Total sells Norweigian assets to AkerBP for USD205 million

Total has agreed to sell interests in a portfolio of 11 licences in Norway to AkerBP for a cash consideration of USD205 million. The portfolio includes four discoveries with net recoverable resources of 83mmboe.

The acquisition allows AkerBP to consolidate its position around the Alvheim, NOAKA and Skarv hubs as well as adding exploration acreage near its operated Ula field (AkerBP 80%). Increasing stakes in fields and discoveries and having control of tie-backs will help improve the economics of hubs for AkerBP.

For example two of the discoveries, Trell and Trine, are located near the AkerBP-operated Alvheim field (AkerBP 65% operated interest) and are expected to be produced through the low-cost Alvheim FPSO.

One important part of this transaction is the NOAKA area (North of Alvheim and Krafla Askja) where AkerBP and Equinor are pursuing the development for this complex with FID scheduled for 2020. Resources in NOAKA remain stranded until the partners agree a development concept and export route, but adding acreage and discoveries builds further critical mass on the path to bolstering the case for project sanction. Note that NOAKA is estimated to contain over 500mmboe in resources, but scattered across 15 discoveries hence the complexity of the development. Nevertheless this deal shows further intent by AkerBP to maximise recovery from the area.

Separately the Alve Nord discovery is located north of the AkerBP-operated Skarv field (23.8%) in the Norwegian Sea, and can be produced through the Skarv FPSO as another example of synergy.

The transaction is subject to regulatory approval. The full list of licences being transferred is as follows:

Source: Wood Mackenzie

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Map of the day: Ghana near-field tiebacks and upsides

#Ghana #Jubilee #Kosmos #TEN #Tullow

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Trump administration hampers US oil

Plains All American Pipeline company has been denied a request for an exemption from steel import tariffs. This will hit plans to build much needed takeaway capacity for the evacuation of oil from the Permian Basin. The capacity bottleneck has already manifested in large discounts for Midland-Permian crude which is trading at a discount of c.USD12/bbl to WTI.

Plains sought an exemption for high-grade steel from Greece for its 585mbopd Cactus II pipeline to the port of Corpus Christi. However the government purports that the steel is domestically produced in “sufficient and reasonably available” quantities in denying the request. Plains is now looking to challenge the decision.

Plains released a strong statement criticising the government following the decision: “Collecting a tariff on steel pipe orders for projects like this constitutes a tax on the construction of critical U.S. energy infrastructure…and is a significant unintended consequence of current trade policy and risks U.S. energy security and American jobs.”

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Kosmos hit by rig contract as dry hole is announced in Suriname

Kosmos could be liable for a share of the onerous contract in Ghana entered into by Tullow Oil, operator of the Jubilee and TEN fields. This could equate to over USD100 million for Kosmos which would wipe out Q2 2018 revenues and earnings since the beginning of the year.

Tullow, on behalf of the field partners entered into a long-term rig contract for the West Leo rig in 2012 for work in the Jubilee and TEN area. In 2016, Tullow declared force majeure under the contract, driven by the border dispute between Ghana and Côte d’Ivoire which forbid any further drilling around the TEN fields until the matter was resolved.

Although the partners had a choice to redeploy the rig at the Jubilee field to undertake further work, it decided not to given issues with the FPSO turret and therefore uncertainty over ongoing development at the field. In an effort to save costs, the partners declared force majeure on the rig contract, which England’s Commercial Court has now ruled was not a valid reason to trigger force majeure. The liability between the TEN and Jubilee partners stands at USD254 million.

This comes on the back of bad news for Kosmos in Suriname where the Anapai-1 well was dry. This extends the dry run of Kosmos and follows the high profile dry well at Requin Tigre (see Kosmos' end of a winning streak with dry well at Requin Tigre).

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The nonsense of releasing US Strategic Petroleum Reserves

Trump is on a mission to contain oil prices and has been sending strong tweets and messages blaming OPEC and supposed ally Saudi Arabia for the current levels of “high” oil prices. The Trump administration’s policies are in complete dissonance as tampering with the Iranian sanctions is a key cause of the tightening of global oil supply and strong noises around US energy independence is in complete opposition to Trump asking OPEC to pump more oil, which illustrates that the US is far from energy independence and still needing to call up OPEC in times of need.

Trump is now considering tapping the US strategic petroleum reserves (“SPR”) in an attempt to lower oil prices in the run up to the US midterm elections; logic being that this will translate into lower prices at the pump. However, his administration may be wrongly conflating the two with no guarantee that a release of SPR will lower gasoline prices.

A release of SPR crude will likely do little to alleviate pump prices. US refiners are already running at near full capacity and additional crude will have limited ability to be absorbed and converted to gasoline domestically. In fact, additional crude on the market will likely depress WTI and increase the profits of the refiners rather than the benefits trickling through to the pumps. Furthermore, the SPR holds light crude whereas the feed slate for US Gulf refiners is typically heavy crude from South America.

The SPR was established in 1975 following the Arab oil embargo in 1973. The US, together with 28 other countries, are required by the International Energy Agency to hold no less than 90 days of import cover measured against the previous year’s net imports. It is designed to meet domestic demand in the case of supply disruptions. In the US, the SPR is held across four sites on the Gulf Coast with a total of 660mmbbl of mostly light crude. They can be released with a 13-day window once the POTUS gives the decision.

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Ophir lost in space

Ophir’s Equatorial Guinea Fortuna FLNG project faces further uncertainty as the government threatens to pass the Block R licence which contains the gas field to another company in December when it expires. It has given Ophir an ultimatum to present a firm financing plan and progress the FLNG project.

The FLNG concept is still relatively new technology and together with the geography, Ophir has found it challenging to raise bank financing or secure partners over the past few years when the global LNG outlook was uncertain. With the improving LNG demand outlook, Ophir now faces competition from US LNG which has accelerated miles ahead.

The government has not named who it will pass the licence to in December, but this could be the likes of Perenco, who started export at its own FLNG project in Cameroon earlier this year, or Kosmos who is pursuing the Tortue FLNG project with BP in Mauritania/Senegal.

Shortly after the government’s intention were made public, Ophir announced that it had entered into a farm-out agreement on its EG-24 licence in Equatorial Guinea to Kosmos, further lending credence to the hinted company being Kosmos. Under the farm-out, Kosmos will acquire a 40% non-operated interest and fully carry the cost of a block 3D seismic survey. For Kosmos, the deal supplements its recently acquired positions in Okume and Ceiba back in 2017.

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Karish and Tanin to supply Cyprus

Energean announced earlier this month that it is seeking approval to build a pipeline from its Karish and Tanin fields to the shores of Cyprus from the Cypriot government. The company has already contracted 4.2bcm p.a. from its fields with Israeli buyers and is progressing with further gas supply contracts. The Karish and Tanin project has already been sanctioned, so further supply contracts are not necessary for FID but will strengthen the commercialisation of the project. Energean’s FPSO once online will have capacity to handle c.800mmcfpd.

There are ample of buyers in the Eastern Mediterranean for gas given gas shortages and growing demand in the region. Cyprus in particular is a country keen to secure more gas as it has just put out a tender for LNG import and Floating Storage and Regasification Unit construction.

Reuters noted that Energean will bid for further supply contracts in Israeli power plants with the coal-to-gas switching initiative providing further opportunities for the company.

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