LATAMNRG PROSPECTOR VOL 18 2019
Hess Sanctions Liza Phase 2 Development Offshore Guyana
CGX Energy And Frontera Energy Receive Approval Of Strategic JV From Guyana
Argentina Inaugurates Loma Campana-Lago Pellegrini Oil Pipeline
BASF And LetterOne Finalize Merger Of Wintershall And DEA
Pemex’s Net Income Falls 132.9% In 1Q:19 Vs 1Q:18, EBITDA Falls 16.6%
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Energy Analytics Institute’s weekly LatAmNRG prospector and select highlights from the week. Read the full stories online 24/7 at www.energy-analytics-institute.org
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Energy Analytics Institute (EAI) is a Houston-based private organization focused on provided integrated services related to the Latin American and Caribbean upstream, downstream, midstream and renewable energy sectors. I. EAI’s primary focus related to the Latin American and Caribbean petroleum sectors is to assist businesses establish and nurture relationships with other businesses or consumers by facilitating integrated business-to-business (B2B) and business-to-consumer (B2C) solutions. II. EAI also organizes timely forums, seminars or executive speaking engagements related to the Latin American and Caribbean petroleum sector covering topics relevant to the upstream, midstream, downstream and renewable enegy sectors. III. EAI also provides unbiased breaking news, among project updates, related to the Latin American and Caribbean petroleum sectors covering countries small and big from Jamaica and Trinidad and Tobago in the Caribbean to Guyana, Bolivia and Peru in South America and bigger regional players including Mexico, Colombia, Venezuela, Brazil and Argentina. CONTACT / FOLLOW US: E. news@energy-analytics-institute.org E. webmaster@energy-analytics-institute.org W. www.energy-analytics-institute.org
ARGENTINA Argentina Inaugurates Loma Campana-Lago Pellegrini Oil Pipeline
(Energy Analytics Institute, Aaron Simonsky, 3.May.2019) — Argentina inaugurated the Loma Campana-Lago Pellegrini pipeline. The pipeline has an extension of 88 kilometers and will allow for the transportation of much of the oil produced from the Vaca Muerta formation, the Energy, Mining and Hydrocarbons Under Secretariat for the Neuquén Province announced 3 May 2019 via its official twitter account.
ECUADOR EP PetroEcuador Restarts NonCatalytic Unit #1 At Esmeraldas Refinery (Energy Analytics Institute, Piero Stewart, 1.May.2019) — EP PetroEcuador announced the restart on 1 May 2019 of operations at the non-catalytic unit #1 of its Esmeraldas refinery, the company announced in an official statement.
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Incorporation of this unit will allow for import reductions on the magnitude of nearly 520,000 barrels of diesel #2.
GUYANA Hess Sanctions Liza Phase 2 Development Offshore Guyana
Update on Other Stabroek Developments Liza Phase 1 remains on track to achieve first oil by the first quarter of 2020. It will produce up to 120,000 gross barrels of oil per day at peak rates utilizing the Liza Destiny FPSO, which is expected to arrive offshore Guyana in the third quarter of 2019. A final investment decision is expected later this year for a third phase of development, Payara, subject to government and regulatory approvals. The Payara development is expected to produce between 180,000 and 220,000 gross barrels of oil per day with startup as early as 2023. Following the recent Yellowtail and Tilapia discoveries, the Turbot area is also expected to become another major development hub, and additional development potential is being evaluated in other areas of the Stabroek Block including at Hammerhead. Exploration and Appraisal Update
(Hess, 3.May 3.2019) — Hess Corporation announced it has received regulatory approval from the government of Guyana and has made a final investment decision to proceed with the second phase of development of the Liza Field on the Stabroek Block, offshore Guyana. Liza Phase 2 will utilize the Liza Unity Floating Production, Storage and Offloading vessel (FPSO) which will have the capacity to produce up to 220,000 gross barrels of oil per day. Six drill centers are planned with a total of 30 wells, including 15 production wells, nine water injection wells and six gas injection wells. First oil is expected by mid2022. The development is expected to have a gross capital cost of approximately US$6 billion, including a lease capitalization cost of approximately US$1.6 billion for the FPSO, and will develop approximately 600 million barrels of oil. Excluding pre-sanction and lease costs (which will be accounted for as operating expense), Hess’ net share of development costs is forecast to be approximately US$1.6 billion, of which US$210 million is already included in Hess’ 2019 capital and exploratory budget. “We are excited to achieve another significant milestone in the development of the Stabroek Block,” CEO John Hess said. “We look forward to continuing to work with the Government of Guyana and our partners to realize the extraordinary potential of this world class resource.”
Exploration activities continue at other locations on the Stabroek Block. Following completion of well operations at the recently announced Yellowtail discovery, the Noble Tom Madden will next drill the Hammerhead-2 well. The Stena Carron will next drill the Hammerhead-3 well and will drill a second well at the Ranger discovery later in 2019. The Noble Bob Douglas drillship is currently completing development drilling operations for the Liza Phase 1 development. ExxonMobil also will add another drillship, the Noble Don Taylor, in the fourth quarter bringing the number of drillships offshore Guyana to four. Community Investment The partners’ investment in the Guyanese economy has continued to increase. The number of Guyanese nationals supporting project activities more than doubled in 2018 to more than 1,000. ExxonMobil and its co-venturers spent nearly US$60 million with more than 500 Guyanese vendors in 2018. More than 1,500 Guyanese companies are registered with the Centre for Local Business Development, which was founded by ExxonMobil and its co-venturers in 2017 with the mission of supporting local businesses to become globally competitive. The Stabroek Block is 6.6 million acres (26,800 square kilometers). Current gross discovered recoverable resources are estimated to be more than 5.5 billion barrels of oil equivalent. The 13 discoveries on the block to date have established the potential for at least five
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floating production, storage and offloading (FPSO) vessels producing more than 750,000 barrels of oil per day by 2025. ExxonMobil affiliate Esso Exploration and Production Guyana Limited is operator and holds 45 percent interest in the Stabroek Block. Hess Guyana Exploration Ltd. holds 30 percent interest and CNOOC Petroleum Guyana Limited, a wholly-owned subsidiary of CNOOC Limited, holds 25 percent interest.
water, adjacent to the ExxonMobil Stabroek block, which has encountered 13 discoveries since May 2015. The Utakwaaka well must be drilled by November 27, 2019 with an additional exploration well to be drilled by November 27, 2022. Demerara Petroleum Agreement
CGX Energy And Frontera Energy Receive Approval Of Strategic JV From Guyana
The Demerara block contains 750,000 net acres offshore The Cooperative Republic of Guyana in shallow water, adjacent to the ExxonMobil Stabroek block which has encountered 13 discoveries since May 2015. An exploration well is required to be drilled on the block by February 12, 2021 with a further exploration well by February 12, 2023.
(CGX, 3.May.2019) — CGX Energy Inc. and Frontera Energy Corporation announced that the Government of The Cooperative Republic of Guyana has approved the farm-in joint venture agreement covering two shallow water offshore Petroleum Prospecting Licenses in Guyana, the Corentyne and Demerara blocks.
Petrobras Presents Strategic Plan For Guyana’s Oil And Gas Sector
Under the terms of the farm-in joint venture agreement between Frontera and a wholly owned subsidiary of CGX, CGX Resources Inc., Frontera will acquire a 33.333% working interest in the two blocks in exchanged for a US$33.3 million signing bonus, paid by way of offset of $24.6 million of debt payable to Frontera by CGX plus a cash payment of US$8.7 million paid by Frontera to CGX. Frontera has agreed to pay one-third of the applicable costs under the joint ventures plus an additional 8.333% of CGX’s direct drilling costs for the initial exploratory commitment wells in the two blocks. CGX is the operator assigned to the blocks. Professor Suresh Narine, Executive Chairman and Executive Director (Guyana), CGX, said: “CGX is one of the pioneer explorers in the Guyana basin, celebrating its 20th year in 2018; it is widely regarded as Guyana’s indigenous oil company. I would like to thank the Government of The Cooperative Republic of Guyana for the approval of this pivotal joint venture by Frontera into the Corentyne and Demerara blocks. Coupled with the recently concluded successful rights offering financing, this partnership allows CGX to significantly clean up its balance sheet and resume with vigor its exploration of the continental shelf in the Guyana basin.” Corentyne Petroleum Agreement The Corentyne block contains 1,125,000 net acres offshore The Cooperative Republic of Guyana in shallow
(Stabroek News, 30.Apr.2019) — Representatives of the majority-state-owned Brazilian oil company, Petrobras presented a five-year strategic plan for Guyana’s oil and gas industry, which includes technical assistance, export and import services and training, according to a statement from the Department of Public Information (DPI). The plan was presented to Minister Dawn HastingsWilliams, under her new portfolio as Minister of State, during a courtesy call in the Ministry of the Presidency’s boardroom, DPI said.
MEXICO Pemex’s Net Income Falls 132.9% In 1Q:19 Vs 1Q:18, EBITDA Falls 16.6% (Energy Analytics Institute, Pietro D. Pitts, 25.Apr.2019) — Mexico’s state oil company Petroleos Mexicanos (Pemex) reported a net loss of 35.1 billion pesos ($1.8 billion) during the first quarter of 2019, down 132.9% compared to net income of 106.8 billion pesos in the first quarter of 2018, the company announced on 30 April 2019.
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Total revenues were 356.3 billion pesos during the 1Q:19, down 10.4% compared to 397.4 billion pesos during 1Q:18, while pre-tax income was 56.7 billion pesos, down 74.5% compared to 222.2 billion pesos, respectively. Additionally, Pemex announced EBITDA was 115.7 billion pesos during 1Q:19, down 16.6% compared to 138.7 billion pesos during 1Q:18 (see Table in Annex section). Margin Analysis (%) Pemex’s margin analysis reveals two problematic line items: sales costs and rights to share units. These two line items continue to contribute to bring down the state oil company’s potential to produce higher net income and in some cases, like the most recent quarter, positive results. All summed during 1Q:19 operating income pre-tax margins amounted to 15.9% of total revenues, down 71.5% compared to 55.9% during 1Q:18 due to exchange costs. Operating income after-tax and after conversion effects during 1Q:19 amounted to a negative 9.9% of total revenues, down 136.7% compared to 26.9% during 1Q:18, while EBITDA margins remained relatively flat at 32.5% during 1Q:19 compared to 34.9% during 1Q:18.
Pemex Results Swing To Loss In First Quarter (Reuters, 30.Apr.2019) — Mexico’s Pemex swung to a 35.7 billion peso ($1.8 billion) loss during the first quarter, as sales at the heavily-indebted state oil company slipped in comparison to the same period a year earlier, results posted to the stock exchange showed on Tuesday. Sales at the company were 356.3 billion pesos during the January-March period, down from 397.4 billion pesos in the same period in 2018, the results showed. Pemex posted a profit of 113.3 billion pesos in the first quarter of last year.
McDermott Awarded EPC Contract By ENI México For Amoca Field Offshore (McDermott, 30.Apr.2019) — McDermott International, Inc. announced the award of a contract by ENI México for engineering, procurement and construction of wellhead platform one (WHP1) to be installed in the Amoca field,
located approximately 18 miles (30 kilometers) offshore Dos Bocas in southeast Mexico. The four-deck topsides will have two main decks and will weigh approximately 2,924 tons (2,653 metric tons). The four-legged jacket and piles will weigh approximately 1,785 tons (1,620 metric tons). McDermott will perform the hookup, commissioning and startup of 12 wells. The jacket and piles are scheduled to be ready for loadout by the end of the fourth quarter 2019 while the deck is expected to be ready for loadout by the end of the second quarter 2020. “This contract marks McDermott’s largest award to date with ENI México and it builds on our previous success in delivering ENI’s projects with the highest levels of safety, quality and cost-efficiency,” said Mark Coscio, McDermott’s Senior Vice President for North, Central and South America. “For the Amoca Field project, we will provide word-class solutions through our engineering center in Mexico City and our fabrication facility in Altamira to perform the work.” The engineering work is expected to begin immediately, and the contract will be reflected in McDermott’s second quarter 2019 backlog. The Amoca WHP1 is an unmanned oil and gas production facility that includes eight producer wells and four water injection wells. WHP1 will be installed in the Gulf of Mexico, Contract Block 1 at an approximate water depth of 93 feet (28 meters). Fluids will be exported to a floating production, storage and offloading vessel.
URUGUAY Petrobras Uruguay Says Not Willing To Accumulate Damages, Losses (Energy Analytics Institute, Aaron Simonsky, 29.Apr.2019) — Petrobras Uruguay commented on announcements made from Petrobras’ headquarters in Rio de Janeiro, Brazil. “Petrobras Uruguay will continue to develop its business and comply with obligations assumed with employees,
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customers and suppliers,” reported online media La Red 21. Regarding gas distribution, Petrobras Uruguay said, “it is determined not to continue accumulating damages, holding public service concessions that have an economicfinancial equation broken by structural problems, unrelated to management.” Petrobras announced recently plans for the divestment of assets with emphasis on its refining and distribution sectors, including the comprehensive sale of Petrobras Uruguay Distribución SA (PUDSA), a distributor of liquid fuels, lubricants and liquid fertilizers, with a network of service stations in Uruguay.
VENEZUELA PDVSA’s Oil Exports Steady In April, Flow To Cuba Continues Data (Reuters, Marianna Parraga, 2.May.2019) — Venezuela’s state-run PDVSA exported 1.06 million barrels per day (bpd) of crude and refined products last month, an eight percent increase from March as the sanctioned company managed to boost shipments to China, according to Refinitiv Eikon data.
(PAI), the sale to Chevron USA Inc. (Chevron) of 100% of its shares in the companies that encompass Pasadena’s entire refining operations system in the United States. The transaction closed today with the payment by Chevron to PAI of US$ 467 million (about R$ 1.8 billion), of which US$ 350 million corresponds to equity and US$ 117 million corresponds to working capital, which will be adjusted later to reflect the closing date position. This operation is in line with the company’s portfolio optimization and improvement of its capital allocation, aiming value generation for our shareholders.
BASF And LetterOne Finalize Merger Of Wintershall And DEA (LetterOne, 1.May.2019) — LetterOne and BASF announced the completion of the merger of their oil and gas businesses to create Wintershall Dea, the largest independent exploration and production company in Europe. All necessary regulatory approvals were received from nine countries, including Germany, Norway, the United Kingdom and Russia. Highlights:
The U.S. government imposed the toughest sanctions yet on PDVSA in late January, causing an abrupt disruption in flows of Venezuelan oil to the United States, formerly the OPEC-member country’s first destination for crude exports.
— Creation of the largest independent oil and gas company in Europe — On track to reach production target of 750,000 to 800,000 barrels of oil equivalent per day between 20212023, equivalent to an annual production growth rate of 6-8% — Synergies of at least €200 million per year — Initial Public Offering envisaged for 2nd half of 2020
OTHER INT’L
This merger, the largest in the oil and gas sector for a decade, creates a new oil and gas company – Wintershall Dea – which is the world’s largest privately-held energy company.
Petrobras Completes Pasadena Refinery Sale To Chevron
Headquartered in Kassel and Hamburg, Wintershall Dea has activity spanning 13 countries across Europe, Latin America, North Africa and the Middle East. The company will be managed by an Executive Board consisting of five members: Mario Mehren, Chairman and Chief Executive Officer (CEO); Maria Moraeus Hanssen, Deputy CEO and Chief Operating Officer (COO), responsible for Europe and MENA; Thilo Wieland, Member of the Executive Board
(Petrobras, 1.May.2019) — Petrobras, following up on the release disclosed on 01/30/2019, informs that it has completed, through its subsidiary Petrobras America Inc.
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responsible for Russia, Latin America and Midstream; Hugo Dijkgraaf, Chief Technology Officer (CTO) and Paul Smith, Chief Financial Officer (CFO). LetterOne and BASF have also today announced that Hans-Ulrich Engel, Vice Chairman of the Board of Executive Directors of BASF SE, and Lord Browne of Madingley, Executive Chairman of L1 Energy, will be rotating non-executive Chairmen of Wintershall Dea’s Supervisory Board. The role will be held by Hans-Ulrich Engel for the first fifteen months. BASF and LetterOne will be supported by independent advisors Scott Nyquist, former senior partner and member of McKinsey’s Board of Directors, and Matti Lievonen, CEO of Oiltanking GmbH and former CEO of Neste Corporation. In 2018, Wintershall and DEA together would have produced approximately 590,000 barrels of oil equivalent (BOE) per day. On a proven (1P) reserves basis, the combined company’s reserves stood at 2.4 billion BOE, giving a reserves to production ratio of 11 years. The combined business of Wintershall and DEA would have had sales in 2018 of €5.7 billion, income from operations before depreciation and amortization (EBITDA) of €3.6 billion and net income of €1.1 billion. Based on its existing project pipeline, Wintershall Dea is on track to grow production to between 750,000 and 800,000 BOE per day between 2021 and 2023, which equates to an annual production growth rate of between 6 and 8 percent. Commenting on the completion of the merger, Lord Browne said:
Teams have been preparing the integration of the two companies, including the development of Wintershall Dea’s operating model; the identification of synergies is progressing. The company expects to realise annual synergies of at least €200m as of the third year following the closing of the transaction. Both shareholders are committed to the sustainable and profitable growth of Wintershall Dea. The company will target an investment grade credit rating. After closing, the joint venture will have no shareholder loans outstanding towards BASF or LetterOne. BASF and LetterOne expect to offer shares in Wintershall Dea through an Initial Public Offering (IPO) in the second half of 2020, subject to market conditions. Notes L1 Energy is the energy investment arm of LetterOne. LetterOne was founded in 2013 and is an international investment business headquartered in Luxembourg. LetterOne’s strategy is to build a new portfolio of successful companies that are leaders in their fields and sectors. It makes long-term investments of its own capital in companies in which its sectoral experience and strategic and geographic expertise will improve performance and help companies grow. It has recruited world-class CEOs, sector investment teams and Advisory Boards to invest at scale. It buys and builds assets, which it can develop over time as platforms of long-term sustainable growth. It invests through L1 Energy, L1 Technology, L1 Health and L1 Retail.
“Size is very important in this industry. Very rarely do you have the opportunity to create a company of this scale and quality. Wintershall Dea will hit the ground running, with a project pipeline that delivers market-leading growth in the years to come. L1 Energy looks forward to seeing Wintershall Dea generate sustainable value growth long into the future.” Hans-Ulrich Engel said: “With Wintershall Dea we create the leading independent European exploration and production company with international operations in core regions. By combining the two German-based entities, BASF and LetterOne lay the basis for strong profitable growth for Wintershall Dea.”
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ANNEX TABLE 1: PEMEX MARGINS
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LATAMNRG WEEKLY ePROSPECTOR
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