Catcher if you can

The Catcher FPSO has arrived on schedule into the North Sea. The vessel is currently at Nigg performing crew changes and resupply ahead of moving to the Catcher field location.

The field remains on track to come onstream by the end of the year. Tweleve wells have been completed ahead of first oil and drilling has been better than expected, encountering 30% more net pay with 40% better well deliverability. As a result, expected plateau production has increased by 20% to 60mboepd. There is potential for a reserves upgrades above the existing 96mmboe 2P. The well results also reduce the total wells required from 20 to 18.

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OPEC may extend yet

Saudi Arabia has been working tirelessly behind the scenes and appears to be gaining good momentum with the major actors of OPEC + 1 (i.e. Russia) for extending the OPEC output agreement beyond April 2018. Saudi Arabia and its new ally, Russia, are keenly in favour of maintaining the cuts until June 2018 and several other producers have recently signaled their support for an extension as well.

Iran: Initially one of the tougher partners at the November 2016 pact discussions given its demand to return to pre-sanction production levels, Iran has played along with the creation of the special cap arrangement. Iranian oil minister, Bijan Zanganeh, has indicated that the country “will cooperate with the majority” on any extension proposal.

Iraq: Has publicly been a vocal critic of the current arrangements arguing that it was not exempt from the cuts (like Libya and Nigeria) as it needed funding to fight the war with Islamic State. Iraqi oil minister, Jabbar al Luiebi, has also been critical of the fact that Iraq has not been allowed to use its own numbers for the calculation of the output cut). Up until now, Iraq has been sending mixed signals about whether it would actually agree to any extension. However the Saudi oil minister, Khalid al-Falih, has been working behind the scenes and made a special visit to Baghdad in May before the OPEC meeting to ensure that Iraq would agree to a 9-month timeframe. Saudi’s diplomatic efforts may have paid off as Iraq is now softening its tone and affirming its commitment to the current agreement; in August 2017, Luiebi stated during a visit to Moscow that it would go along with an extension if one is agreed.

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Senegal moves ahead

Cairn Energy, the operator of the SNE field in Senegal, released a resource update on 22^nd August as part of its half-year announcement.

The updated 2C resource base is 563mmbbl gross (vs. 473mmbbl in May 2016) and now brings it in line with Woodside's estimate of 560mmbbl, but is still far below that of partner FAR which carries 641mmbbl (assessed by RISC). The differing resource estimates is nothing new and we constantly see the other partners playing catch-up with FAR.

Focus is now on FEED with no further drilling planned until after FID. It is envisaged that SNE will undertake a phased development with the initial phase targeting the lower 500 series sands and core area of the upper 400 series sands. The second phase will target the remainder of the 400 series and more outreach parts of the field.

Gross capex is currently estimated at USD2.3 bn, but could come down as the engineering is defined and possibility of Woodside bringing in an existing FPSO. FID for Phase 1 is planned for the end of 2018 with first oil in 2021 and an initial plateau of 75-125mbopd.

The partners are Cairn 40%, Woodside 35%, FAR 15% and Petrosen 10% (Petrosen has the option to increase its interest to 18% during the development phase).

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Sail-away to Catcher

The Catcher FPSO sailed away on 26th August from Singapore. It will take around 45 days to reach the UK North Sea, following which it will be connected and commissioned, a process expected to take 60-65 days with first oil targeting December.

The project is on schedule and c.30% below budget. Development drilling results have been promising with 30% more net pay and 40% better well deliverability. Expected plateau will now increase by 20% to 60mboepd with a potential for reserves upgrade from the 96mboe 2P at sanction.
The Catcher field partners are: Premier 50% operator, Cairn Energy 20%, MOL 20% and Dyas 10%.

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Kosmos London listing at risk as company and advisors face potential legal action

Kosmos' secondary listing is at risk as the Saharawi government had strongly condemned the company's move to list on the LSE. The Sahrawi government has threatened the company's licences in the region as well as legal action against Kosmos and its advisors.

The listing would set a precedent for legal proceedings regarding companies operating in the disputed region which could drag out for years to come. The press release by the Saharwi government is below.

--------------------------------------

Media release – Communiqué

For immediate release


Saharawi government responds to the proposed listing of Kosmos Energy Ltd. on the London Stock Exchange

Bir Lehlu, Western Sahara (August 16, 2017), The government of the Saharawi Republic (the SADR) notes with concern recently expressed plans of the United States-based petroleum company Kosmos Energy Ltd. to trade in securities in a secondary listing on the London Stock Exchange (the LSE).

“Any effort by Kosmos to raise additional capital, including securities offerings and especially on an exchange which is, for the time being, subject to European law results in clear risks for the company and others financially interested in it. Kosmos continues with seabed petroleum exploration in the coastal waters of occupied Western Sahara with an established basis for legal action against the company and its supporting enterprises”, remarked Emhamed Khadad, the SADR official responsible for natural resources following Kosmos Energy’s recent announcement.

Western Sahara, routinely referred to as Africa’s last colony, has been illegally occupied across much of its inland area and part of its coast since 1975. A commitment by the United Nations organization to deliver a self-determination referendum to the Saharawi people who had been the sole, exclusive occupants of the territory, has been stalled as a result of continuing annexation efforts including resources development purportedly done to generate economic benefits for the territory. Four senior level international and national courts have confirmed an occupying Morocco to be without right or title to the territory. “What this means”, noted Khadad, “is that the rule of international law holds that the occupying state is unable to offer exploration licenses and, even less, hold out any rights to petroleum that could be recovered from the seabed.”

In a December 2016 judgment the Court of Justice of the European Union confirmed that Western Sahara is not a part of Morocco and that the kingdom is unable to exercise treaty authority over the territory in respect of trade matters.

A June 2017 judgment of South Africa’s High Court, concerning a shipment of phosphate rock exported seized after export from Western Sahara, concluded that:

“Morocco has no claim to sovereignty over Western Sahara ... Furthermore, it acquired the territory by force [and] we conclude that howsoever Morocco's presence in Western Sahara may be described, it does not exercise sovereignty over the territory".

(A copy of the decision in Saharawi Arab Democratic Republic and Another v Owner and Charterers of the MV 'NM Cherry Blossom' and Others [2017] ZAECPEHC 31 is available online at: <www.saflii.org/za/cases/ZAECPEHC/2017/31.html>.)

The 2017 and 2016 judgments follow one of the United Kingdom High Court in 2015 which confirmed the territorial status of Western Sahara as not being part of Morocco. A securities listing on the LSE, and related activity, faces the risk of precedent in the United Kingdom and by parallel and separate proceedings, in the Court of Justice of the European Union.

“There is no longer any speculation by the SADR government in its safeguarding of the sovereign resource rights of the Saharawi people that formal legal measures will be resorted to in the face of financial activity to capitalize the taking of our resources, and as against activities as such. International law is clear about such matters and we will continue to employ it in the face of a universally derided, illegal occupation”, observed Khadad.

# # #

For additional information and media contact:

Mr. Kamal Fadel
Saharawi Republic representative for Australia and New Zealand
Senior executive of the SADR Petroleum & Mining Authority
T: + 61 2 92 65 82 58

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Kurdistan's outstanding debts to Turkey

A year ago, at the height of the oil price downturn, Kurdistan turned to Turkey for financial aid. At the time, USD1.15 billion was owed to Turkey in the form of loans together with c.USD500 million in outstanding payments to TEC for services provided to the KRG.

The Kurdish Minister of Natural Resources, Dr Ashti Hawrami, proposed to the Turkish Energy Minister, Berat Albayrak, that more funding be provided by Turkey to help Kurdistan with upcoming expenses. The proposal effectively asked Turkey to quadruple its funding to USD4.7 billion (including the existing debts above).

The budgetary position of Kurdistan meant that it was in no position to repay the debts to Turkey in the near term and Dr Ashti’s preferred solution was to transfer the KRG’s equity interests in certain oil assets (Tawke, Taq Taq and Shaikan) to Turkey. Turkey responded saying that if this was the preferred route, it would need further upside given taking a stake in the PSCs would result in the recovery of debts over a longer period than originally envisaged.

As of today, the Turkish debt problem remains unresolved and is an ongoing issue for both the KRG and Turkey. In the context of the upcoming referendum, Turkey is clearly displeased that it is being held but its ability to take strong action against Kurdistan could be detrimental to the recovery of debts. At the same time, Kurdistan could be an important future source of gas for Turkey. For Kurdistan, maintaining amicable relationships with Turkey is key, being the only viable oil export route in the near term. Turkey can make token threats, such as the rumoured closure of a border point, but is unlikely to escalate to anything more serious.

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Canacol on track with Sabanas pipeline

Canacol has signed an agreement for the construction, operation and ownership of the Sabanas flowline. The 82km pipeline will connect the gas processing plant at Jobo to the Promigas trunkline at Bremen.

Source: Canacol June 2017 investor presentation

The USD41 million pipeline will be funded by:

• USD30.5 million from a group of private investors
• USD10.5 million from Canacol

Canacol’s contribution has been almost entirely satisfied by costs incurred to date.
Construction is proceeding on schedule, with first gas transportation expected in December 2017. All rights of way have been acquired, tubulars are on order and civil works are to commence during August 2017.

The Sabanas flowline will provide an additional 40mmcf/d export capacity and will satisfy 40mmcf/d take-or-pay contracts entered into in 2016 with existing and new customers. Canacol will pay a tariff for use of the pipeline in line with other regulated tariffs which will be borne by gas offtakers. Canacol does not have a ship-or-pay commitment for use of the pipeline.

With the additional 40mmcf/d production, Canacol’s production will increase to a 2017 exit rate of 130mmcf/d. The end of 2018 will see another big step change in production with an additional 100mmcf/d coming onstream with the completion of the additional Promigas Jobo-Bremen pipeline.

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