Exxon Carries on Drilling Off Essequibo Despite Venezuela's Objections

By Editorial Dept - Feb 16, 2024

Politics, Geopolitics & Conflict

-Ukraine said this week that it had destroyed a Russian warship off the coast of occupied Crimea, sinking the vessel with navy drones. This comes amid a number of developments related to the war in Ukraine this week, including a Ukrainian strike on a Russian border town, Belgorod, near a shopping center, in which seven people were killed on Thursday. The flashpoint, frontline city in Ukraine is now Avdiivka, near occupied Donetsk, which the Russians have turned their attention to. The Russians have yet to make any decisive breakthrough.

-Estonian intelligence warning that Russia is preparing for a military confrontation with the West in the next decade–analysis derived from the fact that Russia is planning to double its military troops at its borders with Finland and the Baltics.

-In Guyana, we view Venezuela’s deploying more troops to the border as tensions over Maduro’s claim on the oil-rich Essequibo area rise. Venezuela is building up its troop presence on Ankoko Island, a disputed territory on the border area with Guyana. The build-up is likely more of a smokescreen for Maduro, who has launched an all-out war with the opposition in Caracas in the face of presidential elections that are planned for this year. The buildup itself is unimpressive in terms of scale.

-On Thursday, U.S. Centcom said its forces had seized a weapons shipment from Iran en route to Yemen’s Houthis, who continue their bombardment of the Red Sea shipping lane. U.S. forces seized unmanned underwater surface vehicle components, anti-tank launcher assemblies and medium-range ballistic missile components, among other weaponry.

Deals, Mergers & Acquisitions

-BP and ADNOC will form a natural gas JV in Egypt, in line with ADNOC’s goal of growing its presence internationally, as evidenced by other international projects such as in Azerbaijan. The JV will also further cement Egypt’s ties with the UAE, which has been a supporter of El-Sisi. As part of the new deal, BP will contribute towards three development concessions, and ADNOC will help foot the bill for growth opportunities in an unspecified amount. The deal will give the UAE a foothold in the European LNG market, of which Egypt is a supplier.

-Diamondback Energy will purchase privately held Endeavor Energy in a $26B deal, comprising $17.8B of Diamondback stock and $8B in cash. The resulting entity will be 60.5% by Diamondback and 39.5% by Endeavor, boasting a market cap of $50B.

Discovery & Development

-Cyprus’ first natural gas production could begin as soon as 2026, and the presidential republic also plans to participate in a high-powered electricity cable project that would link the eastern Mediterranean to continental Europe. The island would greatly benefit from a hook-up to overseas power markets, and domestic gas production could also change. The gas discovery that will be first to production will likely be TotalEnergy and Eni’s 2022 discovery known as Cronos, which is thought to hold 2.5 tcf of gas. The project would see nat gas delivered to Eni’z Zohr facilities in Egypt. Eni completed the drilling of a second appraisal well at Cronos this week.

-Wintershall Dea will drill more appraisal wells in its shallow-water discovery known as Kan-1EXP in Block 30 of the Sureste basin offshore Mexico, with last year’s pre-drill estimating the wildcat’s resource potential to be 78.5 million boe with a 40% probability of success.

-Var Energi ASA drilled two dry wells at its Hubert and Magellan prospects in PL 917 off the coast of Norway. The wells were the third and fourth in the license, and have since been permanently plugged. Var Energi is the operator of PL 917 at 40%. Its partners are Aker BP (40%) and Equinor (20%).

-Despite Venezuela’s objections, Exxon said it would carry on with its drilling in Essequibo in Guyana’s Stabroek block. Venezuela’s pushback and insistence that the area in question rightfully belongs to Venezuela likely brings back bad memories for Exxon following the country’s nationalization of Exxon’s oil assets back in 2007–a move that the World Bank said in 2014 would cost PDVSA $1.6B.