Libya update: co-ordinated militia attacks against Islamists

• On 16 May, forces loyal to Colonel Haftar attacked the bases of two Islamist militias in the eastern Libyan city of Benghazi: Ansar al-Sharia and 17 February Martyrs Brigade
• Haftar commands the "national army"
• Aim of attack to remove Islamist militias from Benghazi
• Ansar al-Sharia aims to impose Sharia law in Libya
• Allied with 17 February Martyrs, who report to the Government
• In Western city of Tripoli, militias allied with the Zintan Brigade also moved in support of Haftar's actions and attached the General National Congress ("GNC")
• Colonel Obaidi, the chief of staff of the Libyan Army, has said the army will support the GNC and branded the move by Haftar as a coup attempt
• Increasing number of former Libyan Islamic Fighting Group ("LIFG") have taken up senior Government security positions
• LIFG as similar ideology to Ansar al-Sharia
• Two groups rumoured to be working with the Muslim Brotherhood to takeover the governance of Libya
• Haftar and his affiliates have called for further forces to support his cause, but us unlikely to have the funding and resources to oust the Islamist militants; in Western Libya, the Sintan Brigade is also unlikely to have the resources to capture Tripoli - most likely outcome is protracted fighting and stalemate

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Lekoil acquires 40% WI in Otakikpo Marginal Field

• 20 May 2014: Lekoil announced acquisition of 40% participating and economic interest in Otakikpo, a Nigerian onshore Marginal Field; located within OML11
• Vendor: Green Energy
• Consideration: USD7m upfront, plus USD4m contingent on production and ministerial approval
• Lekoil will also fund work programme for re-entry of existing wells and all costs up to production (estimated c.USD67m); this is recoverable from enhanced share (88%) of production cash flow
• Lekoil expects to bring Otakikpo into production within 12-18 months
• Acquisition and work programme partly funded by placing; 70-80% of the work programme expected to be funded through RBL
• 2C estimate: 36mmbbl + 31 bcf (gross)
• Otakikpo has partial 2D and 3D coverage; 3 wells to date, with h/c encountered in multiple intervals; field is close to existing infrastructure
• Lekoil's other assets are:
• 30% economic interest in OPL310 (17.14% WI) which contains Ogo. Partners are Optimum (30% economic interest, 60% WI), Afren (40% economic interest, 22.86% WI)
• 1% in OPL241
• 77.5% in exploration Blocks 2514A and 2514B, Namibia

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Oryx: Appraisal drilling update for Demir Dagh, Kurdistan

• Oryx holds 65% WI in Hawler licence (Operator), KNOC (15%), KRG (20%)
• On 19 May 2014, announced test results for Demir Dagh-3 ("DD-3") and Demir Dagh-5 ("DD-5") wells
• DD-3: all four tests flowed successfully; crude quality similar to that at DD-2 and -4
• Spudded in November 2013, 3km south-east of DD-2
• Will now be completed as producer with DD-2 and -4
• DD-5: Logging data and drilling fluid losses during drilling, only small amount of hydrocarbons recovered to surface
• First production from Demir Dagh Area expected Q2 2014
• DD-6 plus a further 4 appraisal/development wells to be drilled in 2014 to:
• further increase production capacity
• delineate reservoir
• DD-6 well now spudded
• Oryx also holds a 50% WI in Wasit, Kurdistan
• Wasit is close to the super-giant East Baghdad field
• 5 leads identified with 404mmbbl gross unrisked prospective resources
• Seismic has been planned on the licence in 2014

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Petroceltic successfully completes USD100m placing

• Joint book-runners are Davy, HSBC and Mirabaud
• Proceeds will be used to "provide financial flexibility to pursue growth opportunities across Petroceltic's existing portfolio and also through new ventures"
• Dovenby Capital will be a new strategic shareholder, subscribing to USD50m of the placing
• Dovenby Captial is an investment company led by Dato' Ahmad Fuad, a Malaysian oil and gas industry specialist

Update on assets

• Algeria
• Ain Tsila / Isarene PSC - tender for FEED at end 2013, farm-out to Sonatrach (pre-empted) - post farm-out Petroceltic (38.25%), Sonatrach (43.375%), Enel (18.375%)
• Egypt
• Award of El Qa'a Plain, North Thekahm South Idku ratified
• Commenced drilling on South Dikimis in May 2014; gross mean unrisked prospective of 7.6mmboe
• Kurdistan
• Shakrok-1 TD reached in April 2014; four zones selected for testing - 2 flowed formation water and no hydrocarbons, remaining 2 zones still being tested
• On Dinarta licence, preparation for drilling Shireen-1 well, targeting gross mean unrisked prospective of 706mmbbl
• Petroceltic holds 16% WI in the above two licences, Hess (64%*), KRG (20%)
• Other assets in Bulgaria, Romania and Italy

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Keystone kills bipartisan energy bill

• The Energy Savings and Industrial Competitiveness Act was proposed by Rob Portman, a Ohio Republican
• The bill had aimed to reduce energy needs and cut emissions by offering incentives for adopting energy-saving technology such as water heaters with smart meters
• More importantly, the bill had bipartisan support
• As the bill neared the vote, some Republicans tried to attach amendments to the bill to approve Keystone
• Harry Reid (Democrat), Senate Majority Leader, refused the amendment and the amendment's supporters retaliated by blocking the main bill
• TransCanada submitted plans for Keystone six years ago for the US to review
• The pipeline was proposed as a conduit connecting Alberta's oil sands with US Gulf Coast refiners
• TransCanada's Energy East project which would export the oil sands crude to the Atlantic Coast (New Brunswick) may be an easier option as US approval would not be required
• Proponents argue that exporting from the east coast is a valuable option with access to the growing Indian markets and the crude would also support Canadian jobs by supplying refineries in Eastern Canada
• It is also clear that the US no longer needs Canadian crude to help achieve energy independence, a big change since the Keystone plans were submitted

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Statoil divests its 5% WI in 15/06 Angola to Sonangol

• Statoil announced on 12 May 2014 that it is divesting its 5% WI in Eni-operated Block 15/06 to Sonangol for USD200m
• Statoil's remaining licences in Angola are Blocks 17, 15, 31, 4/05, 22 (pre-salt), 25 (pre-salt) and  40 (pre-salt)
• Statoil is also operator of pre-salt Blocks 38 and 39
• In April 2014, Statoil also farmed down a 15% WI in Block 39 to WRG, a 50/50 JV between White Rose and Genel. Post transaction, interests will be Statoil (40%), Sonangol (30%), Total (15%) and WRG (15%)
• WRG also acquired, concomitantly, a 15% WI in Block 38 from China Sonangol. Post transaction, interests will be Statoil (55%), Sonangol (30%) and WRG (15%)
• Exploration on Blocks 38 and 39 will commence during 2014 with the first prospect
• Dilolo-1 is the first high-impact prospect that will be drilled on Block 39; this will be followed by the second commitment well on Block 38
• Angola is Statoil's largest contributor to production outside of Norway with 2013 production of c.200mboepd, c.28% of total international output

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Egypt: the gas conundrum

• LNG exports have dwindled as domestic consumption has increased and upstream production has declined, primarily driven by the decline in the mature offshore fields in the Nile Delta which account for the majority of Egypt’s gas production
• The declines have been exacerbated by the IOCs moderating capex due to increased political uncertainty and build-up of outstanding payments from the Government
• Increasing investment in growing gas production is critical but unattractive fiscal terms have discouraged investment
• Although in 2010, BP and RWE secured better fiscal terms for the North Alexandria gas development (60%, 40% WI respectively) with a revised gas pricing structure incorporating a floor of USD3/mmbtu and ceiling of USD4.1/mmbtu
• Egypt has now become an LNG importer with an estimated USD1bn of imports estimated to be required to satisfy summer demand in 2014
• In October 2013, Egypt issued a tender for a floating regas terminal and this was awarded to Norwegian firm Hoegh LNG – however, the contract was not finalised as the financial guarantees offered by EGAS to underpin the project were not acceptable
• Aid has provided temporary relief for Egypt, but subsidy reform will form an important part of a longer term solution. However, any newly elected government will be unlikely to instigate radical subsidy cutbacks due to avoid increasing social unrest
• Aid packages includes:
• Qatar offered five LNG cargoes as a gift through the summer months of July-September 2013
• Saudi Arabia has announced a USD5bn package before the Egyptian elections on 26-27 May
• Egypt is currently receiving USD700m in petroleum aid every month from Arab countries

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