Forcing regime change in Venezuela

US attempts to force regime change in Venezuela continues despite the huge humanitarian crisis it is causing.

The sanctions on the Maduro government have been absolutely crippling with oil output down from 2.5mmbbl/d down to sub-1mmbbl/d and falling - due to inability to invest to maintain production, striking PDVSA staff with pay uncertainty, inexperienced generals taking over and running over PDVSA as well and shrinking importer base for its crude. On this note, the situation is worsened with the US' latest sanctions of Russian Rosneft which was a key buyer of Venezuelab crude on 18th February. In the meantime, Rosneft has continued purchases from a PDVSA subsidiary under US granted waivers which expire in April 2020.

In 2019 the IMF forecasts the country's GDP fell by 35% and inflation increased by 200,000%. Clutching at straws, President Maduro has launched a new Bolivar currency and cryptocurrency called Petro although many doubt this will solve anything apart from being smoke and mirrors.

The longer the crisis continues, the stronger the support for the topple of Maduro, paving the way for the internationally-backed pro-democratic Juan Guaido to come to power.

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Lest we forget

With coverage of Iranian tensions diminishing and more recently overshadowed by COVID-19, we review the likely direction of travel in light of recent events.

On 23rd February 2020, the country held its 11th parliamentary elections with Conservatives securing all 30 parliamentary seats in Tehran and winning control overt most branches of the State. This will continue the Conservatives run in parliament but does set the stage for a more extreme Presedential candidate from the Iranian Revolutionary Guards to win in 2021.

The country has been drastically crippled by the reinstatement of US sanctions with oil production down to c.400mbbl/d from pre-sanction highs of >2mmbbl/d. The public resentment grows stronger both against the US but also its own government after the shooting down of the passenger jet at the beginning of this year. We could well see the path to an escalation in conflict with the US together with further refinement of its nuclear stockpile, although this will only be a real threat and take maximum effect in a tight oil market. With current weak trajectory of oil prices during COVID-19, the US reaction could very well be so what...?

At the same time, COVID-19 has claimed over 200 lives in Iran and question is whether we could see it seek assistance in the international arena if things worsen.

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Premier announces landmark acquisitions with BP and Dana for USD816 million

Premier announced the below this morning.

Premier is pleased to announce the proposed acquisitions of the Andrew Area and Shearwater assets from BP for US$625 million, and an additional 25 per cent. interest in the Premier operated Tolmount Area from Dana for US$191 million plus contingent payments of up to US$55 million (together the “Acquisitions”). Premier is also pleased to announce the proposed extension of its existing credit facilities to 30 November 2023.

In addition, Premier today provides a separate trading update ahead of its 2019 Full Year Results including the proposed farm-out of part of its Sea Lion and Tuna assets.

Rationale and benefits of the Acquisitions

• Add c.23 kboepd of cash generative production in 2019 with development upside; acquired assets forecast to generate over US$1 billion of free cash flow to end 2023
• Add 82 mmboe of reserves and contingent resources at an implied cost of less than US$10/boe
• Contribute to rising Group production out to 2024 with pro forma 2019 production in excess of 100 kboepd
• Add low cost, low carbon emission assets with combined opex of less than US$20/boe
• Accelerate the use of Premier’s US$4.2bn tax losses
• Materially strengthen Premier’s financial position
• Additional free cash flow accelerates debt reduction
• Significantly reduce forward covenant leverage ratio towards 1x by 2022
• Extension of existing, non-amortising facilities to late 2023

Asset highlights

• Andrew Area (50%-100% interests in 5 fields, operatorship): currently producing c.18 kboepd (net to BP) with material near term upside through further development of the Andrew Lower Cretaceous reservoir
• Shearwater (27.5% interest): significant producing and infrastructure hub, adding 25 mmboe of reserves and resources with incremental investment opportunities and tariff income
• Tolmount (25% interest): consolidates interest in existing high return development, which is on schedule to deliver first gas by end-2020, with significant upside following recent drilling success at Tolmount East

The proposed Acquisitions will be funded via a US$500m equity raise (net of expenses) which has been fully underwritten on a standby basis, existing cash resources and, if required, an Acquisition Bridge Facility of US$300 million. Premier expects that the equity raise will include both a placing and rights issue component with any shares issued under the placing qualifying for the subsequent pre-emptive rights issue. It expects to confirm the structure and terms in Q1 2020 following consultation with major shareholders.

RBC Capital Markets and Jefferies are acting as Joint Corporate Brokers and Joint Underwriters.

RBC Capital Markets is also acting as Financial Adviser and Sponsor.

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Cameron LNG Liquefaction-Export Facility Begins Production At Train 2

Press release as follows:

Sempra LNG, a subsidiary of Sempra Energy, today announced that Cameron LNG has begun producing liquefied natural gas (LNG) from the second liquefaction train of the export facility in Hackberry, Louisiana.  

"We are pleased to reach this important milestone in the development of the liquefaction facility," said Lisa Glatch, chief operating officer of Sempra LNG and board chair for Cameron LNG.

Train 2 and Train 3 are expected to commence commercial operations under Cameron LNG's tolling agreements in the first and third quarter of 2020, respectively. The facility's first liquefaction train started commercial operations in August 2019.

Phase 1 of the Cameron LNG export project includes the first three liquefaction trains that will enable the export of approximately 12 million tonnes per annum (Mtpa) of LNG, or approximately 1.7 billion cubic feet per day.

Cameron LNG is jointly owned by affiliates of Sempra LNG, Total, Mitsui & Co., Ltd., and Japan LNG Investment, LLC, a company jointly owned by Mitsubishi Corporation and Nippon Yusen Kabushiki Kaisha (NYK). Sempra Energy indirectly owns 50.2% of Cameron LNG.

Sempra Energy is also developing other LNG export projects in North America, including Cameron LNG Phase 2, previously authorized by the Federal Energy Regulatory Commission, which could include up to two additional liquefaction trains and up to two additional LNG storage tanks; Port Arthur LNG in Texas; and Energía Costa Azul (ECA) LNG Phase 1 and Phase 2 in Mexico.

Development of any of these LNG export projects is contingent upon obtaining binding customer commitments, completing the required commercial agreements, securing all necessary permits, obtaining financing, other factors, and reaching final investment decisions. In addition, the ability to successfully complete construction projects, such as the Cameron LNG export project, is subject to a number of risks and uncertainties.

Sempra LNG develops and builds natural gas liquefaction facilities and is pursuing the development of five strategically located LNG projects in North America with a goal of delivering 45 Mtpa of clean natural gas to the largest world markets.

See also:
Cameron LNG Commences Commercial Operations For Train 1 Of Liquefaction-Export Project

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McDermott, Chiyoda and Zachry Group Announce First Cargo from Freeport LNG Train 2

• First cargo of liquefied natural gas shipped from Train 2 of the Freeport LNG project
• Project team maintains a continuous focus on safety and quality
• Accomplishment is a precursor to substantial completion of Train 2

Below is the full press release from McDermott

HOUSTON, Dec. 18, 2019 McDermott International, Inc. along with its partners, Chiyoda International Corporation and Zachry Group, announced today that the first commissioning cargo of liquefied natural gas (LNG) has been shipped from Train 2 of the Freeport LNG project on Quintana Island in Freeport, Texas. Production of LNG from Train 2 was announced on Dec. 6 and today's announcement of first cargo is a precursor to substantial completion of Train 2.

"The ongoing momentum of this project has accelerated us past multiple accomplishments, including Train 1's introduction of feed gas, first liquid and first cargo. And, we are well on our way toward commercial operation for Train 2," said Mark Coscio, McDermott's Senior Vice President for North, Central and South America. "I commend the project team for delivering these results and getting us closer to substantial completion."

Zachry Group, as the joint venture lead, partnered with McDermott for the Pre-FEED in 2011, followed by FEED works to support the early development stage of the project as a one-stop shop solution provider for Trains 1 and 2. Later Chiyoda joined the joint venture partnership for work related to Train 3. The project scope includes three pre-treatment trains, a liquefaction facility with three trains, a second loading berth and a 165,000 m3 full containment LNG storage tank.

Freeport LNG Trains 2 and 3 remain on schedule with Train 3 initial production of LNG scheduled for Q1 of 2020.

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Cheniere: Innovative deal structuring on Corpus Christi

This year saw one of the first innovative upstream gas supply deals for a US Gulf Coast liquefaction plant.

In June, Cheniere had signed a long term gas supply agreement with Apache for its Corpus Christi Stage III trains. The Corpus Christi Stage III project is being developed to include up to seven midscale liquefaction trains with a total expected nominal production capacity of approximately 9.5mtpa.

The supply agreement will be for gas volumes of 15mmbtu/day, delivered to Corpus Christi, and more importantly Apache will receive a gas price that will be the LNG price less a fixed liquefaction fee and certain costs incurred by Cheniere.

The LNG associated with this gas supply is c.0.85mtpa and will be marketed by Cheniere.

“This first-of-its-kind long-term agreement with Apache represents a commercial evolution in the U.S. LNG industry, as it will ensure the continued reliable delivery of natural gas to Cheniere from one of the premier producers in the Permian Basin, while enabling Apache to access global LNG pricing and receive flow assurance for its gas,” said Jack Fusco, Cheniere’s President and CEO.

“This commercial agreement, which is expected to support the Corpus Christi Stage III project, reinforces Cheniere’s track record of creating innovative, collaborative solutions to meet customers’ needs and support Cheniere’s growth.

Apache’s agreement with Cheniere is part of the company’s long-term strategy to leverage the scale of our assets in the Permian Basin and diversify our customer base and cost structure by accessing new markets for natural gas produced at Alpine High. We are pleased to partner with Cheniere in this innovative marketing agreement,” said John J. Christmann IV, Apache’s Chief Executive Officer and President.

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PGNiG confirms termination of Russian gas imports from end 2022

Poland's PGNiG has notified Gazprom of its intention to terminate imports of Russian pipeline gas from the end of 2022.


This will now increase the country's reliant on US LNG (which at this time many US Gulf Coast LNG projects still have to be sanctioned and not guaranteed to come online) and the long awaited Baltic pipeline to take Norwegian gas to Poland.


The move is not a big surprise and is completely consistent with all the messages the Poland has been giving over the past few years including aggressively signing up US LNG volumes.


Poland consumes around 17 bcm of gas annually, more than half of which comes from Gazprom under a long-term contract that expires at the end of 2022. It has used the upcoming expiry as an opportunity to diversify its gas supply ahead of time and has consistently stressed that Gazprom is charging Poland too much for the gas noting that Russia has taken advantage of the historic lack of other sources of gas which is now rapidly changing with the advent of LNG.


Related links:

• Nov 2018: PGNiG shuns Russian gas
• Nov 2018: PGNiG expands footprint in Norway
• Jun 2019: PGNiG acquires Total's 22.2% stake in King Lear
• Jun 2019: Tommeliten Alpha Project passes important decision gate towards production in 2024

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