South Africa searches for partners for South Sudan oil block

Category : News

By Antony Sguazzin and Paul Burkhardt on 5/21/2019

JOHANNESBURG (Bloomberg) — South Africa’s Strategic Fuel Fund is welcome to bring in partners to help it execute a $1-billion agreement to drill for oil and build a refinery and pipeline in South Sudan, the central African nation’s oil minister said.

Under the agreement, signed between the two governments on May 6, the Strategic Fuel Fund holds 90% of the project in B2 Block with the Nile Petroleum Corp., South Sudan’s national oil company, owning the rest, Ezekiel Gatkuoth said in an interview at Bloomberg’s office in Johannesburg after earlier meeting his South African counterpart. The project, which Gatkuoth expects to reach production in about six years, includes the construction of a 60,000-bpd oil refinery in Pagak, he said.

“They have room to farm in” a partner, the South Sudanese minister said, adding that his government has the right to approve any partners and that a transaction would be subject to capital gains tax.

The partnership should benefit South Sudan by boosting production in a nation where output is half of what it was before a civil war, while securing energy supplies for South Africa, which imports crude for its refineries as it has little oil production of its own. Gatkuoth acknowledged that the project is likely to cost more than $1 billion. The SSF didn’t immediately respond to requests for comment.

In addition to bringing new partners into its oil fields, South Sudan is trying to diversify export routes for its oil.

Currently it exports oil through Sudan — the country from which it seceded acrimoniously in 2011 — at a cost of $24/bbl, but it’s now considering paying Uganda a fee to transport crude south to a port in Tanzania when new pipelines are built, Gatkuoth said. Exports through Ethiopia could also be an option.

The B2 Block was once part of an area held by Total SA until 1985 that was the size of Pennsylvania.

Russia’s open to relaxing OPEC+ cuts as Saudis urge restraint

Category : News

By Annmarie Hordern and Dina Khrennikova on 5/20/2019


Photo: Russian Energy Minister Alexander Novak.

LONDON and MOSCOW (Bloomberg) — From easing the limits to ending the extreme throttling-back that has seen some countries exceed original cutback targets, Russia sees a range of options that would allow OPEC+ to continue output cooperation until year-end.

“One of the options we discussed today is removing the over-compliance, a return to the parameters of the current agreement,” Russian Energy Minister Alexander Novak said Sunday in an interview with Bloomberg TV in Jeddah, Saudi Arabia, after a producer group meeting. OPEC+ may need “to tweak the parameters to a certain extent” if monitoring shows full compliance is not enough to prevent a market deficit, he said.

As the Organization of Petroleum Exporting Countries and its allies gathered over the weekend to discuss the future of the output-cuts pact, Russia was the only member of the group that did not rule out a relaxation of the cuts. Most other nations including the de facto leader, Saudi Arabia, have signaled they prefer extending the current deal until year-end.

If Russia’s support to ease the restrictions strengthens over the next several weeks, OPEC+ may find it difficult to reach a consensus over extending the agreement at the ministerial meeting in June when the current deal expires.

Continuing the OPEC+ pact into the second half of the year with full compliance of all member states would allow for production increases. In April, the group’s total average conformity with the deal reached 168%. Saudi Arabia alone could ramp production up by about 500,000 bopd without breaching its cap, as it has cut output deeper than required.

For Russia, the full-compliance option would be less attractive, adding just several dozens of barrels to the average daily output. The nation has dragged its feet to meet its obligations under the output-cut deal, showing full conformity only since the last days of April. Meanwhile, Russian producers have indicated they are keen to quickly ramp-up output once the current deal expires in June, analysts at IHS Markit Inc. and VTB Capital said last week.

So far, it’s difficult to determine what option would balance the market best due to a range of “black swan” uncertainties, like tougher U.S. sanctions against Iran, Novak said. Russia remains committed to joint effort within OPEC+ and expects that the next several weeks will make it clear what solution to choose, he said.

“What’s important now is that we agree to continue cooperation, and as for the final parameters, they will be decided at the June meeting,” he said.

Venezuela falls to fourth-largest oil producer in Latin America

Category : News

By Lucia Kassai on 5/20/2019


Photo: Venezuela oil slick.

HOUSTON (Bloomberg) — Venezuela, which sits atop more oil than Saudi Arabia, has fallen behind three other Latin American countries as years of mismanagement and lack of investments take its toll.

The OPEC founding member produced 740,000 bopd in March, while Colombia’s oil reserves are less than 1% of Venezuela’s, produced 884,815 bbl. Venezuela has oil reserves of 302.3 Bbbl, while the neighboring Latin American country holds volumes almost as large as Gabon’s, with 1.96 Bbbl.

Venezuela, once the main source of crude for U.S. Gulf refiners, has seen its share drop to zero after the U.S. imposed a de facto ban on imports from Petroleos de Venezuela SA at the end of January. Colombian oil producers have stepped up to help fill the void, as refiners owned by Chevron Corp, Valero Energy Corp and even Citgo Petroleum Corp — formerly controlled by the Nicolas Maduro regime and now controlled by interim president Juan Guaido — gorge on Colombia crude.

Plagued by chronic power outages and lack of chemicals, oil production in Venezuela has been falling over the past decade. Last year the country produced 1.354 MMbbl a day, the lowest in 69 years. Once the largest producer of oil in Latin America, Venezuela now is the fourth largest, after Brazil, Mexico and Colombia.