Unnamed Reuters Sources Say Aramco, ADNOC in US LNG Talks

By Charles Kennedy - Mar 06, 2024

Reuters on Wednesday cited unnamed sources as saying that giant Saudi Aramco and Abu Dhabi National Oil Company (ADNOC) are in talks to invest in American liquefied natural gas (LNG) in a quest to compete with Qatar, which lost its ranking to the U.S. in January as the world’s largest LNG exporter. 

Citing “sources aware of the matter”, Reuters said Aramco and ADNOC are attempting to broaden competition with Qatar as demand for LNG is expected to grow by 50% by 2030. 

On the Aramco side, talks reportedly center around the Sempra Infrastructure Port Arthur LNG Phase 2 project in Texas. Phase 1 is already producing, and phase 2 has been proposed for expansion. 

On the ADNOC side, talks are reportedly in conjunction with NextDecade’s proposed fourth processing facility at the Rio Grande LNG export operation and concerns a potential offtake agreement. 

Reuters was unable to provide additional detail about the nature of the talks, or whether purchase agreements or equity stakes were being discussed. 

Neither Aramco nor ADNOC have responded to Reuters requests for comment. 

Reports of these unconfirmed talks come after the Biden Administration in January paused approvals for new LNG projects, and as American LNG faces difficulties in securing financing for new projects. 

"The message is: If ESG focussed banks won't finance U.S. projects, someone will," Reuters cited Kaushal Ramesh, Rystad Energy's vice president for LNG research, as saying. 

In early January, the U.S. overtook Qatar and the largest LNG exporter in the world, primarily due to the Russian invasion of Ukraine, which forced Europe to quickly change energy gears and intake American LNG to replace Russian gas. 

The U.S. started exporting LNG in 2016. Forbes cites LSEG data as showing full-year 2023 American LNG exports had reached 88.9 million metric tons, an increase year-on-year of around 15%

 

TotalEnergies and Qatar Expand Namibia Oil Exploration Into South Africa

By Charles Kennedy - Mar 06, 2024

TotalEnergies and QatarEnergy are expanding their efforts to explore for oil and gas in the Orange Basin offshore Namibia by acquiring a nearby license in the basin in South African waters.  

TotalEnergies and its partner QatarEnergy have signed an agreement to buy participating interests in Block 3B/4B offshore South Africa from the companies Africa Oil South Africa, Azinam, and Ricocure, the French supermajor said on Wednesday.    

Following completion of the transaction, TotalEnergies will hold a 33% participating interest in Block 3B/4B and assume operatorship, while QatarEnergy will hold a 24% stake. The remaining interests will be held by the existing license holders – Africa Oil, Ricocure, and Azinam.

“Following the Venus success in Namibia, TotalEnergies is continuing to progress its Exploration effort in the Orange Basin, by entering this promising exploration license in South Africa”, said Kevin McLachlan, Senior Vice-President Exploration of TotalEnergies.

QatarEnergy’s president and chief executive, Saad Sherida Al-Kaabi, said,

“The farm-in to Block 3B/4B builds on our presence in the prolific Orange Basin.”

“We look forward to working together with our partners and the relevant government entities in South Africa to further assess this block’s potential,” said Al-Kaabi, who is also Qatar’s Minister of State for Energy Affairs.

Block 3B/4B covers an area of more than 17,500 square kilometers (6,757 square miles) within the Orange Basin offshore the western coast of South Africa in water depths ranging between 300 and 2,000 meters (985 ft to 6,562 ft).

South Africa is one of TotalEnergies’ two targeted frontier exploration areas offshore Africa—the other one is offshore Namibia, which analysts say could have the potential to become the new Guyana for oil and gas exploration and discoveries.

TotalEnergies, as well as Shell, have already made large discoveries offshore Namibia.

TotalEnergies made a significant discovery of light oil with associated gas on the Venus prospect in the Orange Basin in early 2022. Venus in Namibia could be a “giant oil and gas discovery,” TotalEnergies said in an investor presentation in September 2022.   

By Charles Kennedy for Oilprice.com

Nigeria Power Market Tycoon Calls for Energy Grid Reforms

By Charles Kennedy - Mar 07, 2024

A Nigerian businessman who controls 15% of the country’s electricity market has called for an overhaul of the grid to solve long-running problems with supply.

Tony Elumelu, who controls several power sector companies, told Bloomberg in an interview that Nigeria needs more transmission lines and the electricity market needs more liquidity in order to reverse years of insufficient supply that is hampering economic growth.

“As a country, we can’t produce well enough in spite of our natural resources. The reason is lack of electricity,” Elumelu said.

Nigeria can produce around 13 GW of electricity but only delivers about 4 GW to the grid due to constraints, which means most of its population is solidly dependent on home generators for their power supply. A privatization drive that saw 15 power generators move from state into private hands in 2013 was expected to solve the problem but the transmission lines remained state-owned and no meaningful investments were made in expanding the network.

So, while power generation increased, bringing the electricity to end consumers was hampered by the size of the grid.

“Even where you generate electricity, the grid cannot take it, so it’s a problem for us,” Elumelu explained to Bloomberg. “I am advocating that let us privatize transmission lines.”

The businessman, whose company Transcorp Power Ltd. went public this week with a valuation of $1.2 billion, also suggested that the government attracts investors to develop Nigeria’s substantial natural gas reserves and sell them to power generators.

The country has problems in the distribution segment as well. There are 11 power distribution companies operating in Nigeria but they are all struggling with a lack of capital and exorbitant tariffs imposed by the country’s electricity market regulator.

These persistent problems have culminated in frequent blackouts and a “total system collapse” that occurred in September last year. The collapse was caused by an explosion at a transmission line, which tripped the grid bringing power generation to zero.

By Charles Kennedy for Oilprice.com

Democrats Seek Probe Into U.S. Oil and Gas Mergers

By Tsvetana Paraskova - Mar 07, 2024

Nearly 50 Democratic Senators and Representatives are urging the Federal Trade Commission (FTC) to investigate the recent mergers in America’s oil and gas sector amid concerns that they would harm competition and hurt consumers.   

In a letter to FTC chair Lina Khan, the Democratic Members of Congress, led by Senate Majority Leader Chuck Schumer, wrote that the recent wave of oil and gas industry consolidation “threatens competition in the industry and could lead to higher prices and fewer choices for businesses across the supply chain, suppress worker wages, and make heating, cooling, and gas at the pump more expensive for consumers.”

The lawmakers urge the FTC to fully investigate the announced mergers and oppose any acquisitions if it determines them to be in violation of antitrust law.

“Contrary to disinformation spread by industry groups, these deals are not about efficiency, international competitiveness, or lowering costs; they are designed to pump more profits out of Americans’ pockets – plain and simple,” the Democratic Members of Congress wrote in the letter.

“Fossil fuel companies have overwhelmingly identified investor pressure as the reason to keep prices high so they can continue to benefit from record profits. Americans are paying the price for Big Oil’s greed and are still struggling to keep up with gas prices higher than prepandemic levels.”

Last year, Democrats had already raised the issue with the FTC when ExxonMobil and Chevron announced their respective mega deals. In November, Democratic lawmakers urged the antitrust regulator to “carefully consider all of the possible anticompetitive harms that these acquisitions present,” referring to Exxon’s proposed $60 billion acquisition of Pioneer Natural Resources and Chevron’s proposed $53 billion acquisition of Hess Corporation.

Since Exxon and Chevron announced the acquisitions, many other companies, large and small, have entered into M&A deals, including Occidental and Chesapeake.

The value of global upstream mergers and acquisitions this quarter is the highest first quarter since 2017, driven by frenzied consolidation in the U.S. shale patch, analysts told Reuters last month.  

Industry executives and analysts expect the consolidation drive in the U.S. oil and gas sector to continue amid high stock values and the desire of many firms to get their hands on more inventory for production in the top shale basin, the Permian.

By Tsvetana Paraskova for Oilprice.com

  

Chevron Returns to Venezuela Oil Field

By Charles Kennedy - Mar 07, 2024

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

By Irina Slav - Mar 07, 2024

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

By Irina Slav - Mar 06, 2024

• 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.

Perspectives | Clock is ticking as Central Asia confronts water calamity

Stakeholders need to collaborate, tackle waste and address the elephant in the room: Afghanistan.

The dwindling health of the Amu-Darya River is a stark illustration of the consequences of poor water resources management. (Photo: David Trilling)

Sanat Kushkumbayev Feb 14, 2024

The future of water in Central Asia is about numbers.

And the numbers are troubling.

Consider this: the five countries in the region collectively consume approximately 127 billion cubic meters of water, with about 80 percent, or 100 billion cubic meters, used annually for agriculture.

But only 50 percent of the water earmarked for agriculture is utilized effectively. This implies that half of the water does not reach the fields and is lost along the way due to the poor condition of irrigation facilities and wasteful agricultural practices.

To put it succinctly, countries are flushing away vast quantities of water and getting little in return. That is why Central Asia’s water use efficiency indicator has been found to be eight times lower than the global average.

There are clear and present repercussions to this mismanagement.

Of the region’s 79 million people, fully 22 million lack access to safe water. So, for every 10 Central Asians, three live perennially without the certainty they can find a glass of clean water to drink. And that ratio may get much worse without remedial action.

The World Bank estimates that the population of the region is poised to grow to 90-110 million by 2050. Continued urbanization, climate change, droughts, and the demand for increased food production will only exacerbate the strain on scarce water resources.

An immediate turn to rational usage of shared water resources on a sustainable, equitable, and cooperative basis is imperative.

This year, Kazakhstan has taken over as chair of the International Fund for Saving the Aral Sea, or IFAS. It will perform that role for three years.

IFAS needs a kickstart if it is to be of any use. As observers have fairly noted, the Aral Sea is scarcely a sea, and the International Fund for Saving the Aral Sea lacks funds. Kazakh officials have stated that they intend to give new vigor to this body.

This presents a valuable opportunity to take decisive steps.

To begin with, we should establish a Central Asian Water and Energy Consortium, with equal participation of all regional states. This idea has been under discussion for a considerable time and has garnered support, particularly at the USAID. The consortium should be based on an international treaty and be open to extra-regional participants, international organizations, and financial institutions.

The desired outcome is to strike a balance between the interests of so-called "upper" and "lower" states.

Upper states – which is to say Kyrgyzstan and Tajikistan, the heavily mountainous nations in which our region’s big rivers mostly rise – want to build large hydroelectric power plants. That will entail erecting tall dams and vast reservoirs.

What is more, politicians and experts in those countries call for water from transboundary rivers to be considered a commodity. This implies slapping a charge on water use by lower states – Uzbekistan, Turkmenistan, and Kazakhstan, which happen to be far better endowed with other natural resources, like oil, gas, and even uranium.

This impasse has led to decades of often fruitless disputes. Less arguing, more negotiating is the order of the day.

Next, there is the elephant in the room: Afghanistan. There is no point in pretending this country does not have a colossal part to play. It taps into the same water resources that Central Asian nations rely upon, so it needs to be made a partner to the conversation.

Failure to do that bears deep risks.

In 2022, the Taliban-run government initiated construction of a significant irrigation project known as the Kosh-Tepa Canal. The canal spans 285 kilometers, from Balkh to Faryab province. It is expected that work on it will be completed by 2028.

Once finished, Kosh-Tepa will have the capacity to divert up to 20 percent of water from the Amu Darya. This development could raise tensions between Central Asian countries and Afghanistan.

There may be ideological and political differences between Afghanistan and the five countries of Central Asia, but Kabul’s practical participation in water management processes is a sine qua non for sustainable management of the entire basin.

And third, it is high time to apply best practices in water usage.

This is costly, but doing this would be a win-win. Using water efficiently means more of it is available to go around, less pollution, higher productivity, which in turn means more money. All the region’s governments need to be encouraging the introduction of modern technologies, digitalization, and green investments in the water sector.

Again, we must turn to numbers to illustrate the stakes.

The Global Commission on Adaptation has identified a direct correlation between water policies and economic indicators. Their predictions suggest that if Central Asian countries fail to address the water issue by 2050, there could be a substantial decrease in gross domestic product, or GDP, in the range of 7-12 percent.

That would be calamitous.


Dr. Sanat Kushkumbayev is a visiting scholar at the Institute for European, Russian, and Eurasian Studies, Elliott School of International Affairs at The George Washington University.

Kazakhstan gives methane super-emitter $780,000 slap on wrist

U.S. officials say the impact of the leak was “comparable to that of driving more than 717,000 petrol cars for a year.”

Feb 19, 2024
Examples of satellite-based methane plumes as documented by SRON Netherlands Institute for Space Research and the Valencia Polytechnic University.

A state environmental agency in Kazakhstan has fined an oil company in the west of the country $780,000 over a prolonged fire at one of its fields last year that caused one of the largest emissions of methane in history.

The ecology department of the Mangystau regional government said on February 19 that methane concentrations at the Buzachi Neft-operated Karaturun field exceeded permissible levels by 480 times.

The alarm over the leak was raised by geo-monitoring firm Kayrros SAS, which reported in July that it had produced satellite imagery showing clouds of methane rising from the oil field.

Buzachi Neft told Bloomberg news agency at the time that the “satellite images likely [showed] hot vapor clouds with minimal traces of the greenhouse gas.”

That explanation was dismissed by Kayrros.

“It is extremely unlikely to mistake water vapor for methane on multiple images captured by two hyperspectral satellites, whose very high spectral resolution leaves little doubt about the nature of the gas observed,” Kayrros told Bloomberg.

Buzachi Neft elsewhere sought to claim that it was taking measures to mitigate methane emissions.

“In order to avoid the unauthorized release of gasses in the area of well No. 303, the company regularly fires a burning charge into the clouds evaporating from the zone of active combustion,” Daniyar Duisembayev, deputy general director for strategic development at Buzachi Neft, told Vlast news website in a written statement in August.

This was in turn contradicted by researchers with the SRON Netherlands Institute for Space Research and the Valencia Polytechnic University.

“The relatively low intensity of the fire at the Karaturun East site would indicate that only a small fraction of the gas outflow was flared,” the researchers said in a paper published last week.

Such large emissions of methane are alarming because the gas has a far more potent greenhouse effect than carbon dioxide.

The fire that triggered the leak broke out at an oil well at the Karaturun field on June 9. The blaze was only put out on December 25.

The Mangystau region ecology department said it initiated an unscheduled inspection of the offending site in January — one month after the blaze was extinguished and six months after the issue was reported by both domestic and international media.

News of the fine, meanwhile, comes just days after the BBC published its own report on the methane leak. The BBC’s report cited the U.S. Environmental Protection Agency's Greenhouse Gas Equivalency Calculator as assessing that the leak was “comparable to that of driving more than 717,000 petrol cars for a year.”

The Mangystau ecology department inspection revealed, among other things, that drilling on the well that exploded had been, under the terms of the development license, due to begin in 2024, but that it began in May 2023 instead.

“Based on the results of the inspection, the company was ordered to develop a remediation program to eliminate the environmental damage caused,” the department said.

These developments have only consolidated Central Asia’s dismal reputation as a major contributor to the greenhouse gas crisis.

The Guardian newspaper reported in 2023, citing satellite data, again provided by Kayrros, on how methane leaks at two gas fields alone in Turkmenistan in 2022 contributed more to global warming than did all the United Kingdom’s carbon emissions.

In attempt to repair that public relations damage, Turkmenistan announced at the COP-28 climate summit in Dubai that it would sign up to the Global Methane Pledge, a voluntary agreement that commits adherents to cut methane emissions by 30 percent by 2030.

In doing so, it joined another new adherent to the Global Methane Pledge: Kazakhstan.