Chevron Returns to Venezuela Oil Field
Chevron has restarted drilling at a key Venezuelan oil field despite signals from the White House the sanction noose around Caracas is about to tighten.
Work at the Petroindependencia field in the Orinoco Belt has been ongoing since the middle of last month, Bloomberg reported today, citing unnamed sources. That work’s part of preparations to drill 30 new wells at the field, the report also said.
The new wells should increase Chevron’s total output from its joint ventures with PDVSA in Venezuela by 35% to some 250,000 barrels daily by next year.
Back in September last year, Reuters reported that Chevron was eyeing an increase of 65,000 bpd from its ventures with PDVSA by the end of 2024. At the time, the ventures were producing 135,000 barrels daily, which was 70% higher than a year earlier.
While Chevron is the only Western supermajor with special authorization to operate oil fields and export from Venezuela, Washington had indicated that more authorizations could be in the future amid tight global supply.
The mood has changed since September last year, however, as Maduro staked an open claim to the Essequibo region in neighboring Guyana with a December referendum. The move prompted a warning from Rystad Energy that if the situation escalated, Chevron would suffer a setback in its plans for Venezuelan oil.
Venezuela is home to the largest crude oil reserves in the world, though production has been in decline due to corruption and lack of investment in and mismanagement of state-run PDVSA. In 2022, production hit a 50-year low of around 700,000 bpd. Late last year, Washington eased some sanctions on Venezuela, allowing Chevron to resume work in the country to enable exports to make up for lack of access to Russian heavy crude as a result of the war in Ukraine.
By Charles Kennedy for Oilprice.com
Exxon Files for Arbitration Over Guyana Oil Block
Exxon has filed for arbitration on the issue of its rights to first refusal to acquire the stake of Hess Corp. in the Stabroek Block offshore Guyana where the two made a string of oil discoveries.
The move is the latest update in what seems like escalating problems between Exxon, the majority stakeholder in the Stabroek Block, and Chevron, which last year struck a deal to acquire Hess Corp. mostly because of its Guyana stake.
“We’re absolutely confident that within this contract, we have pre-emption rights, and we have filed for arbitration to make sure that we can secure those pre-emption rights,” Exxon senior VP Neil Chapman said at an event Wednesday, as quoted by the Financial Times.
“The pre-emption rights are to give us the opportunity to look at the value, which we can then match should we choose to do so,” Chapman also said, suggesting Exxon may make a counter-offer for Hess Corp’s assets in the Stabroek Block.
Exxon first invoked its first-refusal right to those assets earlier this year, with Hess Corp. and Chevron countering that these stipulations were not relevant because the deal between Hess and Chevron was not about Hess’s Guyanese assets but the whole company.
"The right of first refusal provision is not applicable to the merger. We are fully committed to the transaction and do not believe the ROFR or these discussions will prevent its successful completion," Chevron and Hess said in a joint statement in late February.
The dispute highlights how valuable the Stabroek Block is to oil majors in an environment of dwindling new discoveries. Since the Exxon-led consortium first struck oil in the 6.6 million acre Stabroek Block, the three companies, including China’s CNOOC, have booked more than 30 world-class oil discoveries containing more than an estimated 11 billion barrels of oil resources.
By Irina Slav for Oilprice.com
BP Tries To Reverse Big Oil’s Fortunes in Brazil
- Supermajors are returning pre-salt blocks in Brazil to the government after failing to strike oil.
- The exception here is oil major BP, which sees the drilling project in Sau Brasil as worth the effort.
- After its erroneous peak oil demand forecast, the company has changed its views on long-term oil production somewhat.
Back in 2019, Brazil produced over 1 billion barrels of crude oil. It was the first time the national total had broken the billion-barrel mark, and more than half of that was pumped from the presalt zone offshore Brazil.
Five years later, supermajors are returning presalt blocks to the government after failing to strike oil. But one supermajor is going the opposite way: BP is drilling a deepwater well in one of the fields where other oil companies came up empty.
Back in 2019, everyone was flocking to the presalt basins, lured in by exploration data suggesting there are billions of barrels of oil lying below the salt layer on Brazil’s continental shelf. Everyone who’s anyone in oil was in Brazil. And some are still there.
Exxon, Chevron, Shell, Norway’s Equinor, and China’s CNOOC all have operations in Brazil’s presalt fields, and they have no intention of leaving the country. However, those same companies are among a number of explorers that recently had to give up exploration in fringe presalt areas, Upstream Online reported last month.
Exxon, Chevron, Shell, and Spanish Repsol, plus Petrobras itself, have all quit exploration in as many as 15 blocks in the Santos and Campos basins—two of the focal points of the presalt exploration spree, believed to contain a lot of yet untapped oil. But BP appears to be optimistic about the Pau Brasil field, where it had plans to start drilling back in 2019.
To say that this optimism is unusual would be putting it mildly. During a price rally in a business-as-usual environment for the industry, BP’s move would have been perfectly normal. But this is neither a time of a price rally nor is it business as usual for the oil industry.
Oil prices appear to be stuck in a narrow range, not least because of the uncertain outlook on long-term demand, and the industry in general, and BP specifically, are being subjected to ever-growing pressure to basically drop oil and gas in favor of more politically correct project such as solar power and EV charging, for instance.
Because of this environment, the supermajors have lately focused on the lowest-cost, surest-return assets they have, and those that have a shortage of such assets have gone on an acquisition spree. The argument could be made that the oil industry is in survival mode, challenged by the inexorable progress of the energy transition.
However, BP’s move in Brazil, as well as similar moves by other Big Oil majors, such as TotalEnergies in East Africa and Shell in Namibia, to mention but a couple, suggest that the above argument doesn’t really hold water.
What BP is doing in Brazil is a high-risk exploration project. This is not a field that has not been explored at all. There has been exploration in the area, and it has turned up zero barrels of oil. Yet BP sees the drilling project in Sau Brasil as worth the effort—and the money. And that, in turn, suggests that, challenges or not, the industry is not convinced that oil demand is on its way out.
It is a little ironic because a couple of years ago, it was BP that said that oil demand growth had peaked and it would never return to 2019 levels after the pandemic lockdown slump. It soon turned out that the prediction was as wrong as could be.
Oil demand did not simply rebound after the end of the lockdowns. It surged considerably above 2019 levels. Perhaps BP learned from its forecasting mistake at the time. Perhaps that’s why it is giving Sau Brasil a new chance. Because the transition is not going too well. And the world still needs ever-growing amounts of oil.
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