAvionics to monitor and maintain water and power infrastructure. DEWA is the first utility to use satellites in this regard, and seeks to leverage its expertise and offer satellite-as-a-service to other utilities around the world as they continue to digitise and improve their infrastructure.

In May Finland-based Iceye announced an agreement to develop a five-satellite constellation for Bayanat, a UAE geospatial analysis firm, and Abu Dhabi-based satellite communications company Yahsat that will launch in 2024, further bolstering the UAE’s satellite imaging capabilities.

The UAE also continues to pursue space exploration with the aim of scientific advancement. In May it announced plans to send a spacecraft to the solar system’s main asteroid belt by 2028 for a seven-year study of seven main asteroids. The mission will start with a fly-by of Venus, following the UAE successful 2021 mission to Mars.

Global partnerships

Investing in space is an opportunity to capitalise on what many see as a prime opportunity to commercialise space travel and communications. With the ISS nearing retirement, companies like Axiom Space as well as Blue Origin and Nanoracks have announced plans to build stations in low Earth orbit.

China is keen to develop its Tiangong space station, which become operational in 2022, and is looking to partner with Saudi Arabia and the UAE. China announced its intentions at the first China-GCC Summit held in Riyadh in December, specifying areas pertaining to remote sensing and communications satellites, space utilisation, aerospace infrastructure, and the selection and training of astronauts, according to the summit’s keynote speech by China’s President Xi Jinping.

After the establishment of the SSA in June, the agency immediately held meetings with Chinese government agencies and businesses to discuss enhanced cooperation and collaborations in the fields of technology, industry and space exploration.

Abdullah Al Swaha, chairman of the board of directors of the SSA, met his counterpart from China Aerospace Science and Technology Corporation and other leading figures from the space sector in Beijing. A Saudi delegation, meanwhile, held talks with China’s Galaxy Space, which develops and sells communication satellites, and iSpace, which specialises in the development and manufacture of spacecraft.

International public services company Serco launched its Saudi Space Division in March, through which it will establish local capabilities for its global advisory, consultancy and operational space services. These span the full lifecycle of a mission, from spacecraft and mission design through to data management, operations and decommissioning, including spacecraft control, ground segment operations and engineering.

In May Nanjing-based start-up Origin Space, UAE University’s National Space Science and Technology Centre, and the University of Hong Kong’s Laboratory for Space Research signed a letter of intent in Abu Dhabi to build a joint research and development centre in the city. The centre will build remote-sensing satellites and space telescopes, and pursue joint deep space exploration missions.

By Oxford Business Group 

Canada Walks Diplomatic Tightrope In Caucasus

By Eurasianet - Aug 28, 2023

• Canada is set to open an embassy in Armenia and join the EU Mission in Armenia, marking an increased engagement in the region.
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• The decision comes as Canada also reopens talks with Turkey about exporting Canadian defense technology, following an embargo imposed in 2021 due to Turkey's role in the Nagorno-Karabakh war.
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• The Trudeau government is juggling international diplomatic considerations with domestic politics, including a vocal Armenian diaspora in Canada.

Canada is raising its diplomatic profile in the Caucasus, as domestic and foreign policy considerations are pushing Ottawa into the thick of the Nagorno-Karabakh conflict. 

Canadian Foreign Minister Mélanie Joly is expected to attend the opening of a Canadian embassy in Yerevan in September. Canada is also set to become the first third-party state to join the EU Mission in Armenia (EUMA), under which unarmed observers monitor conditions along Armenia’s side of the frontier with Azerbaijan. The mission strives to “contribute to human security in conflict-affected areas in Armenia,” as well as foster better Armenian-Azerbaijani relations. Canada’s observers will be drawn from the ranks of the Royal Canadian Mounted Police, a source with direct knowledge of the arrangement told Eurasianet. 

Canada’s interest in South Caucasus security appears connected to an ongoing diplomatic tussle with Turkey. Canadian officials announced their decision to join the EU monitoring mission just days after NATO’s annual summit in Lithuania, where Ottawa reportedly reopened talks with Turkey about the export of Canadian defense technology. Canada canceled military export permits to Turkey in 2021, after receiving “credible evidence” that Turkey transferred Canadian-made technology to Azerbaijan that was then used to great effect in the 2020 Nagorno-Karabakh war. “This use was not consistent with Canadian foreign policy, nor end-use assurances given by Turkey,” said former Canadian foreign minister Marc Garneau. 

In exchange for supporting Sweden’s NATO bid, Turkey is demanding that its NATO allies, Canada included, drop embargoes on defense technology. A Reuters report cited an unnamed Turkish official as saying it was unacceptable for NATO allies to impose export restrictions on each other.

During the 2020 Nagorno-Karabakh war, drones played a major role in helping Azerbaijan recapture large swathes of territory. Amidst the fighting, Armenian forces shot down a Turkish-made TB2 Bayraktar drone, which was equipped with what Armenian Prime Minister Nikol Pashinyan said was an “ultramodern optical unit that was produced in Canada.” The component was indeed the MX-15D targeting system, made by Canadian defense manufacturer L3 Harris Wescam. “It’s the brains of the system,” Chris Kilford, Canada’s former military attaché to Turkey, told Eurasianet. 

Without sufficient air defenses, the Armenian military suffered heavy losses from attacks by Azerbaijan’s fleet of TB2s. And it was this Canadian component that was critical to the drones’ effectiveness. 

“I think what will happen is that the embargo will be lifted, but it will come with certain export controls,” Kilford said. Canada is hoping, it appears, that by joining the EU border monitoring mission in Armenia, it can hedge against any potential political fallout of lifting the embargo. Prime Minister Justin Trudeau’s government doesn’t want to create complications for NATO by maintaining the embargo, but neither does it want to alienate a small, but influential domestic constituency, the country’s Armenian diaspora community.

“The government here might be weighing up the domestic damage that could be done by lifting the embargo,” Kilford said, referring to the potential for vocal diaspora opposition. Canada’s next federal election won’t take place until 2025, but the popularity of Trudeau’s Liberal Party is sagging, and the government already faces an uphill struggle to retain power. 

Joly already seems to be vigorously courting diaspora support. On August 20, she met with representatives of a diaspora organization, the Armenian National Committee of Canada (ANCC), during which they presented policy recommendations to ease hardships faced by Armenians in Karabakh. Joly also spoke at an annual festival of diaspora Armenians, held in Montreal from August 18-20, saying that Canada would play an active role in troubleshooting Karabakh-related issues. “It is important for Canada to play a very important role in the region,” Joly said in a video distributed via the @301arm channel on the platform formerly known as Twitter. “Armenians are facing a real threat in Artsakh.” Joly’s use of the term Artsakh, which is the Armenian word for the contested enclave, certainly pleased her Montreal audience, but its use in diplomatic dealings would be sure to alienate Azerbaijan.

While Kilford believes the embargo will ultimately be lifted, Canada could still block Turkey from importing the targeting pods from L3 Harris Wescam. Yet, even if Canada does so, the Turkish defense industry appears close to producing a suitable replacement. After Canada initially canceled its permits, Turkey developed its own targeting system for TB2s called CATS, made by Turkish defense manufacturer Aselsan. “I’ve visited many of Turkey’s arms manufacturers over the years. If they have to rely on their own CATS systems, it will become better and better,” Kilford said. 

The main reason for Canada’s increased engagement with Armenia, Kilford says, is to exert a greater degree of influence over future developments, including the possible normalization of relations between Armenia and its Turkic neighbors. 

While the EU monitoring mission has faced criticism over its inability to deter sporadic fighting along the border, it is still useful “in the margins,” said analyst Eric Hacopian. The patrols increase the potential political cost Azerbaijan could pay for conducting potential military operations on Armenian territory, he added

By Fin DePencier via Eurasianet.org