Saudi Arabia - joining the dots: Part 3 - The reshuffling has begun

Saudi Arabia - joining the dots is a series of blog entries exploring Saudi Arabia's role in the oil markets with a brief look at the history of the royal family and politics that dictate and influence the Kingdom's oil policy.

Part 3 - The reshuffling has begun

Ali al-Niami's job remains safe...for now

In a further move which signals King Salman's tightening grip over the Kingdom's affairs since coming to power,  Salman promoted his son Prince Abdulaziz bin Salman from the position of Assistant Minister for Petroleum Affairs to Deputy Oil Minister at the end of January 2015.

The move, although unexpected, should not be seen as a surprise given Salman's desire to place members of the Sadairi branch of the family into key positions.

Ali al-Niami's post as Oil Minister remains safe for now but his power in dictating Saudi oil policy, arguably the one of the most important roles in the Kingdom, is quickly diminishing. The re-shuffling is also symbolically important as it could be the first in a number of moves by Salman to sideline al-Niami and his policy of defending Saudi market share and letting oil prices fall to USD50/bbl - a policy which does not sit well with factions within the Saudi governing circle.

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Natuna Sea Block A PSC ("NSBA")

• KUFPEC (33.33%), PMO (28.67%*), Petronas (15%), Pertamina (11.5%), PTTEP (11.5%)
• Pertamina and PTTEP acquired their stakes as part of Hess' Indonesian portfolio
• NSBA supplies gas to SembGas in Singapore, together with South Natuna Sea Block B and Kakap, as part of a GSA signed in 1999 for a period of 22 years
• In 2008, PMO signed two additional GSAs to supply NSBA gas for power generation in Batam, Indonesia
• Due to delay in constructing the pipeline to Batam, a swap agreement has been signed for the Batam earmarked gas to be supplied to Singapore and another field to supply Batam instead
• The largest field on the block is Anoa which contains about half of the PSC's gas reserves. Gas from Anoa, Pelikan, Bison and Gajah Puteri are dedicated to the SembGas 1 GSA
• SembGas 2 is predominantly supplied by Gajah Baru which was developed as a second phase of NSBA
• Crude is piped by an 8" pipeline to the Anoa Natuna FPSO for processing and storage
• Gas is exported via the West Natuna Transportation System (operated by COP) and serves the three Natuna PSCs (NSBA, South Natuna Block B and Kakap)
• The network consists of 656km of pipeline, with a 470km section transporting the gas to Singapore
• A pipeline connecting the system to Batam is also planned but is the responsibility of the buyers of the gas
• The pipeline costs are recoverable under the PSCs

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Aasta Hansteen Area

• Located in Norwegian Sea; Aasta Hansteen discovered in 1997 but remained undeveloped due to the remoteness
• Area includes Snefrid Sør and Haklang, both discovered in 2008
• Statoil (75%*), OMV (15%), COP (10%)
• Area thought to contain >2.4 GIIP, estimated recoery c.66%
• PDO submitted in January 2013 and received approval in April 2013
• Development will utilise subsea wells tied back to SPAR platform
• Power supply expected to be generated on platform due to high cost and difficulty of supplying electricity from shore (distance)
• First production expected in Q3 2017
• Aasta Hansteen will be first deepwater development in Voring Basin; facilities expected to be used by other fields and discoveries in area
• Gas will be exported by new 480km pipeline (Polarled pipeline) from SPAR to Nyhamna gas terminal; condensate will be offloaded from the SPAR
• Standalone economics are marginal, due to remoteness of area
• Tie-backs will improve economics (tariff income)
• Attractiveness of area surrounding Aasta Hansteen demonstrated by high take-up of licences in recent licensing rounds
• Polarled pipeline will draw further investment and exploration
• Government announced changes to fiscal regime in May 2013 - PDO submitted prior to announced change so should be eligible for transitional terms (7.5% capital uplift vs. 5.5%)

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Saudi Arabia - joining the dots: Part 2 - Scandal

Saudi Arabia - joining the dots is a series of blog entries exploring Saudi Arabia's role in the oil markets with a brief look at the history of the royal family and politics that dictate and influence the Kingdom's oil policy.

Part 2 - Scandal



In 2006, the then King Abdullah created the Allegiance Council in 2006 to help select future rulers. In March 2014, Prince Muqrin was appointed by Abdullah to be the next in line after Salman, placing Muqrin to be the third in line to the throne at the time. Prince Muqrin has now been elevated to second in line following the death of Abdullah. 

However, the appointment of Muqrin was not an unanimous decision by the Allegiance Council. It was in fact, somewhat of a surprise given Muqrin's mother is of Yemeni origin and not of Saudi Arabia. It is believed that Muqrin was selected by Abdullah as he was the most likely to continue Abdullah's domestic reform policy, which he was unable to fully devote his time to when he became King.

Since King Salman's crowning, Salman has appointed his nephew Prince Mohammed Bin Nayef to the post of Second deputy Premier, the post also held by Muqrin. This essentially places Salman's nephew to be next in line to the throne, potentially undermining Muqrin's rise. Furthermore, it is now unknown whether Salman will demolish the Allegiance Council altogether.

Muqrin

vs

Bin Nayef

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Saudi Arabia - joining the dots: Part 1 - The return of the Sudairis

Saudi Arabia - joining the dots is a series of blog entries exploring Saudi Arabia's role in the oil markets with a brief look at the history of the royal family and politics that dictate and influence the Kingdom's oil policy.

Part 1 - The return of the Sudairis

On Friday 23^rd January 2015, King Abdullah passed away paving the way for the Sudairi branch of the Royal Family to consolidate power and strengthen its grip over the country. 

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Repsol makes US$8.3bn offer for Talisman Energy

Repsol makes US$8.3bn offer for Talisman Energy @ US$8/share

86% premium to 12 December closing price

...but not that big in the context of the recent share price fall

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Sub-Saharan Africa - newsflow update

Gabon Deepwater - Leopard discovery

• Leopard-1 was drilled on licence BCD10
• Shell 75%*, CNOOC 25%
• Encountered substantial gas column with 200m net gas pay
• Further appraisal required
• FLNG? 3-4 tcf may be required, although economics of sales into Europe are marginal
• Government is also keen to grow domestic gas market

Congo Offshore - Eni/NewAge - follow up discovery in Marine XII

• Minsala Marine discovery
• Estimated 1bnboe in place, of which 80% oil
• In same shallow water block as the Litchendjili and Nene Marine fields, both of which are currently undergoing development

Angola - first discovery in Kwanza Basin

• Pre-salt offshore Kwanza Basin - oil discovery made by Repsol
• Will evaluate commerciality of the Locosso oil field
• Located in Block 22, immediately to south of Cobalt's Block 21 which contains the play opening Cameia field
• Given remote location and water depth, Wood Mackenzie estimates will require 300mmbbl to be commercial on standalone basis

Liberia, Cote d'Ivoire - Anadarko's non-commercial wells

• Anadarko wells in West Africa all encountered non-commercial oil
• Liberia: Iroko-1 and Timbo-1
• Cote d'Ivoire: Morue-1
• http://www.anadarko.com/SiteCollectionDocuments/PDF/Operations%20Reports/APC%203Q14%20Ops%20Report%2010-28-14.pdf

Nigeria - NNPC pre-empts sale of OML25

• NNPC has pre-empted on the sale of OML25
• Post transaction, NNPC will own 100% and likely transfer the interest to NPDC
• NPDC's portfolio is already overstretched and future investment will be heavily constrained
• The winning bidder of the Shell, Eni, Total process was Crestar Integrated Natural Resources Limited
• It is believed that the pre-emption, a decision made by the Minster of Energy, is due to Crestar's Chairman being  Osten Olorunsola
• The Minister of Energy had fired Osten Olorunsola as Director of Petroleum Resources in June 2013
• http://africaoilgasreport.com/2014/11/farm-in-farm-out/nnpc-in-desperate-search-for-funds-to-pay-for-oml-25/

South Sudan - fighting likely to intensify around fields

• Government and rebels now re-arming following end of rainy season
• Sudan is providing South Sudanese Machar-led rebels with weapons and intelligence
• Rebels likely to set-up bases where they can attack oil fields
• Local self defence militia are guarding fields bolstered by Chinese peacekeepers
• Should prevent rebels gaining control of fields, but fighting likely to intensify

East African export pipeline

• World bank has pledged USD600mm funding towards Ugandan/Kenyan export pipeline
• Total cost estimated to be >USD4bn
• Project still remains in early stages - commercial structure, construction, ownership and operations all yet to be determined
• FEED contracts expected to be awarded end of 2014

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