Tunisia E&P activity to slow amidst increased regulatory scrutiny

• Tunisia's new constitution, passed in January 2014, includes Article 13 which requires natural resource agreements to be ratified by the National Constituent Assembly rather than the Industry Minister
• Proponents of Article 13 include President Marzouki's party, and is part of a trend towards growing scrutiny of decision making in the country's upstream sector
• This will add a new layer of approvals for investments, extension of permitting timelines and routine permission held back
• Tunisia's upstream industry is characterised by a large number of smaller companies and independents, often working in consortia - these are often reliant on farm-in and farm-out activity to manage exposure and costs
• These companies may be deterred from entering the country if permitting delays become worse and proposals for regulatory/contract reviews go ahead
• A number of approvals are currently outstanding including:
• EnQuest/PA in Didon and Zarat permits
• Extension of Sonde's Joint Oil licence
• ADX/Gulfsands asset transfer
• Cygam sale of Sud Tozour to YNG

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Further Kashagan delays

• Discovered in 2000; project partners are Eni, Total, Shell, XOM (each with 16.8%), KMG (16.9%), CNPC (8.3%), INPEX (7.6%)
• USD50bn spent on Phae 1; production originally expected to start in 2006 but has been plagued by delays and cost overruns
• Production commenced in September 2013, but subsequently shut down due to leaks of hydrogen sulphide from the extensive gas network
• Kazakhstan environment ministry will fine the Kashagan companies USD735m for burning gas emptied from the pipeline - the companies have said they will appeal the fine
• Production not expected to resume until end 2015/early 2016 as much of the pipeline network will need to be replaced due to corrosion
• Phase 1 proven reserves estimated at 3.3bnboe (c.80% oil). Including future phases, total recoverable estimates of 9-13bnboe
• Kashagan partners have said they will need extension to to PSC (expiring 2041) to warrant further investment to lift production to >1mmboepd - Phase 1 production is expected to be at c.450mboepd

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Cobalt makes Orca discovery in Kwanza Basin

• Cobalt has 40% WI in Blocks 9, 20 and 21 offshore Angola
• In the company's Q1 results (1 May 2014), Cobalt announced that it had successfully tested the Orca-1 well which flowed at a constrained rate of 3,700bopd + 460mcmpd
• Orca-1 lies in Block 20 and is the largest discovery to date in the Kwanza Basin; Orca is estimated to hold 400-700mmboe
• On Block 21, Cobalt recently began drilling the Cameia-3 well with the field expected to reach first oil in 2017
• The Cameia-1 discovery was drilled made in 2012 and the Cameia-2 appraisal was drilled in 2013
• On Block 9, Cobalt has received a two-year extension where it plans to drill the Loengo-1 exploration well after Cameia-3

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Libya plans "smart cards" to stop fuel smuggling

• Gaddafi introduced subsidies on items from fuel to bread and airline tickets to discourage opposition
• The subsidies, together with public salaries take up more than half of the national budget
• Citizens have been subsidised buying fuel and smuggling into Tunisia for resale at higher prices
• With shutdown of oil fields and ports since mid-2013, crude export revenues are drying up and the government is proposing a fuel card system to parliament that will limit the amount of subsidised fuel that can be bought
• Egypt has recently implemented such a fuel card system

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Sinopec and China Huadian acquire 15% stake in Petronas' Pacific NorthWest LNG project

• Sinopec and China Huadian, one of China's largest power companies, have agreed to acquire a 15% stake in Petronas' proposed Pacific NorthWest LNG project, BC
• The acquisition also includes the 15% associated interest in Petronas' Montney position
• Sinopec has also entered into a Heads of Agreement to purchase an additional 3mmtpa of LNG for 20 years sourced primarily from the Pacific NorthWest LNG project 
• Following Petronas' acquisition of Progress Energy in 2012 for CAD5.5bn, the company announced its intention reduce its exposure to the LNG project by divesting up to a 50% stake
• Divestments to date are Japex (10%), Petroleum Brunei (3%), Indian Oil (10%); post completion of the sale to Sinopec and China Huadian (15%), Petronas will retain a 62% stake in the project

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Encana divests more gas assets

• On 31 March 2014, Encaca sold its interests in the Jonah Field to TPG
• On 29 April 2014, Encana announced the sale of further gas assets in US L48 to an undisclosed buyer
• Encana has adopted strategy known as "Getting Back to Winning", focusing on liquids-rich opportunities/higher returns at times of weak gas pricing
• PE buyers continue to pick up gas assets - after low risk, long-lived cash generating assets, potential for cost efficiencies
• With absence of shareholder pressure, PE buyers can hold assets and take longer-term view on gas prices
• PE can also achieve higher returns as do not need to pay corporate tax (profits distributed directly to shareholders), similar to MLPs

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OMV farms-in to Tullow Madagascar blocks

• On 30 April 2014, OMV announced the acquisition of a 35% WI in Block 3109 (Mandabe) and Block 3111 (Berenty) from Tullow
• Tullow will retain 65% WI and remain Operator
• Block 3109: 2D to be shot in 2014
• Block 3111: First well to be spud in Q1 2015
• The acquisition continues OMV's strategy of "build[ing] up a new exploration business in the region of Sub-Saharan Africa"
• In August 2013, OMV farmed into a 40% WI in Niko's Grand Prix PSC, offshore Madagascar (Niko 35% WI), EnerMad (25% WI)
• In December 2013, OMV farmed into Ophir's exploration projects in Gabon:
• Mbeli (10% WI)
• Ntsina (10% WI)
• Gnondo (30% WI)
• Manga (30% WI)
• 3D seismic is planned on all the licences in 2014, with 1 well to be drilled on each of Mbeli, Ntsina and Gnondo
• In March 2014, OMV teamed up with Murphy Oil to acquire Blocks 2613A and 2613B, Namibia from Brazil's Cowan Petroleum; OMV acquired a 25% WI in the blocks, with Murphy taking 40% and Operatorship
• OMV's head of exploration and production, Jaap Huijskes, said in a statement at the time: "Offshore Namibia offers great exploration potential as it is largely unexplored, yet has all the elements of an effective hydrocarbon system"

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