Week 27 Overview
Agreements towered in the 27th week, with US-based ExxonMobil announcing a significant investment in Belgium and a flurry of deals showing that European assets are a good investment for American and European companies, while Chinese and Australian firms are far more prone to mull business opportunities in other areas, mainly in Northern Africa.
With reports indicating that Eni’s stake in Saipem is up for sale, the negotiations for the oil and gas industry contractor will shed more light on European assets’ attractiveness. The company involved in the construction of the South Stream project could be soon sold and the final buyer could benefit from the technological expertise of the 12th largest company by market capitalisation in Italy. Will Chinese investors consider Eni’s 43% stake in Saipem or will Russian companies’ funds prevail? Will America eventually try to contain a Russian acquisition? Saipem is an important company and, with its engineering tradition, may represent a strategic purchase.
EUROPEAN DEALS: EXXONMOBIL, MOL, SAN LEON, TOTAL, OKN ORLEN, HUTTON, LUNDIN
ExxonMobil announced its plan to install a new delayed coker unit at its Antwerp refinery to convert sulfur residual oils into transportation fuels products. The company will invest more than $1bn, betting on the growth of the European market for diesel and marine fuel.
“This new unit, along with the recently completed 130 megawatt cogeneration unit and diesel hydrotreater at the Antwerp complex, reaffirms ExxonMobil as a leader in the European and global energy markets,” Jerry Wascom, incoming president of ExxonMobil Refining & Supply Company, said in a note released on Wednesday.
The week also witnessed smaller deals.
On Monday, Hungary-based MOL signed a Sale and Purchase Agreement with Premier Oil UK for 6 offshore licences, adding that its 2P reserves increased by 14.3 MMboe from three producing fields.
‘The portfolio includes non-operated equity stakes in the Scott (21.84% unitised Working Interest [“WI”]), Rochelle (15% unitised WI) and Telford (1.59% unitised WI) fields, as well as participating interest in further exploration licences such as the Rochelle Upper Jurassic deep prospect,’ reads a statement released on Monday.
On Tuesday, Ireland-based San Leon Energy signed a Joint Venture Agreement with Palomar Natural Resources (PNR) to develop the Siekierki and Rawicz gas fields in Poland.
‘In return for a 65% working interest in the Southern Permian Basin and Northern Permian Basin Concessions, PNR has paid upfront to San Leon $5 million and $15 million, respectively, in cash and will carry San Leon for a defined initial work programme aimed at bringing the Rawicz and Siekierki fields into production as soon as possible. PNR will become the operator of all of the Concessions,’ reads a note released on Tuesday.
On Wednesday, France-based Total confirmed its clear intention to sell Totalgaz to US’ UGI Corporation, after it had given a mandate to two banks to conduct the operations back in March.
‘Total today announced that it has entered into exclusive negotiations with UGI Corporation, the parent company of Antargaz, after having received a firm offer from the U.S. company to acquire all outstanding shares of Totalgaz, the Group’s liquefied petroleum gas (LPG) distributor in France,’ the company wrote on Wednesday.
Also on Wednesday, Unipetrol, PKN ORLEN's subsidiary, announced it will buy Eni’s 32.445% interest in Česká Rafinérská for around EUR 30m.
‘By exercising its pre-emptive right, Unipetrol will become the sole owner of Česká Rafinérská. The transaction closure is contingent on obtaining antitrust clearance for the transaction,’ reads a communiqué about the largest oil refining company in Czech Republic.
On Thursday, Total said it see room for expansion in the West of Shetland area, announcing it decided to launch the development of the Edradour gas field together with its partner Dong E&P (UK). It also acquired a 60% interest in the neighbouring Glenlivet discovery.
“With the upcoming start up of Laggan-Tormore, the sanction of Edradour and the entry into Glenlivet, Total is establishing a new strategic hub in the West of Shetland area” Patrice de Vivies, Total’s Senior Vice President Exploration & Production Northern Europe, said in a note released on Thursday.
On Friday, Hutton Energy signed a Term Sheet with Newton Energy to acquire 100% of its wholly-owned subsidiary Newton Energy UK, confirming the ongoing consolidation trend in the UK shale gas industry.
“The acquisition of Newton UK gives Hutton exposure to the emerging shale gas sector in the UK as well as a number of exciting conventional prospects. This is consistent with Hutton’s strategy of combining both unconventional and conventional opportunities in the same basin. Importantly it also positions Hutton in both the UK and Poland, Europe’s most supportive shale gas countries,” David Messina, MD of Hutton commented in a note.
Hours later, Lundin Norway entered into an agreement to sell an additional 15% interest in PL350 to Wintershall Norge. The subsidiary of Lundin Petroleum acquired a 30% interest from Premier Oil in June and sold a 5% interest to OMV (Norge) AS.
‘Lundin Norway will sell a 15 percent interest to Wintershall Norge AS (Wintershall) on the same terms as the PL359 transactions announced on 17 June 2014,’ the company wrote on Friday.
Lundin Petroleum acquired its 30% interest for a consideration of USD 17.5 million.
NORTH AFRICA AND CHINA
On Monday, US-based Noble Energy announced the execution of a non-binding Letter of Intent between the Leviathan field partners and BG International aimed at supplying Israel’s gas to BG’s existing natural gas liquefaction (LNG) facilities in Egypt.
‘The LOI contemplates a total gross sales quantity of up to 3.75 trillion cubic feet (Tcf) of natural gas over a 15-year period, or the equivalent of approximately 700 million cubic feet per day over the term. Delivery of the natural gas to BG is expected at the outlet of the Leviathan floating, production, storage, and offloading vessel, with planned connection to the LNG facilities by way of subsea pipeline,’ reads a note released by Noble Energy on Monday.
A day after, on Tuesday, Algeria voiced its intention to strengthen its business ties with China. Algerian government asked Chinese companies to take part to the fourth call for tenders on the exploitation of hydrocarbons in the country.
‘Energy Minister Youcef Yousfi has invited Tuesday Chinese companies to get further involved in the achievement of the national energy development programme and to participate in the fourth call for tenders on the exploitation of hydrocarbons,’ reads a statement published on Tuesday.
Chinese made the headlines of the newspapers also for an engineering joint venture between Kvaerner and China Offshore Oil Engineering Co. Ltd (COOEC).
‘The new engineering company will be a part of the Kvaerner's and COOEC's delivery model for international EPC projects. Already, more than 70 experienced engineering personnel from both COOEC and Kvaerner are working to execute basic engineering for KCET's first topside module project in China, Enping Phase II,’ the company wrote on its website.
On Friday, another agreement suggested that international companies might prefer North Africa to Europe. Reserves and potentials seem way more attractive.
Australia’s Woodside finalised an agreement with Chariot Oil & Gas to acquire an initial 25% interest in the Rabat Deep Offshore permits I-VI. The farm-in agreement to the prospective Doukkala Basin offshore north western Morocco also comprises an option to acquire an additional 25% and operatorship.
“Exploration in this basin aligns with our strategy to secure new international growth opportunities in frontier and emerging basins characterised by materiality and quality. This opportunity has been supported by Woodside’s disciplined approach to studying regional petroleum systems, including the Atlantic margins, and is a good fit with our core capabilities in deepwater exploration and production,” Woodside CEO Peter Coleman commented on Friday.
UKRAINE
Tensions remain. Quadrilateral talks took place over the week with little results.
On Sunday, Russia’s President Vladimir Putin took part to a telephone conversation with Germany’s Angela Merkel, France’s Francois Hollande and Ukraine’s Petro Poroshenko. On Tuesday, Foreign Ministers of the four countries spoke on the phone. Similar talks followed in the second part of the week. But the situation did not change for the better.
After announcing the end of the ceasefire, Ukrainian government forces expelled pro-Russian insurgent from Slovyansk, showing that the death toll is likely to rise in the 36 disputed districts.
It comes as little surprise that Ukraine’s parliament is also struggling to find a way out. The government asked for more controls and powers to cope with the emergency in the energy sector, but doubts remain. The Parliament did not support all draft laws and political instability appears just around the corner.
“The Parliament, the Government and the coalition are to be reshuffled, unless the Government and Parliament have a common vision and work together to save the country out of this extremely difficult situation", Prime Minister Arseniy Yatsenyuk said on Friday.
According to the Ukrainian government, ‘two governmental bills on the state’s energy security have already been reported to the Parliament, on the third attempt they were included in the agenda, government committees considered them two times, all the leaders of factions and groups confirmed the need for their approval at a coalition’s meeting. To reach a compromise, the Government has agreed that they should be voted only at first reading. But despite this, on July 3, they were not voted.’
CONFRONTATION: RUSSIA VS WEST
Does Europe really wish to engage in any real arm-wrestling with Moscow? For a long period, Europe and the US have warned the Kremlin they might have imposed new sanctions. But deadlines passed without new Western action.
On the other hand, there could be a confrontation for strategic deals. Indeed, it will probably be more an economic and financial war, rather than an open-faced political contest.
That is why, Saipem and Totalgaz are so important. Strategic assets are clearly part of this “peaceful” challenge.
European companies do indeed maintain a good grip on technology. However, with energy costs facilitating with what some see as the "de-industrialization" of Europe, that technology is perhaps the only attractive European asset for international investors. As such, Saipem’s sale is really interesting. Is this an opportunity for Russia? Will Chinese investors have a say?
Sergio Matalucci