Issue 718

19•June•2018 Week 24

™™

Colombian continuity
The oil industry is positive about Ivan Duque becoming Colombia’s new
president, though there are some concerns about his security policies.

™™

Aranguren sacked
Argentine Energy Minister Juan Jose Aranguren was unexpectedly sacked
last week and has been replaced by Javier Iguacel.

™™

Guyana drilling kicks off
Liza-1 development drilling began in May with 17 wells programmed, as
Guyana targets output of 500,000 bpd by the end of the next decade.

™™

Unease in Mexico
Recent comments by the likely next president Andres Manuel Lopez
Obrador and his advisers have put the oil industry on edge.
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LatAmOil Contents LatAmOil

w w w. N E W S B A S E . c o m

LatAmOil
Latin America Oil & Gas Monitor

COMMENTARY
Relief for Colombian oil industry as Duque wins presidency 4
Exxon launches Guyana drilling 6

i n v e s tment
Gazprom and YPFB deepen ties during Morales’ Moscow visit 8
GeoPark eyes approval for two Block 64 wells by end of the year 9

P o l i cy
Aranguren sacked as Argentina’s energy minister 10
New law loosens governance of Brazil’s pre-salt oil sales 11
Investor unease ahead of Mexican election 12

PROJECTS & COMPANIES

Equinor completes acquisition of 25% stake in Roncador field 13
New contract for Peru’s Block 192 imminent 14

News in brief 16

o u r c u s tomer s 22

Have a question or comment? Contact the editor – Ryan Stevenson ryans@newsbase.com)

Copyright © 2018 NewsBase Ltd. All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes
internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents

Week 24 19•June•2018 w w w. N E W S B A S E . c o m P3
LatAmOil C o m m e n ta r y LatAmOil

Relief for Colombian

oil industry as Duque
wins presidency
The oil industry is positive about Ivan Duque
becoming Colombia’s new president, though there
are some concerns about his security policies,
writes Simon West in Medellin
colombia Colombia’s oil and gas sector breathed a col-
lective sigh of relief after market-friendly Ivan
W h at: Duque swept to victory in the country’s runoff
Duque’s pro-business presidential election on June 17.
credentials chime well The 41-year-old conservative, who will take
with the oil industry. office in August as Colombia’s youngest presi-
dent in over a century, overcame a spirited effort
W h y: from his leftist rival Gustavo Petro, the former
His rival Gustavo Petro guerrilla who had vowed to “wean Colombians
had vowed to wean off oil and coal”.
Colombians off oil and Petro, who served as mayor of Bogota from
coal. 2012-15, had also pledged to raise corporate
taxes, redistribute unproductive land to the poor
W h at n e x t: and convert state-owned oil company Ecopetrol
The new president could into the “the largest solar power producer in the
open the door to fracking region.”
to replace reserves. Ecopetrol accounts for about 60% of Colom-
bia’s crude output of around 850,000 bpd.
In the end, though, a majority of voters, many
of whom had been spooked by the right’s injuri- Economic reboot
ous claims that Petro would turn Colombia into Aside from fears of a Petro presidency, Duque’s
“another Venezuela”, plumped for Duque, who promises to cut public spending, reduce corpo-
won 54% of the vote compared to his opponent’s rate taxes and lure foreign investors in a bid to
42%. reboot the country’s sagging economy chimed
Duque, running for the right-wing Demo- well with Colombia’s business community.
cratic Centre party of former president Alvaro For the oil and gas sector, the former law-
Uribe, had also won the first round contest in maker has vowed to create new incentives that
May with 39% of votes, although had fallen short could encourage companies to invest in explo-
of the majority needed to avoid a runoff. ration and production. At current output rates,
“Petro had put some complicated ideas on Colombia has just 5.7 years worth of oil reserves
the table,” Camilo Silva, founder of the Bogo- and 11.7 years of natural gas reserves.
ta-based financial advisory firm Valora Anali- In particular, Duque wants to push for more
tik, told NewsBase Intelligence (NBI). “For the offshore activity, while at the same time reduce
country’s oil and mining sectors in particular his what he called the “inflated” costs of oil produc-
defeat was good news.” tion and transportation that deter investment.
After the result, the president of the Colom- Ecopetrol’s aging 250,000 bpd Barrancaber-
bian Oil Engineers Association (Acipet), Julio meja oil refinery – the country’s largest – could
Cesar Vera, echoed the sectors’ support for the also get a long overdue refit that would help
winning candidate. “Thank you Colombia, for expand exports of higher-value refined products.
choosing Ivan Duque,” he tweeted. Crucially, Duque would support hydraulic

P4 w w w. N E W S B A S E . c o m Week 24 19•June•2018
LatAmOil C o m m e n ta r y
fracturing to replace reserves, music to the ears
of producers keen to start drilling for Colombia’s
estimated 6.8 billion barrels of shale oil and 55 tcf
(1.6 tcm) of shale gas.
“The priority for Duque has to be increasing
the country’s reserves,” said Silva.
The president-elect will consider himself
fortunate that his ascendency comes at a time of
recovery in the sector rather than a downturn.
Rising oil prices are already leading to higher
spending: according to Colombia’s Banco de la
Republica, foreign direct investment (FDI) in
oil and gas last year totalled US$3.46 billion, an
increase of 44.9% compared with 2016.
Private producers are expected to invest
US$4.5-4.9 billion this year, up by 45% com-
pared with 2017, while Ecopetrol’s expenditure
could reach US$4 billion, up by 55%.
Production is also on the up, exceeding gov-
ernment targets to reach 854,190 bpd in the first
five months of the year, according to the Energy
Ministry.
Natural gas output in May topped 1 bcf (28.3
mcm) per day for the first time since April 2016.
Key questions
Still, questions remain over some of Duque’s
proposals.
In particular, the president-elect’s get-tough
approach towards security issues, popular
among Colombians during the election cam-
paign, may backfire.
In a victory speech at his campaign headquar-
ters in Bogota, Duque reiterated plans to amend
a peace deal signed 18 months ago between the
government of outgoing president Juan Manuel
Santos and the Revolutionary Armed Forces of
Colombia (FARC) to formally end over five dec-
ades of conflict.
Week 24 19•June•2018 w w w. N E W S B A S E . c o m
LatAmOil
Colombia has an
estimated 6.8 billion
barrels of shale oil and
55 tcf (1.6 tcm) of
shale gas.
Duque and his supporters have slammed
the agreement for being too lenient on former
FARC rebels, while proponents of the deal argue
that any tampering could end up reigniting
hostilities.
According to the IMF, regional development
projects linked to the peace process was one fac-
tor helping to lure capital back to the sector.
A tough approach to the FARC issue may
threaten stop-start peace talks with the National
Liberation Army (ELN), Colombia’s largest rebel
group.
The 2,000-strong ELN, which is accused of
muscling into territories that the demobilised
FARC gave up as part of the peace process, has
routinely attacked pipelines and other oil instal-
lations in a bid to strong-arm the government to
the negotiating table. Duque will also
Duque will also have to address sooner rather
than later the thorny issue of popular referenda, have to address
a mechanism whereby communities vote to
approve or block local hydrocarbon and mining
sooner rather
projects. His campaign stressed the need for a than later the
more stringent legal framework, without pro-
viding specific details. thorny issue
The Colombian Petroleum Association
(ACP) has warned that popular referenda jeop- of popular
ardise up to one fifth of domestic oil production.
Gustavo Arnavat, who served with Duque on
referenda.
the executive board at the Washington DC-based
Inter-American Development Bank (IDB),
believes the new president will be equipped to
meet the challenge.
“He consistently brought a universal per-
spective to our interactions while advocating
on behalf of Colombia,” Arnavat told NBI. “He
was always operating on a higher level than
most other representatives of their respective
countries.”v
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LatAmOil C o m m e n ta r y LatAmOil

Exxon launches Guyana

drilling as scrutiny of
acreage awards intensifies
Guyana could have output of 500,000 bpd by the end of next decade,
but the ramp up in development brings considerable risk, particularly in
respect of new blocks being awarded, writes Ryan Stevenson
guyana ExxonMobil and its partners have launched Fiscal Regime Comparison: frontier offshore oil
development drilling of Phase 1 of the Liza pro- 75% 72% 71% 71%
Government Take (LoP)

W h at: ject offshore Guyana. 70%

65% 63% 64% 64% 65%

Liza-1 development Whilst it is a key milestone in the country’s 60%

drilling began in May with emergence as an oil producer, the process for 55% 52%
50%
17 wells programmed. how it awards acreage has come under closer 45%
scrutiny. 40%
MR-Chinguetti Ghana Guinea Guyana LB-Block13 PNG SN-Cayar SN-StLouis
W h y: ExxonMobil announced on June 12 that Stabroek

Reserves exceeding 3 development drilling began in May on the first 450m barrel field size, EIA Reference price

billion boe have been of 17 wells that are programmed for Liza-1, with
found off the coast of a view to production start-up in 2020.
Guyana. Liza-1 production will be facilitated by a
floating, production, storage and offloading
W h at n e x t: (FPSO) vessel along with four undersea drill
A new Department of centres with capacity to yield 120,000 bpd of oil.
Energy has been formed The consortium, which comprises ExxonMo-
to make future block bil (45%), Hess (30%) and CNOOC subsidiary
awards more transparent. Nexen (25%), also reportedly aims to drill up
to 40 new wells to bring Liza Phase 2 on line by
mid-2022. The production capacity of the FPSO
vessel for Liza-2 is projected to be 220,000 bpd.
In addition to the two Liza phases, the group
is also working on developing the Payara dis-
covery in the Stabroek block, which could add
an additional 110,000 bpd of output by 2023 or
2024.
The consortium has made seven major dis-
coveries in the block to date, the latest being the
Pacora-1 and Ranger wells, which have esti-
mated recoverable reserves in excess of 3.2 bil-
lion boe.
Overall output from the three projects could
reach up to 500,000 bpd over the next decade.
Forfeiting value
ExxonMobil has placed a huge amount of
importance on its Guyana work, which it views
as one of several strategic projects that will drive
its future performance.
The rapid pace of development being spear-
headed by the company will bring welcome rev-
enue to the impoverished country’s coffers.
But there has been criticism of Exxon’s acqui- Source: OpenOil
sition of its offshore acreage, which was awarded
behind closed doors with little transparency.
The contract for the Stabroek block was rene-
gotiated in 2016, with the overall take for Guyana
coming in at around 52%. The norm for similar
frontier countries is 60-80%, meaning Guyana
is forfeiting significant value to the US-based
super-major and its co-venturers compared to
similar frontier countries. (See graph above)
Jan Mangal, who was petroleum adviser to Development
Guyana’s President David Granger until March,
is adamant that a transparent bid round process drilling began in
should be adopted by the country to bring it in
line with other countries in the region, such as
May on the first
Brazil and Mexico. Such a system would also of 17 wells that
secure a better deal for the country in terms of
the royalties it receives, whilst reducing scope are programmed
for corruption. “Now that Guyana is on the radar
post Liza, it is my personal view that all future for Liza-1,
acreage should be leased in a way which max-
imises benefit to Guyana, hence in a market-ori-
with a view to
entated way by an open bid round to ensure production start-
competition,” Mangal told NewsBase Intelligence
(NBI). “Acreage should not be negotiated one- up in 2020.
on-one between the government and a prospec-
tive developer. “These negotiations are prone to
corruption and Guyana is a highly corrupt place.
Chevron, Petrobras and others would love for
Guyana to enter into one-on-one talks because
they know they can out-wit Guyana at the nego-
tiating table, the same way Exxon did in 2016.”

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LatAmOil C o m m e n ta r y
New department
With a view to managing the country’s hydrocar-
bon wealth better, the government has created
a new Department of Energy, which operates
under the auspices of the Ministry of the Pres-
idency. Mangal said Guyana should not award
any acreage until there is sufficient capacity in
the new department for creating and managing
a transparent competitive auction process. He
advocated that the department should be staffed
with qualified, experienced oil and gas profes-
sionals with clean, ethical backgrounds.
Mangal, who has an insider’s view of how
the Guyanese government is managing its new
resource windfall, said the Ministry of Natural
Resources’ recent announcement (See LatAmOil
Week 14, Issue 708) that a consultant be hired to
negotiate the remaining blocks was not appro-
priate route and should be halted.
“There is no rush to award the remaining
blocks, and there is time to do it properly,” he
said. “I suspect blocks were awarded in highly
inappropriate ways or even corrupt ways under
the last administration prior to the 2015 elec-
tions. These should be investigated to ensure
the people of Guyana were not robbed of tens
or even hundreds of millions of US dollars. The
current administration risks repeating the same
mistakes if they rush.”
Mangal was quick to stress that his criticism
of the administration was based in his belief that
the oil industry should serve to improve the lives
of the country’s population. “Guyana would be
in a much worse place if the previous adminis-
tration were in charge,” he stated. “There would
be zero transparency, blocks would be awarded
Week 24 19•June•2018 w w w. N E W S B A S E . c o m
LatAmOil
ExxonMobil and its
partners have been
searching for oil and
gas off Guyana with the
Stena Carron drill ship.
in complete secrecy. But please remember greed
and corruption do not respect elections, and
these forces are still strong and tempting under
any administration. Hence the need for height-
ened scrutiny by the people of Guyana.”
Positive impact
He also denied he was being overtly critical of
oil companies, saying the industry could spur
a very positive transformation in the Guyanese
economy if allowed to progress correctly. “The
only way this new industry will be successful and
sustainable in a way that benefits the poor people
of Guyana, is for Guyana to negotiate hard, is for
Guyana to be prepared to walk away from a par- Guyana must
ticular negotiating table, is for Guyana to hire the
best and the most ethical people,” he said. avoid the
For Mangal, the key is for President Granger
to staff his new Department of Energy with the
mistakes that
best possible talent to ensure the revenues from have doomed
the oil industry are managed well. Otherwise
Guyana could be doomed to repeat the mistakes many other
that many other countries have made in the wake
of discovering natural resources. countries after
He noted that there were already signs of the
economy evolving in a way that was not directly
the discovery
beneficial to the local population, mirroring the of natural
lopsided economic development seen in places
such as Angola. “Already we are seeing many resources.
negative signs,” Mangal said. “The cost of liv-
ing is increasing but the salaries of the majority
are unlikely to be, hence the poor may already
have started to get poorer. This is unacceptable.
Especially since there are so many lessons from
around the world on how to manage things well
and on how not to manage things.”v
P7
LatAmOil IN V E S TMENT
Gazprom and YPFB deepen ties
during Morales’ Moscow visit
bolivia Russia’s state-run gas giant Gazprom said last
week it will invest US$1.2 billion in exploration
and production activity in the highly prospective
Vitiacua block in Bolivia.
The block is located in the Chaco Basin in
the south of the country and is estimated to hold
around 2 tcf (56 bcm) of natural gas. The Russian
company’s commitment comes two years after
Gazprom and Bolivia’s state-run YPFB signed
an agreement to explore for hydrocarbons in the
Vitiacua, La Ceiba and Madidi blocks.
YPFB said the Vitiacua investment pro-
gramme would cover the drilling of two explora-
tory wells and six development wells with a view
to producing 400 mcf (11 mcm) per day of gas.
Gazprom’s latest investment commitment
came after the company’s chairman, Alexey
Miller, met with Bolivian President Evo Morales
in Moscow last week.
As well as looking at the development of
the Vitiacua block, the officials also discussed
YPFB’s work with Gazprom in developing the
Ipati and Aquio blocks in Bolivia. The two com-
panies are stakeholders in a consortium that is
developing the blocks, where the Incahuasi gas
and condensate field is located.
The consortium comprises France’s Total,
P8 w w w. N E W S B A S E . c o m
LatAmOil
with a 50% stake, Gazprom (20%), Argentina’s
Tecpetrol (20%) and YPFB (10%).
The Incahuasi field was producing 6.5 mcm
per day of gas by the end of 2016, with output
from the field flowing into the Bolivian gas
grid via a 100-km pipeline that was built by the
consortium. Gas from Incahuasi is supplied to
the domestic market though expanded output
would facilitate exports to Argentina and Brazil,
both of which are major buyers of Bolivian gas.
In March, it was revealed that Gazprom and
YPFB intend to form a new joint venture that
will focus on selling Bolivian gas to third coun-
tries such as Brazil and Argentina. The JV is due
to be launched before the end of this year.
The meeting in Moscow also saw the signing
of an agreement between the Russian agency for
export credit and investment insurance, EXIAR,
and the Bolivian Energy Ministry. This agree-
ment focuses on the development of the natural
gas vehicle (NGV) market in Bolivia and will
see Moscow provide around 20,000 gas-fuelled
vehicles to the Andean nation to boost the use of
natural gas in its public transport sector.
Bolivia is the third-largest hydrocarbon pro-
ducer in South America, extracting over 20 bcm
per year of natural gas.v
Bolivian President
Evo Morales (left) and
Gazprom chairman
Alexey Miller meet in
Moscow last week.
Week 24 19•June•2018
LatAmOil investment
GeoPark eyes approval for two
Block 64 wells by end of the year
peru The Peruvian subsidiary of US independent
GeoPark is reportedly going to submit environ-
mental impact studies by the end of this month
for two oil wells in Block 64.
The firm hopes to obtain approval for the two
wells, known as Situche 2X and 3X, before the
end of the year, local daily Gestion said citing the
company’s managing director Barbara Bruce.
It is anticipated that GeoPark will invest at
least US$165 million in the block over the next
three years to put the two wells into produc-
tion, though that figure could rise to as much
as US$200 million. Of that total, approximately
US$11 million will be invested in the block this
year, around US$99 million in 2019, and US$55
million in 2020.
There is already evidence of hydrocarbons at
the two blocks, which were drilled by a previous
operator between 2005 and 2011, the report said.
“We are waiting to get a favourable result
from Senace and then we will enter the produc-
tion phase … and begin a new life for the basin,”
Bruce said. Senace is the state agency that han-
dles environmental impact studies.
GeoPark is also planning to submit an
Week 24 19•June•2018 w w w. N E W S B A S E . c o m
LatAmOil
environmental impact study for exploration
works in the northern section of Block 64 in the
near future, the report said.
Block 64, also known as the Morona block,
has proven and probable reserves of about 55
million barrels of oil. It covers an area of around
2 million acres (8,000 square km) on the western
side of the hydrocarbon-rich Maranon Basin,
located in the Amazon.
New York-listed GeoPark has a 75% share of
the block and is operator, while state-run Petrop-
eru has a 25% share.
The US firm signed a deal with Petroperu to
acquire a share in Block 64 in October 2014, but
the companies had to wait until the end of 2016
for the government to approve the contract.
That is because the finance ministry made
objections to the contract based on the fact
that Petroperu was, at the time, legally bound
to devote all its resources to the US$3.5 billion
modernisation of the Talara oil refinery.
GeoPark’s assets include around 30 oil and
gas blocks in Latin America. The majority are
located in Brazil and Colombia, but the firm also
has assets in Argentina and Chile.v
P9
LatAmOil policy
Aranguren sacked as
Argentina’s energy minister
argentina Argentine Energy Minister Juan Jose
Aranguren was unexpectedly sacked last week
and has been replaced by Javier Iguacel, a young
oil engineer and rising political star.
The removal of Aranguren took many in
the industry by surprise. He had taken on the
energy portfolio in the government after more
than a decade of running Royal Dutch Shell in
Argentina, during which time he made his mark
defending the downstream industry’s interests
against encroaching state control by the populist
Kirchner administrations that ruled from 2003
Former oil engineer and to 2015.
YPF employee Javier Aranguren stood his ground, though, and
Iguacel is Argentina’s was admonished by former president Nestor
new energy minister. Kirchner who called for a national boycott of
Shell Argentina’s diesel and gasoline products
after the company raised prices at the pump.
Ironically, it was Aranguren’s revival of price
controls that led in part to his demise on June 16,
which was announced by the government in a
terse three-sentence statement.
With the peso rapidly depreciating against
the US dollar and international crude prices
nearing US$80 per barrel, Aranguren called on
oil refiners to freeze their prices in May and June,
on the promise that they would recoup their
losses later in the year.
The freeze was designed to contain inflation,
which instead of slowing this year as had been
forecast, is picking up. Economists anticipate
that inflation will end this year at 28%, up from
25% in May, which would damage President
Mauricio Macri’s approval rating as the country
heads toward a presidential election in October
2019.
Tensions build
As oil prices remained high and the peso
plunged – it is down 35% since the start of the
year – a tussle broke out between oil producers
and refiners last week.
While both sides had agreed to sell at
below-market prices, refiners struggled to make
a profit as the weakening peso reduced the reve-
nue needed to pay for oil in dollars.
Trafigura, a new entrant in the downstream
sector, decided to slow production from its
30,000 bpd refinery in Bahia Blanca, Buenos
Aires province after producers refused to reduce
crude prices.
At the same time, oil producers started
requesting the right to export their light crude,
which would enable them to fetch higher prices
than in the domestic market.
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Ignorance is bliss
Last week Aranguren was in San Carlos de Bari-
loche, a mountain resort in Patagonia, speaking
at an energy conference and then presiding over
a two-day meeting of world energy leaders. He
appeared unaware of the political manoeuvring
that was under way back in Buenos Aires.
It is a baptism of fire for Iguacel, whose first
job will be to ease the tension that has flared up
between producers and refiners. So does he have
what it takes?
At 43, and 20 years younger than Aranguren,
he certainly has less experience. He started his
career at state-run YPF at the end of the 1990s
before moving on to work at other domestic oil
companies Pecom Energia and Pluspetrol.
In 2015, Iguacel got into politics, running for
the mayor of Capitan Sarmiento, a town to the
northwest of the capital, with a population of
13,000. He narrowly lost, but had enough acu-
men to get noticed by Macri’s team, where he was
appointed as director of the National Highway
Administration, working under Transport Min-
ister Guillermo Dietrich.
His work gained him praise. Elisa Carrio, a
legislator and three-time presidential hopeful
with close ties to Macri, called him “the best offi-
cial” in the administration, adding in posts on
social media that his appointment as well as that Iguacel’s first
of Dante Sica as Production Minister were nec-
essary and would inject some “hope” back into job is to ease the
the economy.
Others warned, however, that Aranguren’s
tension that has
removal could derail the government’s efforts to flared up between
rein in the fiscal deficit, the root of the country’s
economic problems over the past century. producers and
Ramiro Castineira, an economist at Econo-
metrica, an economic consultancy in Buenos refiners.
Aires, said Aranguren had helped to reduce pub-
lic spending by US$12 billion per year by raising
natural gas and power tariffs. Others applauded
him for reinjecting confidence into the energy
sector. That was not enough for Macri to save
him, though, with the president also appointing
a new economic adviser and central bank presi-
dent in a broad reshuffle of his top team.
As well as ironing out the disagreements
between Argentina’s oil producers and refiners,
Iguacel must also act as the front man for the
government’s push to attract new investment
into the Vaca Muerta shale, despite the difficult
prevailing economic winds. It is a tough in-tray
for the new minister, with the political pressure
likely to grow as next year’s presidential election
looms large on the horizon.v
Week 24 19•June•2018
LatAmOil policy
New law loosens governance
of Brazil’s pre-salt oil sales
brazil Brazil’s Pre-Salt Oil Company (PPSA) has
been permitted to sell the Brazilian state’s share
of profit oil from pre-salt production-sharing
contracts (PSCs) directly to interested buyers.
Brazilian President Michel Temer approved
a law that permits direct sales, even though the
government’s preference for conducting such
transactions remains by means of a tender pro-
cess. The government was forced into a rethink,
however, after a PPSA tender in May to sell
future profit oil failed to attract any bids.
PPSA was set up by the government in 2010
to manage its interests in the pre-salt and previ-
ously had to contract a sales agent to sell the gov-
ernment’s share of profit oil. In May, when the
new legislation on direct sales had been passed
by Congress but did not yet have presidential
sanction, PPSA held a tender to sell the gov-
ernment’s share of oil from future production at
three pre-salt fields – but only Royal Dutch Shell
signed up and the company then failed to make
any bids.
“The government is trying to find a way
to resolve this discussion on profit oil more
quickly,” Luis Menezes, a partner and oil indus-
try specialist at the Rio offices of Felsberg, a law
firm, told NewsBase Intelligence (NBI). “It has
decided to give the PPSA the freedom to sell it
directly.”
This represents something of a change in
direction for PPSA, which was set up to manage
the government’s interests rather than to act as a
sales agent, and would involve the hiring of more
specialised staff, Menezes said.
Claudia Rabello, a former superintendent
at Brazil’s regulator, the National Petroleum
Agency (ANP), who now runs consulting outfit
OGE, said the issue could have held up future
pre-salt development. Future volumes are likely
to be considerable, a fact that was emphasised
by the most recent pre-salt tender that was held
on June 7. For example, the Uirapuru block
Week 24 19•June•2018 w w w. N E W S B A S E . c o m
LatAmOil
the Santos Basin was won by a consortium of
Equinor (formerly Statoil), ExxonMobil and
Petrogal, which offered 75.49% to the govern-
ment in profit oil. Petrobras opted to join the
consortium with an operating stake.
Referring to the tender held in May to sell the
government’s profit oil, Rabello said it: “Failed
[because] it did not have people interested. The
oil has to be sold or it becomes a bottleneck in
pre-salt development. The government had to
alter the law because the PPSA did not have this
role.”
Under this new law, tenders are still the pref-
erence but PPSA can now sell oil directly in
“emergency” cases, he added.
The dud tender in May was designed to sell
the government’s share of oil for one year from
three Petrobras-operated pre-salt fields in the
Santos Basin – the Mero field in the Libra block
along with the Lula and Sapinhoa fields – and
used reference prices set by the ANP. PPSA could be
Winning companies were not allowed to buy
the oil on sale at a lower rate than the ANP’s ref-
selling as much
erence price during the tender, which did not as 1 million
go down well with potential bidders. Speaking
anonymously, one industry source said that bpd via such
companies avoided entering to show their dis-
agreement. “What could have happened is the
contracts a
companies did not enter the tender to make this
clear,” the source told NBI.
decade from now.
In an interview with Brazil’s Valor Econom-
ico newspaper, PPSA’s director of contracts, Her-
cules Silva, said the government intends to hold
another tender this year and is evaluating what
went wrong with the last one. Valor said PPSA
could be selling as much as 1 million bpd via
such contracts a decade from now. PPSA has so
far this year sold 1.25 million barrels of oil from
the Mero field to Petrobras.
A new policy will be decided by the National
Energy Policy Council (CNPE) by the end of the
year.v
P11
LatAmOil policy
Investor unease ahead
of Mexican election
Recent comments by Andres Manuel Lopez Obrador have put the oil industry on edge
mexico Mexico’s national oil company Pemex needs
urgent “intervention” or the country will run out
of oil, presidential election frontrunner Andres
Manuel Lopez Obrador said last week.
Lopez Obrador made the remarks to support-
ers at a campaign rally in Ciudad del Carmen,
an oil town in the southern state of Campeche,
Andres Manuel Lopez though he was quick to tell reporters afterwards
Obrador is currently that he was not advocating expropriation in the
polling around 20 industry. “Let me tell you here that we have to
points ahead of his intervene the oil industry soon because if the
nearest challenger. current trend continues, everything is going to
run out and we’ll end up buying crude abroad,”
Lopez Obrador said, after railing against the fall
in production at Pemex from a peak of 3.4 mil-
lion bpd in 2004 to just over half that level now.
The future of the oil industry has been a
key concern for investors amid contradictory
comments from some of his advisers now that
Lopez Obrador looks unstoppable in his push to
become president. With the election due on July
1, he is currently polling 49.5%, some 20 points
ahead of his nearest rival, Ricardo Anaya, who is
heading a right-left coalition, and 30 points clear
of Jose Antonio Meade of the ruling PRI party,
according to a poll of polls by specialist election
website Oraculus.mx.
The reason for the oil crisis, Lopez Obrador
said, was a lack of investment in exploration and
also a drop off in the number of wells drilled.
He went on to say that just as Mexico united
after the oil industry was nationalised in 1938, it
would do so again, comments that will no doubt
be seen as a literal red flag by investors wary of
his leftist ideals.
“We’re all going to pull together – workers,
technicians – and we’re going to lift up this oil
industry again and here is where we’ll begin the
oil rescue because here in Ciudad del Carmen
is where the headquarters of Pemex is going to
be,” Lopez Obrador said. He has vowed to spread
key ministries around the country, which would
include locating the Energy Ministry in the
southeastern town of Villahermosa in his home
state, Tabasco. He lamented the fact that produc-
tion from Cantarell, the mega-field that turned
around Mexico’s oil fortunes after its discovery in
the 1970s, had collapsed and was drying up. “For
40 years, Cantarell gave Mexico oil and we sold
billions of dollars’ worth of oil. They have fin-
ished now – they’re finishing off this field. What
have these technocrats done?” he lamented.
“They had the opportunity and instead of
P12 w w w. N E W S B A S E . c o m
LatAmOil
rescuing Pemex, they sank it,” he added. Mexico
opened its oil sector to private investment in a
landmark legislative shakeup in 2013, but Lopez
Obrador said “the ill-named energy reform”
had been a flop. The reality, however, is that the
reform has paved the way for an influx of invest-
ment that even Lopez Obrador accepts is vital.
The injection of private capital, and the freeing
up of Pemex to focus only on productive fields,
will ensure much needed investment enters the
sector and drives production up from the 1.89
million bpd average that was recorded in the first
quarter of this year.
Exactly what his “rescue” proposal for the
industry and Pemex is remains unclear. Lopez
Obrador said he would announce a plan fur-
ther down the line, though he stressed: “It’s not
expropriation.”
The presidential candidate’s advisers have,
however, made it very clear that there will be a
pause to the current pace of oil tenders. They say
this is necessary to scrutinise the contracts that
have already been awarded to ensure full trans- All of this is
parency and to decide how much of Mexico’s
reserves should be tendered in future. nonsense.
So far, there does not appear to be a single,
clear message on what the future holds.
Doesn’t he think
Carlos Urzua, who Lopez Obrador has des- the US$1 billion
ignated as his finance minister, said companies
should “wait and see and maybe invest some- paid in signature
where else for a time.”
This is a startling comment and will deepen bonuses and well
the sense of unease amongst companies that
have already invested or are planning to in future
commitments is
bid rounds. One former government official in welcome?
the energy sector told NewsBase Intelligence
(NBI) this was madness and displayed a “pro-
found lack of understanding of the way the oil
industry works” because if companies switch
their investment plans to other countries “they
won’t come back”.
Pausing the oil tenders, which have proved
successful with more than 100 contracts
awarded with projected investment of US$200
billion, could also lead to companies that have
won fields deciding not to go ahead with their
plans and to an unravelling of the advances that
have been made to date, which include a major
discovery in shallow waters.
“All of this is nonsense,” an oil company CEO
with investments in Mexico told NBI. “Doesn’t
he think the US$1 billion paid in signature
bonuses and well commitments is welcome?”v
Week 24 19•June•2018
LatAmOil P R O J E C T S & C OM P ANIE S
Equinor completes acquisition of
25% stake in Roncador field
brazil Norway’s Equinor has completed a deal with
Petrobras that will see the Norwegian company
acquire a 25% non-operated interest in the Ron-
cador oilfield in the Campos Basin offshore Bra-
zil. The deal was first announced in December
2017, with the transaction going ahead last week
after government and regulatory approval was
secured.
The Norwegian company paid Petrobras an
adjusted cash consideration of US$2 billion for
the stake. This takes account of equity volumes
that have been produced since the effective start
date of the deal on January 1 and the deposit
that was paid upon the signing of the initial
agreement. The deal also includes additional
payments of up to US$550 million to improve
Roncador’s recovery rate.
The field was once Brazil’s biggest offshore
discovery and is currently the third-largest pro-
ducing asset in Petrobras’ portfolio. It has around
10 billion barrels of oil in place (OIP) with an
estimated remaining recoverable volume of
around 1 billion boe. The companies intend to
enhance recovery by 5%, which would add a fur-
ther 500 million boe.
Petrobras has been working to address
the falling productivity of its mature fields
in the Campos Basin. With this in mind, last
year the company signed a memorandum of
Week 24 19•June•2018 w w w. N E W S B A S E . c o m
LatAmOil
The P-54 FPSO on the
Roncador field.
understanding (MoU) with Equinor (formerly
Statoil) with a view to accessing its technology
and the experience gained from its develop-
ments in the North Sea.
The relationship between the companies has
been deepening for some time. In July 2016,
Statoil agreed to buy 66% of the pre-salt field
Carcara field in the Santos Basin from Petrobras Roncador has
for US$2.5 billion. The Norwegian company
became the field’s operator in the process. around 10 billion
The deal was one of a number of Petrobras
sales that were frozen by legal action but was
barrels of OIP
freed up by a court’s decision in October last year.
Roncador has been in production since the
with an estimated
1990s and yielded around 240,000 bpd of oil remaining
and 40,000 boepd of gas in November, Petrobras
said. These volumes mean the state-backed Nor- recoverable
wegian company will increase its production in
Brazil by around 175%, from some 40,000 boepd
volume of around
to 110,000 boepd. 1 billion boe.
Equinor continues to deepen its presence in
Brazil, as well broadening its ties with Petrobras.
The companies bid successfully along with part-
ners ExxonMobil and Petrogal for the Uirapuru
block in the Santos Basin during Brazil’s 4th Pre-
salt bid round on June 7.
Petrobras will operate the block with 30%,
with Equinor and ExxonMobil each taking 28%
and Petrogal 14%.v
P13
LatAmOil P R O J E C T S & C OM P ANIE S LatAmOil

New contract for Peru’s Block 192 imminent

A new contract to operate Block 192 in Peru’s
peru
Amazonian region of Loreto will be signed off in
the next two or three months.
The head of state-controlled energy producer
Petroperu, James Atkins, told delegates at the
Peru Energia 2018 conference that a deal could
take the form of a services or management con-
tract or joint venture with a strategic partner.
The 1.3 million acre (5,260 square km) Block
192, which sits within the jungle provinces of
Datem del Maranon and Loreto, can produce
up to 12,000 bpd of crude, or a fifth of Peru’s
domestic output. The contract was “close to
being signed off ”, Atkins said.
The block is currently operated by Frontera
Energy, with the Canada-based company’s con-
cession for drilling rights due to expire in June
next year.
Petroperu, which owns the block, has not
produced crude for decades, and instead has
focussed on refining, transportation and com-
mercialisation of oil products.
A spokesperson at Frontera’s Bogota office
was unable to confirm to NewsBase Intelligence
(NBI) whether the company was considering a
fresh bid as Petroperu had yet to define the terms
and conditions of the new contract.
Spain-based energy producer Cepsa, which
Atkins quoted as one of the companies interested
in the concession, did not respond to an email
seeking comment.
Cepsa currently operates the nearby Block
131 in Peru’s Ucayali Basin.
Earlier this month, Frontera called force
majeure on Block 192 after an oil spillage forced
Petroperu to close a section of the Nor Peruano
oil pipeline. Frontera said the shutdown was
costing the company around 8,600 bpd of lost
output.
The 1,106-km Nor Peruano moves crude
from jungle oil blocks to Petroperu’s 65,000 bpd
Talara refinery on the Pacific coast.
The spokesperson at Frontera was una-
ble to provide an update on the force majeure,
although local media reports said the pipeline
section remains offline.
In addition to frequent pipeline ruptures,
Block 192 has been beset by protests carried out
by indigenous groups calling on the government
for tighter environmental regulations and better
access to health and education.
The block was shut down for several weeks
late last year after protestors seized oil drums and
facilities.v

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P14 w w w. N E W S B A S E . c o m Week 24 19•June•2018

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LatAmOil
P OLI C Y
Rick Perry wants to help
Argentina be more like
Texas
The US government is getting in on a shale
boom 8,000 km from home. Energy Secretary
Rick Perry will help Argentina connect with
US companies that have shale oil and gas
expertise as Argentine President Mauricio
Macri – facing a natural gas trade deficit –
hurries to replicate the success of the Permian
basin, in Perry’s home state of Texas.
Fostering energy production from a
regional ally will bolster the geopolitical
influence of the US, Perry told reporters in
Bariloche, Argentina. “One of the things
that I offered Juan Jose is US technology
partnerships, to make the introductions with
the private sector,” Perry said, referring to
Juan Jose Aranguren, Macri’s former energy
minister. “The technology that has allowed for
the shale gas revolution in America we want
to make available to Argentina.”
Perry was meeting Aranguren, who
was sacked on June 16, and other G20
counterparts in snow-covered Bariloche to
discuss a global transition to cleaner energy
– especially gas. Argentina is ramping up
production of the fuel in Vaca Muerta, the
Patagonian shale play where Chevron and
DowDuPont were among the first to get
drilling going.
Argentina’s state-run YPF SA, the
biggest operator in Vaca Muerta, sees the
next phase of shale development driven
by mid-cap independent companies lured
from the Permian. Their arrival will increase
competition and, in turn, slash costs,
Aranguren told reporters in Bariloche. Now,
Perry wants to add to that, bringing in US
pipeline developers to expand the play’s
P16
N e ws i n b r i e f
infrastructure and petrochemical companies
to process the hydrocarbons once they have
been moved out of the isolated shale fields.
Boosting output in Vaca Muerta, one of
the world’s largest shale plays that remains
largely untapped, will help the US to direct
geopolitics amid fractious relationships with
major oil producers Russia and Venezuela,
Perry said. “Being able to not be held hostage
by countries who don’t share our values is
really important,” Perry said. “President
Macri’s policies are right in line with US
values.”
BLOOMBERG, June 17, 2018
WTO joins IMF in urging
Leftist presidential hopeful Colombia to diversify
would end Brazil oil refining economy
monopoly
The leading leftist candidate in Brazil’s
presidential race, Ciro Gomes, would end
the refining monopoly of state oil company
Petroleo Brasileiro SA, said a senior Gomes
adviser. The plan laid out by Nelson Marconi,
policy director for the Gomes campaign,
breaks with longstanding Brazilian industrial
policy and could face blowback from powerful
unions at Petrobras.
His comments underscore how a May
trucker strike over fuel prices, which
paralyzed much of Brazil’s economy and
forced the government to slash diesel taxes,
has sparked bold proposals for Petrobras
ahead of the October election.
A law making Petrobras Brazil’s sole
petroleum refiner was struck down in 1997
after more than four decades. But its de facto
monopoly went unchallenged until April,
when Petrobras laid out plans to sell stakes
in some refineries, drawing an outcry from
unions and many politicians on the left.
Marconi said Gomes, a fiery centre-left
former governor of Ceara state, still demands
w w w. N E W S B A S E . c o m
LatAmOil
the reversal of recent auctions granting
offshore exploration and production rights to
global oil majors, who would be compensated
for cancelled contracts.
Gomes has said President Michel
Temer, who took office in 2016 after the
impeachment of leftist President Dilma
Rousseff, lacked the legitimacy to rewrite the
rules of those auctions, which drew billions
of dollars from ExxonMobil, Shell, BP and
others.
REUTERS, June 14, 2018
The World Trade Organisation (WTO) has
called on Colombia to diversify its economy
and reduce its dependency on the exports of
fossil fuels.
The advice followed months after the
International Monetary Fund (IMF) urged
the South American country to diversify its
economy and stimulate its manufacturing and
service sectors.
According to the WTO, Colombia
has failed to use oil revenues to diversify
its economy when oil prices were high.
As a consequence, the country has had
trouble closing its budget since 2014 when
commodity prices suddenly collapsed.
An ongoing dependency on oil and
mining would continue to make the country
vulnerable and would not reduce poverty
rates, according to the WTO.
Although the outlook for economic growth
and inflation is positive, some structural
problems pose major challenges, including
the need to continue to promote economic
diversification and reduce poverty levels.
The IMF agrees. Colombia’s “medium-
term agenda should revolve around structural
reforms to boost inclusive growth and
productivity,” it said earlier this year.
The WTO advised Colombia to focus on
the stimulation of manufacturing jobs and the
service sector.
COLOMBIA REPORTS, June 14, 2018
C OM P ANIE S
GeoPark announces new
Argentina acquisition
GeoPark has announced further expansion
in the Neuquen Basin in Argentina with
the acquisition of Los Parlamentos block in
Week 24 19•June•2018
LatAmOil
partnership with state-run YPF. The firm
said Los Parlamentos is an attractive, high-
potential block located in the Mendoza
Province and covers an area of approximately
366,000 acres (1,480 square km) with
seismic coverage (100 square km of 3D and
800 square km of 2D seismic), near other
producing fields.
The block was awarded to YPF in the
Mendoza bidding round on May 31, 2018. In
accordance with the partnership agreement
between YPF and GeoPark, and subject to
customary regulatory approvals, GeoPark
will receive a 50% non-operating working
interest (WI) in Los Parlamentos block in
exchange for a commitment to fund its 50%
WI of one exploration well and additional 3D
seismic. GeoPark’s total financial commitment
is approximately US$6 million over the next
three years.
Los Parlamentos expands GeoPark’s seven
blocks, 2+ million acre platform in the prolific
Neuquen basin, with significant conventional
and unconventional exploration potential
within the Grupo Neuquen and Loncoche
formations.
Geoscience evaluation is ongoing and field
operations are expected to start-up in late
2018 or early 2019.
GEOPARK, June 13, 2018
Bahamas Petroleum
announces final 2017
results
Bahamas Petroleum has announced its
final results for 2017. The company said the
significantly improved oil price had created a
more buoyant commercial environment for
exploration, increasing investor confidence in
the sector.
It went on to say that after discussion
with the Bahamas government, the company
was granted a licence extension in March
2017, extending the term of the company’s
licences, and the time in which to perform the
obligations and requirements thereof, for a
further 12 months through to June 2019.
Week 24 19•June•2018
N e ws i n b r i e f
A new government was elected in the
Bahamas in May 2017 with a clear mandate
to address the fiscal deficit in the country. The
government has shown continued support for
the development of an oil and gas industry
in the Bahamas, including the approval in
February 2018 of a new US$5.5 billion oil and
gas refinery on the island of Grand Bahamas.
The firm successfully raised GBP 2.8
million before expenses in June and July 2017,
through the placement of 280 million new
shares, bolstering the company’s negotiating
position in farm-out discussions.
An external technical audit completed in
December 2017 by Moyes & Co, indicated
aggregate mean volumetrics of 8.3 billion
barrels of oil, with a further upside of up to
28 billion barrels STOIIP and a probability of
success in the 25-35% range.
The company’s operating loss decreased
16% to US$3.25 million (vs US$3.88 million
in 2016), with the entire board now deferring
90% of their remuneration to be repaid only
in the event of a successful farm-out or well-
financing being completed.
Bahamas Petroleum has lodged an
application for Environmental Authorisation
with the government, which it said was an
important milestone for the company and
representing the first step in commencing
offshore field activity.
BAHAMAS PETROLEUM, June 13, 2018
Former Petrobras CEO to
lead Brazil’s BRF
Pedro Parente, the former CEO of state-
controlled oil company Petrobras, has been
invited to take over as CEO of Brazilian food
processor BRF, a source familiar with the
process has said.
Parente has a six-month non-compete
agreement as former Petrobras CEO, the
source said and would need clearance from a
government commission to be able to take on
the BRF job while that applied.
Parente left Petrobras on June 1 in a
surprise move that followed government
alterations to fuel pricing policy in the wake of
w w w. N E W S B A S E . c o m
LatAmOil
a trucker strike over rising diesel costs.
He was seen as a key element in turning
the oil company around in the last two years
and his departure sparked a fall in the price of
Petrobras shares. The source said that it was
likely that Parente would be granted clearance
to take the BRF job since apparently there
would be no conflict of interest.
Parente is already chairman at BRF, a post
he took in April when shareholders at the
food processor were seeking a management
overhaul in the wake of a food safety probe
that caused plant closures.
BRF shares are down 45% so far this year.
They fell as much as 6% recently in Sao Paulo
but recovered to close 3% down.
REUTERS, June 14, 2018
Petrobras says oil slips,
gas output rises in May
Brazil’s state-controlled oil company Petroleo
Brasileiro SA has said that oil production
slid 1.2% last month from April, while gas
production rose 2.4% in the same period.
Gas production in May rose to 81 mcm per
day on average excluding liquefied volumes,
while oil output slipped to 2.07 million bpd on
average, Petrobras said.
REUTERS, June 15, 2018
Petrobras prepays
US$750m in debt with Bank
of Nova Scotia
The Brazilian state-owned oil company
Petrobras made a prepayment of US$750
million in debt due in 2022 with Bank of Nova
Scotia and contracted a new credit line for the
same amount, but with better financial costs
and maturing in 2023.
According to Petrobras, the transaction
is part of the debt management strategy that
the company launched in 2016 and is in line
with its previous operations, which moved
US$61.7 billion in prepayments, US$48.6
million billion in funding with more attractive
rates and US$11.7 billion in financing
term extension operations. In a statement,
the company reported that prepayment
operations contributed to improving the
debt profile and lengthening its average term,
from seven years in December 2015 to nine
and a half years in June 2018, resulting in
savings of around US$1.6 billion compared
to the investor return rates on Petrobras’
internationally traded debt securities for
equivalent terms.
RTTNEWS (US), June 12, 2018
P17
LatAmOil
Vitol-led group in talks to
buy Nigeria assets from
Petrobras
A consortium led by top oil trader Vitol
has entered exclusive talks to acquire stakes
in Nigerian offshore fields that are held by
Brazil’s Petrobras and its partners, industry
sources said. The assets are estimated to be
worth up to US$2.5 billion, the two banking
sources and one industry source told Reuters.
The buyers are talking to state-controlled
Petrobras, which is leading the sale, the
sources added.
The buying consortium comprises Vitol,
Vancouver-based Africa Oil and Delonex
Energy, an Africa-focused oil company backed
by private equity fund Warburg Pincus and
the International Finance Corporation (IFC).
The Vitol-led group emerged as winners from
a number of groups that bid for the assets in
its initial two rounds, which included rival
commodity trader Glencore.
Heavily indebted Petrobras launched the
sale of Petrobras Oil & Gas BV, or Petrobras
Africa, in which it holds 50%, as part plans
to offload US$21 billion in assets through
2018. The sale, announced last year, includes
the 40% stake of Petrobras Africa held by a
subsidiary of Grupo BTG Pactual SA and the
10% holding owned by Helios Investment
Partners.
Scotiabank is running the sale process with
Evercore, according to the sale document. The
deal would offer the consortium a stake in
some of Nigeria’s largest and lowest-cost fields.
Vitol is expected to shoulder the largest part of
the investment, spending an estimated US$1
billion, according to one source.
Petrobras Africa has stakes in two offshore
blocks, known as OMLs, that contain two
producing fields. The Agbami field in OML
127 is operated by an affiliate of US firm
Chevron and the Akpo field in OML 130 is
operated by Total. The Agbami oilfield is the
main prize, producing about 240,000 bpd of
light, sweet crude. Petrobras Africa holds a
12.5% stake in the field, Statoil has 20.2% and
Chevron holds a 67.3% stake.
REUTERS, June 19, 2018
Frontera Energy to split
stock for shareholders as of
June 26
Canadian oil company Frontera Energy
Corporation has said that it will split its stock
this year; and will issue a two-for-one share
split on June 26.
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N e ws i n b r i e f
The split of the Toronto Stock Exchange-
traded company will be facilitated by Frontera
transfer agent Computershare Investor
Services, which will send all shareholders as of
June 26 an additional common share for each
one they already hold.
“The Toronto Stock Exchange has
determined to implement due bill trading
in connection with the share split,” said
Frontera Energy in a statement. “Anyone
purchasing common shares during the period
commencing June 20, 2018, and ending on
June 26, 2018, inclusively shall receive a due
bill.” The Toronto-based company’s shares
will “commence trading on an ex-distribution
basis” on June 27, it stated, with a due bill
redemption date of June 28.
FINANCE COLOMBIA, June 12, 2018
OIL
Will the OPEC meeting
deliver oil production
boost?
A busy week for markets includes a crucial
OPEC meeting in Vienna, while fragile
emerging markets and US dollar strength
remains a talking point among investors.
Oil prices have been under pressure amid
expectations that Saudi Arabia and Russia will
soon take steps to increase output after more
than a year of supply curbs.
Energy ministers from OPEC countries
and those outside the cartel are meeting in
Vienna on June 22-23 to debate oil policy with
traders and market analysts questioning how
far countries will go.
There is a consensus between the Saudis
and Russians that production should be
increased “gradually” if deemed necessary,
w w w. N E W S B A S E . c o m
LatAmOil
and the market should be supported by
“reliable and sufficient oil supplies”.
But it is unclear how drastic any output
increase would be and over what period.
US officials have quietly asked producers
to increase output to compensate for any
losses from Iran, which is under a new round
of oil sanctions, and to alleviate the impact
of any price spike. A collapse in Venezuelan
production has contributed to a rise in prices
above US$80 a barrel in recent weeks, even as
Brent crude retreated to US$75 a barrel.
Recent renewed violence in Libya has also
forced the closure of important oil ports.
Despite an agreement between Russia and
Saudi Arabia, architects of the supply cut deal
that has been in place since January 2017,
other countries such as Iran do not back any
easing of the curbs. Iraq’s energy minister has
warned it could trigger renewed supply falls.
Analysts at Bank of America said fast-
growing US shale production still presented
a “risk” to the cartel, which has been marked
by heightened geopolitical factors. “The cartel
needs to prepare for this eventuality.”
FT (UK), June 17, 2018
Ecopetrol embarrassed
by new oil spill in central
Colombia
Colombia’s state-run oil company Ecopetrol
continues to be plagued by oil spills, possibly
due to neglect in maintenance. According to
local media, the crude oil has polluted parts of
the delta of the Magdalena River, the country’s
most important waterway.
The true damage is hard to calculate;
According to Ecopetrol, the spill was due to
“a possible 10-inch rupture in the pipe that
transports the product from Cantagallo (Sur
de Bolivar) to Island 6 in Puerto Wilches.
Week 24 19•June•2018
LatAmOil
This would imply that the crude oil is
flowing directly into the Magdalena River.
More than 1,600 locals were forced to
leave their homes amid the emergency. Some
300 fishermen were forced to immediately
end work. Ecopetrol has announced that the
pipeline causing the spill had been shut to
avoid further leakage. The company also said
it would begin isolating parts of the river to
contain the spill.
The company failed to tell how much crude
oil had been spilt or what caused the rupture.
Locals from areas that depend on the
polluted waters for drinking water have said
that Ecopetrol has failed to provide drinking
water or food supplies.
According to Colombian law, a state-
run entity that deprives a community of its
basic necessities must provide humanitarian
assistance until the situation is normalised.
Oil spills like this one have Ecopetrol
against the wall; two top executives were
suspended last month and the CEO, oil czar
Felipe Bayon, is under investigation over
neglect. Bayon and his predecessor, former
Minister Finance Juan Carlos Echeverry,
are expected to be interrogated over the
company’s alleged failures to carry out
standard maintenance procedures.
The maintenance problems seem to have
begun after Echeverry led the company into a
major crisis between 2015 and his resignation
last year. While in office, the economist went
on a privatisation binge and embarked on
major cuts, while continuing to drive up
the company’s debt from US$623 million
to US$15 billion. Between the arrival and
resignation of the former minister, stocks lost
33.5% of their value on the New York Stock
Exchange.
COLOMBIA REPORTS, June 15, 2018
Colombia produced 866,000
bpd of oil in May
Colombia produced an average of 865,987
bopd in May, an uptick of 1.6% over May 2017
according to government figures.
This level also represents a 0.1% increase
from April, and the slight increase marks the
third straight month of rising production,
according to the Ministry of Mines and
Energy.
After five months, the annual average for
the country now stands at 854,190 bopd. This
is almost exactly in line with the 2017 average
of 854,121 bopd yet still below the 885,000-
bpd average of 2016.
The annual figure, however, still exceeds
the Ministry of Mines’ previously released
“medium-term” estimate of 840,000 bopd.
The vast majority of the oil in Colombia
Week 24 19•June•2018
N e ws i n b r i e f
is produced by state-controlled oil company
Ecopetrol. The Bogota-based company has set
a goal of 725,000 boepd for 2018 and expects
to drill at least 620 development wells and
12 exploration wells during the year to help
replace falling reserves.
Frontera Energy produced an average of
52,195 bopd in Colombia the first quarter
of 2018. This was a slight decrease from the
56,593 it produced in the country compared
to the first quarter of 2017.
FINANCE COLOMBIA, June 14, 2018
Venezuela oil upgraders
halting operations amid
export crisis
Venezuela’s state-run PDVSA and partners
have halted operations at two upgraders that
convert extra-heavy oil into exportable crude
and plan to stop work at two others, a move
aimed at easing the strains from a tanker
backlog that is delaying shipments, according
to six sources close to the projects.
Venezuela’s problems exporting oil this
month led PDVSA to notify customers it
would begin sea-borne transfers in an attempt
to ease a bottleneck at its ports, where more
than 70 vessels are waiting to load about 23
million barrels of oil.
PDVSA also told clients they could not
send new tankers until the ships waiting to
load were serviced.
In the January-April period, Venezuela’s
crude production fell to the lowest annual
average in over three decades and oil exports
fell 28% to 1.19 million bpd. The export
troubles are rising as the cash-strapped nation
faces claims on its assets from creditors, and
an outflow of skilled workers and energy
service companies due to hyperinflation and
unpaid bills.
If PDVSA cannot alleviate the shipping
bottleneck, the company and its joint ventures
could be forced to slow or temporarily pause
production at some Orinoco Belt oilfields,
further cutting crude revenue, the life-blood
of the OPEC nation.
To avoid that, PDVSA has been taking
advantage of maintenance projects at its crude
upgraders, which can convert up to 620,000
bpd of extra-heavy oil into exportable grades,
to schedule additional work, the sources said.
PDVSA President Manuel Quevedo, who is
also Venezuela’s oil minister, recently said the
upgrader at Petro San Felix would be halted
for repairs in July, but the programme was
moved ahead to this month.
REUTERS, June 13, 2018
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LatAmOil
Venezuela suspends oil
delivery to Antigua and
Barbuda and others
Antigua and Barbuda are among countries
to be affected as Venezuela’s PDVSA says it is
suspending petroleum deliveries to about half
of the Caribbean countries in its Petrocaribe
agreement.
The move comes due to falling crude
production and low refinery utilisation,
according to a Venezuelan Oil Ministry
report.
PDVSA, according to the report, is
indefinitely suspending a combined 38,000
bpd of refined products deliveries to eight of
the 17 countries that make up Petrocaribe:
Antigua and Barbuda, Belize, Dominica, El
Salvador, Haiti, Nicaragua, St. Vincent & the
Grenadines and St. Kitts & Nevis.
However, PDVSA will continue to supply
45,600 bpd of refined products in June to
Cuba’s Cubametales, including 95 octane
fuel, aviation fuel, diesel, LPG, and residual
fuel. Cuba has been one of the countries that
have most benefited from the PetroCaribe
agreement, receiving average deliveries from
PDVSA of 95,000 bpd of crude and refined
products.
The original agreement contemplated a
supply of up to 185,000 bpd of crude oil and
products under preferential conditions. In
2017, Venezuelan shipments of petroleum via
Petrocaribe dropped by 40%, or 54,400 bpd,
from 136,000 bpd exported in 2015. The Oil
Ministry report also said even though PDVSA
does not have Mesa 30 crude available in June
to supply Cuba, it is evaluating the possibility
of buying light crude from third parties. In
February, March and April, PDVSA bought
4.2 million barrels of Urals crude for Cuba.
OBSERVER MEDIA (US), June 14, 2018
GA S
Chile to import natural gas
from Argentina by end of
2018
Argentina will begin exporting natural gas
to neighbouring Chile before the end of
2018, the energy ministers of both countries
have said. Chilean companies are in talks to
sign import deals and the first flow of gas
across the Andes could come in October or
November of this year, Chile energy minister
Susana Jimenez said in an interview in the
Argentine town of Bariloche at the G20
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LatAmOil
Meeting of Energy Ministers. The gas could
come both from the Neuquen basin, home to
Vaca Muerta, and from the Austral basin in
southern Argentina, she added.
The two South American countries had
previously signed deals allowing for the export
of gas or electricity in emergency situations
but required that an equivalent amount be
re-imported within twelve months.
The gas could be used for electricity
generation, replacing imports from elsewhere,
or to heat homes in areas where families still
depend on wood, a source of pollution in
the centre-south region, Jimenez said. Chile
produces few hydrocarbons of its own.
Since taking office in December 2015,
President Mauricio Macri has sought to
loosen labour rules and boost infrastructure
to attract investment.
Rising output from Vaca Muerta could
help the country export more than it imports
by 2021, Argentina’s energy minister Juan Jose
Aranguren said at a news conference. The
country is set to import slightly more than 50
cargoes of LNG this year, down from 68 last
year and 90 in 2015.
SANTIAGO TIMES (CHILE), June 14, 2018
Enbridge starts natural gas Mexico targets Yucatan
pipeline construction at with US$85m in natural gas R E F INING
US-Mexico border infrastructure investments Curacao refinery runs slow
Canadian energy company Enbridge has
started construction of the offshore border
crossing section of its US$1.6 billion Valley
Crossing natural gas pipeline between Texas
and Mexico, according to a US federal filing.
The company said in an email the pipeline
remains on track to enter service in October.
The latest filing pertains to a 1,000 ft (305
metres) section of offshore pipe that extends
to the US-Mexico border. The remaining 165
miles of onshore and offshore pipe has been
completed and commissioning activities
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N e ws i n b r i e f
will commence in the near future, Enbridge
spokesman Devin Hotzel said in an email.
The Valley Crossing project is designed to
carry up to 2.6 bcf per day of gas from Texas
to help Mexico meet its growing power needs
as generators there shift away from fuel oil
and imported LNG.
The Valley Crossing project has been under
construction since April 2017, according to
the Enbridge website.
Valley Crossing will connect in the Gulf of
Mexico to the Sur de Texas-Tuxpan pipeline
under construction by a joint venture between
units of TransCanada and Sempra Energy.
Once complete, it will be the biggest gas pipe
between the two countries.
There are already approximately 20
pipelines that can move gas from the US to
Mexico with a total capacity of around 10.9
bcf per day, according to US energy data.
That includes Howard Energy’s 600 mcf
per day Impulsora pipeline in Texas, which is
expected to enter service this month. Analysts
have said, however, that constraints on the
Mexican side of the border have so far limited
a big increase in US pipeline exports.
WORLD PIPELINES (US), June 14, 2018
as PDVSA port backlog
Mexico aims to invest about US$85 million in
two infrastructure projects intended to shore
starts to ease
up natural gas supply in the southeast Yucatan
Peninsula, which suffers from persistent gas
shortages and blackouts.
The first project would reconfigure
the Cempoala compressor station on the
Sistrangas pipeline network to allow expected
gas imports on Mexico’s east coast to reach
farther south. The second would interconnect
the privately owned Mayakan pipeline, which
serves power plants on the peninsula, to
w w w. N E W S B A S E . c o m
LatAmOil
Sistrangas near the Cactus processing plant in
Tabasco State.
The Centro Nacional de Control Del Gas
Natural (Cenagas), the state-run operator
of Sistrangas, is holding a tender for the
Cempoala project, expected to cost US$36
million. France’s Engie plans to invest about
US$49 million in the interconnection project
for Mayakan, which it owns through a
Mexican subsidiary.
Both projects are part of a three-pronged
approach that Mexican energy officials have
previously discussed as a way to ease gas
shortages on the Yucatan Peninsula. US gas
imports currently do not reach southeast
Mexico, while associated gas production at the
southern offshore oilfields operated by Pemex
has dropped sharply in recent years.
The third project is a planned tender for a
floating storage and regasification unit (FSRU)
at the port of Pajaritos in Veracruz. However,
last month the Pajaritos project lost one of
its two sponsors, a marketing subsidiary of
federal power utility Comision Federal de
Electricidad (CFE). The other sponsor, a
subsidiary of Pemex, is still preparing the
bidding documents.
NGI, June 13, 2018
The 335,000-bpd Isla refinery operated by
Venezuelan state-run company PDVSA in
Curacao is working at minimum capacity
while awaiting new crude shipments and as
a tanker backlog in the country’s ports began
to ease, four sources close to the facility told
Reuters. PDVSA’s operations this year have
been mired by problems ranging from fast-
declining crude production and poor refining
due to a lack of equipment, to obstacles for
exporting oil amid port congestion and
financial sanctions.
Only a few units at the Curacao refinery
have been operating during US producer
ConocoPhillips’ moves to seize PDVSA’s
inventories, cargoes and facilities following
a US$2 billion arbitration award by the
International Chamber of Commerce in April.
No shipments of Venezuelan oil have been
sent to Isla since late April and none were
planned this month, according to PDVSA
internal trade documents seen by Reuters.
But new crude cargoes could be received
by Isla through ship-to-ship, or STS, transfers
that would add to its existing inventories and
Week 24 19•June•2018
LatAmOil
be processed in the coming weeks, the sources
said. “PDVSA has promised the refinery that
a new cargo of crude will be delivered. It’s an
agreement the parties have already reached,”
one of the sources said.
The Aframax tanker Europride, loaded
with Venezuelan crude, is about to sail to
Curacao, according to Reuters vessel tracking
data and a source from a shipping firm
working with PDVSA. It was not clear how
much crude Isla is processing, but most units
are out of service due to planned maintenance
that started in the first quarter, the sources
said. The refinery was to fully restart last
month.
PDVSA began using seaborne transfers
earlier this month to ease a bottleneck of
tankers around its main oil ports that has
affected crude exports to customers from
the US to China. As of June 18, 75 tankers
were idled in and around Venezuela’s two
largest oil ports, Jose and the Paraguana
Refining Centre, 20% of which were waiting
to load crude and refined products for export,
according to Reuters data.
The delays affect about 17 million barrels
for export, compared with over 24 million
barrels earlier this month, indicating a slight
easing in the port congestion that had raised
the prospect of a force majeure declaration by
Venezuela if barrels were not shipped.
REUTERS, June 18, 2018
Week 24 19•June•2018
N e ws i n b r i e f
Pemex lets contract for Tula
refinery
Pemex, through its processing subsidiary
Pemex Transformacion Industrial (formerly
Pemex Refinacion), has let a contract to
a partnership of Saipem and Mexican
subsidiary Saimexicana SA de CV for works
to be carried out on the heavy oil (H-Oil)
plant at Pemex’s 215,100 bpd Miguel Hidalgo
refinery in Tula, Hidalgo state.
As part of the contract – valued at
US$39.23 million – Saipem will perform
rehabilitation and commissioning works at
the H-Oil plant, which currently processes
amounts of pure diesel and produces
hydrodesulphurised diesel with low sulphur
content that are sent in bulk to the catalytic
plants, as well as obtaining other products,
like diesel, sour gas, dry gas, and acid, Pemex
said.
The proposed rehabilitation project
will upgrade the H-Oil plant to increase
production of ultra-low-sulphur fuel in
compliance with environmental regulations
and expand handling of crude oil for
production of other fuels, such as diesel and
jet fuel, the operator said.
Upon launch of the tender seeking bids
for the project in March, Carlos Trevino
Medina, Pemex’s chief executive officer, said
w w w. N E W S B A S E . c o m
LatAmOil
he expected the rehabilitated H-Oil plant to be
completed by yearend.
The H-Oil rehabilitation project comes
amid the ongoing reconfiguration of the Tula
refinery Pemex began in 2014.
While Phase 1 of the project was about
27% completed by the end of 2016, certain
works were delayed and rescheduled—
including construction of an 86,000-bpd
delayed coking plant and associated
installations necessary for its operation—due
to budgetary constraints.
As of March 31, construction of the
coker plant was 60% completed, and Pemex
currently is evaluating funding alternatives
through alliances and strategic partnerships to
complete construction, the operator said.
With Phase 1 of Tula’s reconfiguration now
scheduled to be completed by 2020, Phase 2
of the project – which covers construction
of additional processing installations as well
as modernisation and integration of existing
units – is slated for completion in 2022,
Pemex said.
Once completed, Pemex said it expects
modernisation of the Tula refinery will enable
the site to increase production of refined
products to 220,000 bpd from 154,000 bpd,
increasing the refinery’s overall performance
by more than 40%.
OGJ ONLINE (US), June 11, 2018
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