PGNiG acquires Total's 22.2% stake in King Lear

Total has sold its 22.2% stake in King Lear to PGNiG. This follows AkerBP's acquisition of Equinor's 77.8% stake in the field in October 2018 for USD250 million.

In October 2018, AkerBP noted that King Lear is one of the largest undeveloped discoveries in Norway and that it planned to develope the field as a satellite to Ula. Ula is operated by AkerBP (80% with DNO as 20% partner) and the tie-back will improve capacity utilisation at the Ula facilities. Importantly, King Lear will also provide signifcant gas volumes for injection into the Ula field for increased oil recovery. Net recoverable resources at King Lear is estimated at c.100mmboe and is gas weighted.

PGNiG notes that the development of the field is planned to commence in 2021 with first production in 2025.

The King Lear development has stalled since its initial discovery as it was originally expected to be part of the Greater Ekofisk Area project which would have seen King Leat, Tommeliten Alpha and Tor tie back to Ekofisk. However gas processing capacity constraints at Ekofisk meant the project was not sanctioned.

With PGNiG entry into King Lear, and also ownership of Tommeliten Alpha (acquired from Equinor in October 2018) could see the latter now being routed to King Lear.

Read More

PGNiG expands footprint in Norway

On 18^th October PGNiG announced that it had agreed to acquire Equinor's interest in the Tommeliten Alpha gas and condensate field in the Norwegian North Sea. This continues PGNiG's strategy of diversifying its gas supply away from Russia.

PGNiG has always had an interest in Norwegian gas seeing it as as logical and accessible source of gas for Poland. As the long term Russian gas supply contracts come to expiry, PGNiG is making bold moves to secure new sources of gas and LNG. See PGNiG shuns Russian gas.

The operator of the discovery is ConocoPhilips (28.26%), and current partners are Total (20.23%), Eni Norge (9.13%) and Equinor (42.38%) which will sell its entire working interest to PGNiG. The agreed price for Equinor's stake was USD220 million at 1 January 2018 effective date.

The Tommeliten Alpha discovery is located in the vicinity of large, existing fields, most notably the giant Ekofisk field. According to current plans, production is expected to commence in 2024, and the development concept assumes a subsea tie-back to the existing infrastructure on Ekofisk.

Tommeliten Alpha is a gas and condensate field with estimated recoverable resources of 52 mmboe (net to PGNiG's 42.38%). PGNiG believes in an upside potential in the field reserves as well as significant exploration upside in the area.

The field was originally planned to start production in 2019, but development plans were shelved by operator ConocoPhillips in 2016 due to low oil prices.

#PGNiG #NorthSea #TommelitenAlpha # Equinor #Conoco

Read More

The oil market is recovering

Oil inventories have been worked down and beginning to return to historical normalised levels, driven by a mix of robust demand growth on the one hand and concerted efforts by OPEC plus friends to cap production on the other.

While 12-18 months ago heightened geopolitical tensions and operational outages barely moved oil prices, such events are now needle moving news. The outage of Forties at the end of last year and intermittent headline grabbing conflicts in Libya which cause temporary spikes in oil prices are case in point.

However, RBC argues that understanding the breakdown of the inventory story is critical. Data shows that Asian inventories have been worked down which is key for “pulling” crude out of the Atlantic Basin. On the other hand European storage remains in surplus but the clearing of the Atlantic Basin will support drawdowns of European inventory.

Source: RBC Capital Markets, March 2018

It is therefore clear that while the global picture is moving in the right direction, there remains pockets of over and under supply in different regions. The clearing of North Sea crudes, which will be demonstrated by stronger pricing of regional blends such as Ekofisk vs. benchmark is therefore a secondary data point to monitor together with inventory levels for the next step of the global rebalancing story.

Read More