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Senegal: FAR secures option on Djiffere block offshore Senegal Source: FAR
FAR option to earn 75% working interest in Djiffere block offshore Senegal
• Emerging significant shelf play trend, proven by FAR’s world class SNE discovery, intersects Western part of Djiffere block
• 3D seismic survey to evaluate Djiffere exploration potential now in progress
FAR has entered into a farm in option agreement with a subsidiary of Trace Atlantic Oil for the Djiffere block offshore Senegal. The Djiffere block is adjacent to FAR’s highly prospectiveRufisque, Sangomar and Sangomar Deep ('RSSD') blocks that contain the
significant SNE1 and FAN-1 oil discoveries. The western part of the Djiffere Block is located along geological trend with the shelf play types identified in the eastern part of FAR’s RSSD blocks. The potential of this shelf trend has been proven by the world class SNE-1 discovery, which was ranked by IHS CERA as the largest oil discovery worldwide in 2014. FAR has identified multiple large prospects for drilling in its existing RSSD blocks along the shelf trend totalling 765 million barrels of prospective oil resources (gross, unrisked, best estimate, 100%) in a variety of structural play types including Buried Hill and Shelf Edge plays (refer FAR’s prospective resources ASX announcement of 13 April
2015). FAR has further identified a number of potential shelf structures within the Djiffere block from existing 2D seismic data, with one lead already estimated by FAR to have potential to contain in excess of 100 million barrels of unrisked prospective resources. The Djiffere block, being in shallow water, is suitable for low cost drilling and near term development projects. Under its agreements with Trace, FAR has the option to earn a 75% working interest in the Djiffere block by drilling an exploration well before 31 July 2018 (subject to Government approvals). The farmin option can be exercised by FAR at any time before 31 October 2016, by which time FAR expects to have completed the firm 3 well shelf drilling program in its RSSD blocks. FAR has awarded Polarcus a contract to undertake a 3D seismic survey in the Western part of
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the Djiffere block. This survey, in combination with other seismic data will provide 400km2 of 3D coverage and will evaluate the shelf trend potential within the Djiffere block. The survey will be completed during this month as an extension of the current ongoing 3D seismic survey being conducted by FAR and its Senegal joint venture partners over its RSSD blocks. FAR estimates that its 3D survey in Djiffere will cost US$1.1 million. FAR’s Managing Director Cath Norman said; 'This option agreement provides FAR with access to exciting new acreage offshore Senegal adjacent to our existing blocks and with increased exposure to the shelf trend prospectivity confirmed by the SNE discovery. With a large 75% equity position in Djiffere, FAR is well positioned to build its acreage position in this highly prospective emerging petroleum province'.
The Djiffere Block
The Djiffere PSC covers an exploration block of 4,459 km2 offshore central Senegal. The block is in water depths of between 10m and 250m, and predominantly less than 100m. To the north, the Rufisque Block (operated by Cairn Energy, with partners FAR and ConocoPhillips) contains the Rufisque Dome wells, with several incidences of oil shows of Cretaceous age. To the west lies the Sangomar Block where in 2014 the FAN-1 and SNE-1 wildcat wells made new oil discoveries in 2014.
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Liberia: ExxonMobil planning to drill Mesurado-1 wildcat Source: COPL
JV partner Canadian Overseas Petroleum Limited (COPL) has provided an update on its activities in Liberia which are focused on the deep waterBlock LB-13. The Company’s wholly owned subsidiary, Canadian Overseas Petroleum (Bermuda), has received a Work Program and Budget for 2016 from the Operator ExxonMobil. This Work Program is the Operators best
estimate as to the timing of key activities. The well to be drilled under the 2nd
Exploration Phase, Mesurado-1, is planned to spud in late 2016 to early 2017 with the primary goal of proving a commercial quantity of hydrocarbons in the Cretaceous
Santonianage reservoirs. The well will also provide calibration for the seismic response
which can be used to evaluate other leads on the block. The exploration well is currently estimated to be drilled for a total cost of $120M, which is the gross amount of the Company’s 17% carried interest. Long lead items have been ordered and there is an on-going effort to secure a rig of opportunity. The exact timing of the well will be dependent on rig availability and when ExxonMobil can confirm 3rd party contractor’s capability to operate in Liberia. Arthur Millholland, President and CEO, commented: 'This is a positive first step in proceeding with the drilling of the Mesurado-1 well, subject to overcoming the remaining logistical issues related to the need for participation from third party contractors. While the delay to the exploration program has been frustrating for COPL and its shareholders, we are pleased to now have a timetable to work towards exploring this highly prospective acreage.' The Ebola crisis commencing in 2014 in Liberia has caused significant impacts to the LB-13 operational schedule in 2014 and 2015. Even with the recent second declaration of 'Ebola Free' status by the WHO, uncertainty continues to remain as to when ExxonMobil will be fully operational in Liberia. The 'State of Emergency' agreement with NOCAL and the Operator, announced in 2014, provides for additional time to complete the work program in the 2nd Exploration Phase of the LB-13 Production Sharing Contract.
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UK: Salt caverns to prevent oil storage shortage: VTTI REUTERS LONDON | BY DMITRY ZHDANNIKOV AND RON BOUSSO
The world's oil storage tanks are brimming but there is plenty more space to hand in natural salt caverns and elsewhere, said the head VTTI, a leading player in the sector. The crude price collapse has hit energy companies hard, but oil storage is booming with producers and traders renting tanks and investors snapping up assets.
"There is a lot of capacity but there is also a lot of demand," said Rob Nijst, chief executive officer of VTTI, which is half owned by the world's largest oil trader Vitol. "Everyone wants more storage volumes at the moment."
The high volatility in oil prices has offered trading houses such as Vitol, Trafigura, Mercuria, Royal Dutch Shell and BP many opportunities to make money through storage.
"The price volatility has been a good change," said Jared Pearl, VTTI's Chief Commercial Officer. VTTI facilities are mostly geared for refined product storage, not crude, he added.
After seeing weaker profits in 2013 and 2014, trading companies want to expand their physical storage program, Pearl said.
Storage in global hubs such as Singapore, Saldanha Bay in South Africa and northwest Europe and smaller, regional locations have been filling rapidly over the past year with both crude oil and refined oil products such as gasoline and diesel.
But the world is unlikely to run out of storage for now thanks to unconventional storage facilities such as salt caverns or rock-cut caverns in Scandinavia and Asia, Nijst said.
LOOKING AT AFRICA, CENTRAL AND SOUTH AMERICA
VTTI, together with its New York-listed sister company VTTI Energy owns 8.4 million cubic meters of storage and seeks to expand to 11 million cubic meters by 2018-2019, said Nijst, who heads both companies.
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Vitol uses around 50 percent of VTTI's storage capacity.
Unlike some investors who have rushed into the storage sector to lock in high profits, VTTI's expansion plans are detached from current market conditions and are lead more by demand centers.
"We never build terminals purely on the price structure of the market. We always build terminals ... to serve massive shorts in end markets so there is always in-and-out flow," said Nijst. Africa is set to be a focal point for growth. VTTI currently has a 170,000 cubic meter terminal in Cape Town serving local markets.
It is also looking to invest in demand centers with little existing logistics for products such as diesel, liquefied petroleum gas (LPG) and ethane, heavily exported from the United States as a result of the shale boom.
"Quite a bit of our growth and acquisitions will be non-hub. If you look at demand changes in Africa or Central and South America, there are quite a lot of under-served markets for logistics," said Pearl.
Even mature economies such as Europe had under-served markets, he added. China also offered expansion possibilities.
In the United States, VTTI is unlikely to expand beyond its one terminal in Florida as high demand for storage and pipeline infrastructure has boosted valuations, Nijst said. The dramatic drop in oil prices offers some attractive possibilities elsewhere.
"We see a very healthy consolidation opportunity in a lot of markets and we are working on a few of them. You have family owned businesses or companies that own a few assets that want to link up to a global player like ourselves," said Nijst.
"In addition to that, there are a lot of companies that are up for sale." Vitol last month bought the second half of the privately-owned arm of VTTI from Malaysian shipping company MISC Bhd to take pull control of the company.
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China: Is Sitting on an Ocean of Diesel Fuel Bloomberg NewsShare on Twitter Add diesel to the commodities flooding global markets from China.
The nation exported a record volume of the fuel last month after already shipping unprecedented amounts of steel and aluminum overseas. The weakest economic growth since 1990 is sapping domestic demand for commodities, while refineries, mills and smelters grapple with excess capacity after years of expansion.
“A lot of it has to do with slowing demand at a time when companies had plans for much a better demand environment, so capacities had been increased,” saidIvan Szpakowski, a commodities strategist at Citigroup Inc. in Hong Kong. “As demand slows, that’s led to an overcapacity in the domestic market and producers have sought to export the surplus.”
Exports of Chinese raw materials are exacerbating a global glut that drove prices to the lowest since the 2008 financial crisis and prompted steel and aluminum producers around the world to protest against the deluge. While diesel exports are principally a risk to Asian refiners, the additional shipments threaten to worsen a glut that already extends from Singapore to Europe and the U.S.
Refining profits, or cracks, from making diesel in the Asian oil trading hub of Singapore have shrunk about 30 percent from a year ago as exports from China, India and the Middle East create
an oversupply, according to Ehsan Ul-Haq, an analyst at KBC Advanced Technologies in London. "The world is becoming an ocean of diesel," said Ul-Haq. "Demand in China is not as high as it was previously expected. Chinese refiners are becoming more export oriented."
China’s August shipments of the fuel, also known as gasoil, surged 77 percent from a year earlier to a record 722,516 metric tons, or about 175,000 barrels a day, according to data released this week by the General Administration of Customs. They may rise to about 250,000 barrels a day later this year, according to ICIS China and JBC Energy GmbH, industry consultants.
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"Inevitably, this should prevent gasoil cracks in Asia from going higher than they already are," said David Wech, managing director of Vienna-based JBC.
The surplus may persist if the scandal over Volkswagen AG diesel engine emissions tests hurts demand growth in the longer term, according to Gareth Lewis-Davies, a senior energy commodity strategist at BNP Paribas in London. The German auto-maker was found to have tried to dupe regulators and consumers about emissions of diesel engines installed in 11 million cars worldwide.
"If, as a consequence of the Volkswagen issue, growth of distillate demand is affected, it means it will take longer for the current overhang in distillate markets to dissipate,"Lewis-Davies said by phone. “It has negative implications for distillates only in the longer term.” Creating Headaches
China’s apparent diesel demand was at the second-weakest pace in a year in August, growing at 3.6 percent from the same month in 2014. By contrast, gasoline demand surged 19 percent, data compiled by Bloomberg show.
"The divergence between strong gasoline demand and weak diesel demand domestically is creating headaches for Chinese refineries," Amrita Sen, chief oil market analyst at Energy Aspects Ltd., a London-based researcher, said in an e-mail. "This underpinned record diesel exports in August, a trend that is likely to continue although run cuts should ease the pace of exports somewhat early in the fourth quarter."
China’s economic expansion this year is struggling to reach the government’s target of about 7 percent, with Bloomberg’s monthly gross domestic producttracker at 6.64 percent in August. Industrial output last month missed economists’ forecasts, while investment in the first eight months increased at the weakest pace since 2000.
As growth slows, exports of other industrial commodities have increased.Aluminum shipments rose 22 percent in the first eight months of 2015 compared with the same period a year earlier, customs data showed. The country’s smelters have been increasing output as lower-cost producers build new capacity. Steel product exports over the same period climbed 27 percent.
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Oil bounces to $48 on bargain-hunting after sharp fall
Oil steadied at $48 a barrel on Thursday, as investors sought bargains after a sharp fall the previous day on an unexpectedly large buildup in US gasoline stocks and a tepid demand outlook. Brent crude climbed 27 cents to $48.02 a barrel by 0820 GMT, after ending the previous session down $1.33.
US West Texas Intermediate (WTI) crude rose 35 cents to $44.83 a barrel, having slumped $1.88 on Wednesday. "It seems like there's some technical stabilisation at the $48 level after the steep sell-off," said Bjarne Schieldrop, head of commodities research at SEB in Oslo.
Crude prices fell sharply on Wednesday on data from the Energy Information Administration (EIA) that showed a bigger-than-expected rise in gasoline stockpiles in the United States. Higher inventories and sluggish demand make many analysts think the long-term outlook for crude will remain downbeat. "Long-dated contracts are ticking lower and that will push prompt prices lower to ensure there is still a contango," Schieldrop said. Contango is a market structure in which prices are higher at later dates than for prompt delivery, making it profitable to store oil. The EIA data showed gasoline stocks rose by 1.4 million barrels last week, compared with analyst expectations in a Reuters poll for an 819,000-barrel gain. The build in motor fuel in the world's largest oil consumer after the end of its summer driving season raised new concerns about high product stocks during autumn months. Longer-term, many analysts see a continuing supply surplus weighing on the market. "Despite early signs of a cutback in US shale production, the underlying supply and demand fundamentals remain weak for both Brent and WTI," said BMI Research, part of the Fitch ratings agency. "This, alongside uncertainties surrounding China and the broader health of the global economy, is capping any recovery in prices." - Reuters
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Why Shippers Are Turning to LNG-Powered Vessels Loomberg - Christine Buurma
When TOTE Inc., a shipper that operates between the U.S. and the Caribbean, launched its latest container ship last month, the 760-foot craft carried a certain distinction: It’s only the second of the massive vessels worldwide fueled by liquefied natural gas.
The first was launched four months earlier by the same company.
TOTE is among a growing number of ship-owners turning to natural gas at a time of record output, stringent emission rules and churning oil prices. About 70 vessels of all sizes worldwide of are now powered by LNG, up from 42 in just two years, according to DNV GL, which certifies ships for safety. By 2020, the number may pass 1,000.
“More companies see natural gas as a viable alternative fuel source, given the abundance of supply and the relatively stable prices,” Peter Keller, executive vice president of Princeton, New Jersey-based TOTE, said in a telephone interview. At the same time, “the environmental consciousness of the maritime industry has increased,” he said. Narrow Range
LNG prices are expected to trade in a relatively narrow range as exports from the U.S. and Australia rise and global demand, pressured by China’s slowing economy, remains sluggish, according to an Aug. 21 report by Bank of America Corp. Meanwhile, fluctuating fuel oil prices are viewed as a challenge by many in the industry.
“Oil has tumbled to 40 bucks and may be back up to 85 or 90 a year from now. Who knows?” Keller said. “You can’t run a business with a long-term horizon with that kind of volatility.”
Natural gas output in the U.S., the world’s largest producer, rose to a record 2.455 trillion cubic feet in December, according to the Energy Information Administration. Marketed production will expand 5.7 percent to 78.95 billion cubic feet a day in 2015, the government estimates. Cheniere Energy Inc.’s Sabine Pass terminal in Louisiana is scheduled to export the first cargo of LNG from the lower 48 states in the fourth quarter. At the same time, Australia is also adding to the glut with two liquefaction projects entering service later this year.
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“Spare U.S. liquefaction capacity could aggravate the ongoing spot LNG market glut,” Max Denery, a Bank of America analyst, wrote in the report. “Longer-term, the critical question for LNG global prices is whether there will be enough demand to meet incremental supply from Australia and the U.S.”
As the drop in oil prices makes gas less competitive, orders for new LNG ships have tapered off somewhat, said Anders Mikkelsen, a business development leader for maritime advisory at DNV GL in Oslo. However, he believes the slowdown will be short-lived. Oil Volatility
“No one expects oil prices to remain low,” Mikkelsen said by telephone. “They’re likely to increase over the next two-to-five years, so shipowners are still looking at LNG.”
While pricing is one reason behind the switch, an increasing global emphasis on curbing climate change is another. LNG reduces carbon dioxide pollution by at least 20 percent and stops sulfur dioxide release, compared to standard bunker fuel, according to DNV.
More centers for loading LNG onto ships as fuel will be developed in the next four to five years, according to Grahaeme Henderson, vice president for shipping and maritime at Shell International Trading & Shipping in London.
“We’re starting in Rotterdam; we anticipate that further hubs in Singapore and the U.S. will follow thereafter in a global network,” Henderson said in a telephone interview, referring to industry trends and not just Shell’s own operations. The U.S. doesn’t yet have an LNG fueling hub, according to ship broker Poten & Partners Inc. Construction Costs
One bar to the growing interest in LNG-powered ships is the cost to produce them. They are 10 to 25 percent more expensive to build than comparative vessels running on fuel oil, and it will take owners of gas-fueled ships five to eight years to recover those costs, Mikkelsen said. The
insulated storage tanks needed for LNG contribute to the higher price tag.
Tote invested about $350 million in the two LNG-powered container ships, including about $40 million for the LNG tanks and related systems, Keller said. An AGL Resources Inc. unit and WesPac Midstream LLC are building a liquefaction plant in Jacksonville, Florida, that’s scheduled to begin providing fuel for TOTE ships in 2016.
Fuel prices tied to Louisiana’s Henry Hub, the benchmark for U.S. gas, may soften the blow. While LNG contracts are historically linked to crude, adding U.S. supply to the market is creating more choice for shipowners, said Jason Feer, head of business intelligence at Poten & Partners in Houston. “We’re seeing greater diversity in LNG pricing mechanisms,” Feer said by telephone. “People want to see some diversity in shipping fuel, and in the short- to mid-term, there’s likely to be quite a bit of LNG available at competitive prices.”
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NewBase Special Coverage
News Agencies News Release 24 Sep. 2015
Total plans deeper cuts in global project spending The National +NewBase
In a scheduled “strategy and outlook” presentation to investors in Paris, Total executives said the company plans to cut both capital and operating expenditures substantially through 2017, including reducing headcount and freezing recruitment.
Total was the first of the large international oil companies to begin cost-cutting several years ago,
before oil prices began their latest slide. Capital spending had already been cut from a peak two years ago of US$28 billion to about $23.5bn this year and the company said it would be cut a further 15 per cent next year and 12 per cent the year after “to a sustainable $17bn-19bn from 2017 onwards”.
The Total chief executive Patrick Pouyanné and other top executives laid out a strategy that forecasts production to grow at an average of 5 per cent a year from 2014 through 2019. That is a slowing rate of growth from the 11 per cent the company registered in the first half of this year and the 7 per cent it expects through 2017.
It effectively cut its forecast rate of production to 2.6 million barrels per day in 2017 from 2.8 million bpd. In January, Total was the first company to be granted a new concession in Abu Dhabi’s major onshore oilfields concession, known as Adco.
The French company had been one of the legacy Adco concession operators and won a renewal for 40 years with a bid that analysts estimate was $2.2bn for a 10 per cent stake, giving it claim over about 2.2 billion barrels over the life of the contract.
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Regaining Adco this year has been a big factor behind the 11 per cent production increase posted in the first half. The 15 fields are on track to boost production from about 1.6 million bpd last year to 1.8 million bpd by the end of 2017.
But neither the UAE nor the Middle East region in general featured in the plans laid out by Total for the next few years.
Total has already said it plans to cut 2,000 headcount this year as part of efforts to trim $1.2bn from operating costs.
The company said it is now aiming for even sharper cuts, with a target of between $2bn and $3bn of additional opex reductions by 2017.
In the part of the strategy presented by Arnaud Breuillac, Total’s head of exploration and production, he said the company would be looking to cut the numbers and rates of contractors as well as freezing recruitment worldwide as part of efforts to reduce global headcount.
The main focus of cuts would be older provinces, he said, highlighting the UK North Sea, which is targeted for a 20 per cent further reduction in personnel by 2017.
“We are preparing the group to face low oil prices for a long time,” Patrick de la Chevardiere, Total’s head of finance, told a press conference after the presentation.
The focus of future growth will be projects such as offshore Angola as well as liquefied natural gas in Papua New Guinea.
As with other large international oil companies, Total executives said they are concerned to maintain their dividend payments for investors even with much lower oil prices.
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Iraqi Kurds dealt setback by US court ruling on oil sale Bloomberg + Gulf news + NewBase
A US federal court dealt a setback to efforts by Iraq’s self-governing Kurds to sell Iraqi crude oil in the US, further complicating the Kurdish drive for financial independence from the central government in Baghdad.
The US Court of Appeals in New Orleans dismissed an attempt by the Kurdistan Regional Government to overturn a judge’s earlier decision against its planned sale of oil to an unidentified buyer in the US The KRG’s eventual sale of the disputed cargo in Israel made the appeal moot, the court said in a ruling.
The case began last year when Iraq’s central government sued to seize a tanker loaded with crude from the country’s Kurdish region that had sailed to the Gulf of Mexico and anchored 97km off the coast of Texas. The appeals court left in place an order by a judge in Houston requiring the KRG to notify him before trying in the future to sell any oil in the Southern District of Texas.
“The KRG mooted this appeal through its voluntary decision to discharge the cargo in Israel,” the court said Monday in its 13-page ruling. “In so doing, the KRG severely weakened its argument.”
US District Judge Gray Miller in Houston in January rejected the Kurds’ claims of sovereign immunity and said the regional government’s plans to sell its crude in the US gave him authority to hear the lawsuit.
Resisting control
Iraq’s minority Kurds, who historically have resisted control by governments in Baghdad, are independently developing oil reserves they say may total 45 billion barrels — equivalent to almost a third of Iraq’s total deposits, according to BP Plc data. When the KRG sought to export oil on its own last year, the central government waged a legal battle to stop Kurdish cargoes from unloading, including the tanker that reached the Texas coast.
The Oil Ministry in Baghdad won’t rule out taking further legal action against the Kurds if they continue trying to export oil that the central government considers to belong to the whole nation, Laith Al Shaher, director-general of the ministry’s legal department, said Tuesday by phone.
The KRG Ministry of Natural Resources said the court decision means Iraq’s Oil Ministry would now be forced to drop its US lawsuit because the disputed cargo has already been sold and delivered.
“There is no prohibition on the KRG’s export of oil to the United States or elsewhere, and the KRG will continue to export hydrocarbons as the Iraqi constitution permits,” the Kurdish ministry said in a statement posted on its website.
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Oil companies including DNO ASA and Genel Energy Plc that operate in the Kurdish region have been caught up in the dispute over revenue from crude sales between the KRG and the central government. The Kurdish enclave in northern Iraq exports oil by pipeline to the Mediterranean port of Ceyhan, Turkey.
The Suezmax vessel United Kalavryta departed Ceyhan on June 22, 2014, according to ship-tracking data. The ship dropped anchor off Galveston, Texas, and remained unable to discharge its cargo of 1.03 million barrels of oil before sailing in January to Ashqelon in Israel, according to the appeals court ruling. The tanker discharged its oil in Ashqelon between Feb. 23 and March 3, the court said.
The court’s ruling is a rare confirmation that some oil exported by Iraq’s Kurds has made its way to Israel.
The KRG has denied selling oil either directly or indirectly to Israel. Ship-tracking data in February showed that 40 out of 51 cargoes of Kurdish oil may have discharged at Israeli ports.
The KRG plans to boost oil exports to 900,000 barrels a day by the end of 2015 from the current level of 700,000 barrels, Dilshad Shaaban, deputy chairman of the Kurdish parliament’s natural resources committee, told Turkey’s state-run Anadolu Agency in an interview reported Tuesday.
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