Category: Nieuws

The world’s largest oil company, Saudi Aramco, is planning to raise tens of billions of dollars by selling more stakes in its businesses.

The Saudi Arabian state-controlled firm created a new team to review its assets last year, soon after the coronavirus pandemic triggered a plunge in energy prices and strained its balance sheet. Aramco raised $12.4 billion by selling leasing rights over oil pipelines to a U.S.-led group of investors in April.

The sales will continue in the next few years, according to Abdulaziz Al Gudaimi, senior vice president for corporate development.

They will happen “irrespective of any market conditions” and Aramco aims to generate “double-digit billions of dollars,” Al Gudaimi said in an interview. “It’s a strategy meant to create value and create efficiency, it’s not about a specific capital target or financing the dividends of the company.”

Second Deal

The comments are the first from Gudaimi since he was appointed last August to lead a new team that focuses on “portfolio optimization” and reports to Chief Executive Officer Amin Nasser. The company is reviewing what other infrastructure can be monetized and will start seeking investors for a second deal soon, Al Gudaimi said, without commenting further.

After being almost entirely closed off to foreign portfolio and private-equity investors since it was fully nationalized in the 1980s, Aramco is increasingly courting outside capital. It sold a debut international bond in 2019 to help fund a $70 billion acquisition of Saudi Basic Industries Corp., a chemicals maker. That was followed later the same year by an initial public offering in Riyadh, which raised almost $30 billion but failed to attract as much interest from international money managers as Crown Prince Mohammed bin Salman was hoping.

Aramco is planning to sell a stake linked to its natural-gas pipelines, Bloomberg has reported. It has subsidiaries and units involved in several other industries. They include power plants, an aviation company, a real-estate arm and an insurance firm.

Big Spender

Proceeds from the oil-pipelines deal and others will be used for “future growth projects,” he said. “We will continue unlocking value from our assets.”

The asset review was planned before oil’s drop in 2020, Al-Gudaimi said.

Aramco has substantial spending plans, even as it tries to cut its debts and ensure it can keep paying $75 billion in annual dividends, almost all of which go to the Saudi government.

Capital expenditure will probably rise by a quarter this year to $35 billion. Over the longer term, it plans to spend $110 billion developing the Jafurah gas field and an additional amount to boost its daily oil-production capacity to 13 million barrels from 12 million.

Gearing, a measure of debt to equity, has risen to 23%, above the company’s target of between 5% and 15%, after the company borrowed to pay for the Sabic acquisition and following last year’s collapse in earnings.

The transaction for the oil pipelines brought in investors from the United Arab Emirates, South Korea and China as well as the U.S. It was more than twice the value of all the foreign direct investment in the kingdom in 2020.

Learning from Others

Al Gudaimi declined to comment on a separate strategic review of Aramco’s upstream business. It’s a move that could potentially bring external investors into some oil and gas fields, people with knowledge of the matter told Bloomberg in April.

Aramco’s effort to sell and leverage assets mirrors those of other state energy firms in the Persian Gulf. Qatar Petroleum sold a $12.5 billion bond — its first in dollars in 15 years — last month. Oman’s OQ SAOC also issued a debut international bond and is considering an IPO, Bloomberg has reported. And since June last year, firms including U.S. private-equity giant Apollo Global Management Inc. have invested about $15 billion in Abu Dhabi National Oil Co.’s pipelines and property. Adnoc is also looking to list its drilling and fertilizer units.

“All the major international oil companies have gone through a process of portfolio optimization, so we can learn from all of them,” Al Gudaimi said.

Bloomberg, by Matthew Martin, July 16, 2021

Anglo-Dutch major Shell has plans to leave a joint venture with ExxonMobil that accounts for about 25% of the oil and gas production in California.

Relying on four people that Reuters said were familiar with the talks, the news service reported that Shell has plans to leave its joint venture with Exxon, called Aera Energy.

The partnership produces about 125,000 barrels/day of oil and 32mn ft³/d of natural gas, representing about a quarter of all of the production in California. Gavin Newsom, the state’s governor, has called for a ban on new hydraulic fracturing in the state, and potentially the end of its oil production.

Aera CEO Erik Bartsch said last month the proposal was counter-intuitive, as the state would still need oil and gas despite its ambitous climate initiatives.

The report followed rumours that surfaced in June about the potential Shell sale of assets in the Permian shale basin for as much as $10bn.

Shell produced about 193,000 barrels of oil equivalent/day from the Permian basin last year, down from its average of 250,000 boe/d in 2019. The shale basin, situated predominately in Texas, is the top oil producer in the continental US and the second-largest gas producer, behind the Haynesville play in northwest Louisiana and eastern Texas.

Sources familiar with the Permian matter told Reuters that the potential sale aligned with the company’s shift away from fossil fuels.

Shell’s shift away from oil began years ago. In 2015 it acquired UK oil and gas company BG Group for $70bn as part of a shift toward natural gas. The company unveiled a new strategy in February expanding its energy transition plans, forecasting a 1-2% annual decline in its oil output over the coming years. 

A Dutch court in May ruled that Shell’s climate ambitions fell short of the goals outlined in the Paris climate agreement, ordering the company to make steeper cuts in its Scope 1, 2 and 3 emissions.

By Natural Gas World, July 6, 2021

The oil and gas exploration company with licences in the proven oil province of Guyana and the highly prospective basins of Namibia, has received a detailed update from JHI Associates Inc. (‘JHI’). The Jabillo-1 well in the Canje Block, offshore Guyana, reached its planned target depth and was evaluated but did not show evidence of commercial hydrocarbons. Jabillo-1 will now be plugged and abandoned. This well was drilled at no cost to JHI or Eco and was completed on a full carry basis.

The Jabillo-1 well was drilled to test Upper Cretaceous reservoirs in a stratigraphic trap. The well was positioned offshore Guyana, approximately 265 km northeast of Georgetown, in 2,903 meters of water and was safely drilled to a total depth of 6,475 meters.

The Stena DrillMax Rig is currently operating in the ExxonMobil Operated Stabroek Block and is expected to move on to drill the Sapote-1 well, in the eastern portion of the Canje Block. The Sapote-1 Well is expected to be spud in mid-August 2021 with an estimated drilling time of up to 60 days.

The Sapote-1 prospect is located in the south eastern section of Canje, and is a separate and distinct target from Jabillo. Sapote-1 lies approximately 100 km southeast of Jabillo and approximately 50 km north of the Haimara discovery in the Stabroek Block which encountered ~207 feet (63 meters) of high-quality, gas-condensate bearing sandstone reservoir and approximately 60 km northwest of the Maka Central discovery in Block 58 which encountered ~164 feet (50 meters) of high-quality, oil-bearing sandstone reservoir.

Eco recently acquired a 6.4% interest in JHI with the option to increase its stake to 10% on a fully diluted basis. JHI, a private company incorporated in Canada, holds a 17.5% Working Interest in the Canje Block and was carried on the Jabillo-1 well.

Eco remains well funded to progress its planned Orinduik Block drilling program, subject to partner approval, and now as a result of this recent investment in JHI, it is also fully funded for the ongoing program on Canje Block that includes the upcoming committed Sapote-1 well and any additional potential wells considered for this year.

The Canje Block is operated by ExxonMobil and is held by Working Interests partners Esso Exploration & Production Guyana Limited (35%), with TotalEnergies E&P Guyana B.V. (35%), JHI Associates (BVI) Inc. (17.5%) and Mid-Atlantic Oil & Gas Inc. (12.5%).

Gil Holzman, Co-Founder and Chief Executive Officer of Eco Atlantic, commented:

‘While today’s update from JHI is disappointing, this is the nature of oil exploration. Our stakeholders continue to support our exploration efforts and look for us to continue to define these near term high impact opportunities. Our next focus is the Sapote-1 prospect to be spud in the upcoming weeks which brings us another opportunity to share in what we hope to be another major ExxonMobil led discovery. JHI was carried on the Jabillo-1 well and this is just the first in a series of exploration wells that Eco expects to be involved in this year and next. Guyana has proven to be one of the most prolific hydrocarbon regions on the globe and the high discovery ratio continues and the Company continues to be excited about its near-term future prospects on both the Orinduik and the Canje Blocks.

‘The next well in the program, Sapote-1, is located adjacent to existing discoveries and it is expected to be spud in mid-August 2021. The targets in the region have proven to hold some hundreds of millions of barrels of oil and oil equivalent and we look forward to similar scaled results from this upcoming well.

‘I am happy that we managed to become a part of JHI and the Canje Block exploration program in time that offers our stakeholders a stream of high impact catalysts and an ongoing drilling program operated by ExxonMobil. I have a great confidence that our Canje Block exposure will yield great returns and oil discoveries as it also paves the way to a broader exposure and collaboration in the Guyana-Suriname Basin.’

Qualified Person’s Statement:

Colin Kinley, Co-Founder and Chief Operating Officer of Eco Atlantic, has reviewed and approved the technical information contained within this announcement in his capacity as a qualified person, as required under the AIM rules. Mr Kinley has over 35 years’ experience in the oil and gas industry.

About Eco Atlantic:

Eco Atlantic is a TSX-V and AIM quoted Oil & Gas exploration and production Company with interests in Guyana and Namibia, where significant oil discoveries have been made.

The Group aims to deliver material value for its stakeholders through oil exploration, appraisal and development activities in stable emerging markets, in partnership with major oil companies.

In Guyana, Eco Guyana holds a 15% Working Interest alongside TOQAP Guyana B.V. (‘TOQAP’) a company jointly owned by Total E&P Guyana B.V. (60%) and Qatar Petroleum (40%) and Operator Tullow Oil (60%) in the 1,800 km² Orinduik Block in the shallow water of the prospective Suriname-Guyana basin. The Orinduik Block is adjacent and updip to ExxonMobil Operated Stabroek Block, on which twenty discoveries have been announced and over 9 billion BOE recoverable resources are estimated. On 28 June 2021, Eco acquired a 6.4% interest, with the option to increase its stake to 10%, in JHI Associates Inc. a private company which holds a 17.5% WI in the 4,800km² Canje Block. The Canje Block is operated by ExxonMobil and is held by Working Interests partners Esso Exploration & Production Guyana Limited (35%), with Total E&P Guyana B.V. (35%), JHI Associates (BVI) Inc. (17.5%) and Mid-Atlantic Oil & Gas Inc. (12.5%).

Jethro-1 was the first major oil discovery on Orinduik Block. The Jethro-1 encountered 180.5 feet (55 meters) of net heavy oil pay in excellent Lower Tertiary sandstone reservoirs. Joe-1 was the second discovery on the Orinduik Block and comprised of high quality oil-bearing sandstone reservoir, with a high porosity of Upper Tertiary age. The Joe-1 well encountered 52 feet (16 meters) of continuous thick sandstone.

In Namibia, the Company holds interests in four offshore petroleum licenses totalling approximately 28,593km² with over 2.362bboe of prospective P50 resources in the Walvis Basin. These four licenses, Cooper, Guy, Sharon, and Tamar are being explored with industry partners with Eco Operating and maintaining an average 60% Working Interest. Eco has been granted a drilling permit on its Cooper Block (Operator).

Eco Atlantic is a 70% shareholder in Solear Ltd., Solear is an independent private clean energy investment company focused on low cost, high yield solar development projects in southern Europe. Solear offers investors exposure to a portfolio of pre-construction opportunities across the renewable energy value chain, from Ready-to-Build to early-stage development.

By Street Insider, July 6, 2021

When Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman announced that Saudi Arabia was no longer an oil-producing country, he likely didn’t mean literally

“Saudi Arabia is no longer an oil country, it’s an energy-producing country,” the Energy Minister told S&P Global Platts this week.

Saudi Arabia has high green ambitions that include gas production, renewables, and hydrogen.

“I urge the world to accept this as a reality. We are going to be winners of all these activities.

Saudi Arabia will surely benefit from the green transition. While the Exxons, Chevrons, and Shells of the world are busy doing climate activists’ bidding in the boardroom and courtroom, NOCs–particularly in various OPEC nations–are all-too-eager to take advantage of what will surely be increased oil prices.

Already Saudi Arabia has raised its official selling price for the month of July to Asia.

But that doesn’t stop Saudi Arabia from pursuing its green ambitions–the Saudi Green Initiative–while funding those green ambitions through oil sales. Saudi Arabia plans to generate 50% of its energy from renewables by 2030, in part to reduce its dependence on oil. In 2017, renewables made up just 0.02% of the overall energy share in Saudi Arabia.

But that doesn’t mean Saudi Arabia is planning on producing any fewer barrels of oil. And it doesn’t mean that Saudi Arabia is planning on halting funding for all new oil and gas projects, as the recent IEA bombshell report has suggested the world must do to reach net-zero by 2050. Saudi Arabia has long maintained that oil will remain a dominant energy source for decades.

Saudi Arabia’s Energy Minister said that the IEA’s net-zero pathway spelled out in its most recent report was like a sequel to La La Land. In fact, several oil-producing and oil-consuming nations have dismissed the report.

Saudi Arabia’s oil revenues–which will fund any green aspirations the country may undertake–have dwindled over the last year and a half, and state-run oil giant Aramco had to hold bond sales just to pay its hefty dividend to the state.

Nevertheless, the world’s largest exporter of crude claiming it is no longer an oil-producing country is noteworthy indeed.

OilPrice, by Julianne Geiger, June 17, 2021

The events of May 26, 2021 look like a defining moment for the oil and gas industry.

In the space of a few hours, three decisions crystallised trends that had been building for years at the large international oil companies, showing the pressure they are under to address climate change and the energy transition.

In the US, 61% of the votes at Chevron’s annual meeting were cast in favour of a proposal that the company should “substantially reduce” the greenhouse gas emissions created by its products in the medium- to long-term.

Shortly afterwards, shareholders at ExxonMobil elected three directors nominated by the hedge fund Engine #1, despite opposition from the company’s board.

Meanwhile in the Netherlands, environmental campaigners won a court battle against Royal Dutch Shell, which was ordered to cut its worldwide carbon emissions by 45% by 2030.

These events raise five key issues that are worth bearing in mind.

The nature of stakeholder pressure is fundamentally changing

Shareholder resolutions and legal challenges at big oil companies relating to climate change are nothing new. The difference with the latest round of challenges is that they were successful.

The votes at Chevron and ExxonMobil reflected a significant increase in support for shareholder proposals and directors that were opposed by the companies’ boards. This change is largely being driven by institutional investors, which have become much more active on climate-related issues in recent years. These new stances are not about environmental activism, but reflect their assessments of investment risk.

Similarly, the successful case against Shell reflects a new approach to litigation. The campaign group made their case on the basis of human rights law, and succeeded where shareholder resolution in 2018 had failed.

The bar is being raised for decarbonisation

It is worth noting that all three companies already had targets in place for cutting carbon emissions, but shareholders and campaign groups judged these to be insufficient. For Shell, the 45% reduction in absolute emissions ordered by the court is considerably deeper than the 20% the company previously had in place. Chevron shareholders voted for the company to commit to substantial reductions in its Scope 3 emissions, created when its products are used. That is a clear signal that the bar is being raised for all publicly-traded companies in terms of their decarbonisation strategies.

The impact will be felt throughout the industry

At the moment, stakeholder pressure is mainly focused on Big Oil. For the independents, there is more likely to be a steady ratcheting up of pressure, rather than a step change. However, regulatory changes driven by social and political pressure will affect the whole industry. National oil companies do not generally face the same pressures from shareholders and governments, but still need to be commercially competitive. Carbon border adjustment mechanisms that tax imports according to their associated emissions — already under discussion in the EU, Canada and the US — could leave state-owned oil and gas companies locked out of key markets if they fail to address decarbonisation.

Decarbonisation creates higher risks for supply and prices

In Wood Mackenzie’s base-case forecast, as much oil is needed overall in 2050 as is being produced in 2021. Uncertainty over the pace of decarbonisation creates the possibility of unintended consequences for prices. If stakeholder pressure has the effect of constraining investment and restricting exploration and demand remains high, the result could be tight markets and rising prices over the medium-term.

Addressing Scope 3 emissions is a huge challenge for the industry

In the near-term, most oil and gas companies are focused on their Scope 1 and 2 emissions, created by their own operations and their purchases of energy. Significant reductions in Scope 3 emissions are likely to require fundamental structural changes to business models, with companies moving from Big Oil to Big Energy.

The alternative, cutting emissions while remaining focused on hydrocarbons, relies heavily on carbon capture, utilisation and storage (CCUS), for both producers and their customers. However, there are significant barriers: the costs for CCUS are still high relative to prevailing carbon prices in most parts of the world, and reaching the necessary scale could take a long time.

Indian Oil Corp., or IOC, has unveiled refinery diversification plans that will witness the start of a hydrogen dispensing facility at its Gujarat refinery and more downstream products, as it aims to prepare for a future catering to growing demand for both oil and cleaner forms of energy.

The move is part of the state-owned company’s wider initiative to embark on a strategic growth path that will aim to maintain focus on its core refining and fuel marketing businesses, while making bigger inroads into petrochemicals, hydrogen and electric mobility in the next 10 years.

IOC said the hydrogen dispensing facility will aim to fuel hydrogen buses plying between Vadodara and Kevadia, as well as Sabarmati Ashram.

The comments from IOC come after Indian Prime Minister Narendra Modi’s announcement over the weekend that a project is underway to develop Kevadia in the western state of Gujarat as an electric vehicle city.

“There is a fresh momentum for scaling up hydrogen use across sectors globally. Our refineries already have hydrogen generation units, and in fact, refineries present a very attractive case for acting as the hydrogen production and supply centers,” IOC chairman S.M. Vaidya told S&P Global Platts.

Wider products footprint

Vaidya recently said IOC was carving out its expansion path keeping in mind the anticipated slowdown in transportation fuels demand that would come in a decade or two.

“The high demand growth trajectory for Indian petrochemicals demand coupled with the high and growing imports of petrochemicals further strengthen the case for this in the Indian context,” Vaidya said.

Earlier in the week started June 6, IOC signed an agreement with the Gujarat state government to set up a petrochemicals and lubricants integration project as well as an acrylics and oxo alcohols project at IOC’s Gujarat refinery.

The projects will strengthen IOC’s readiness for venturing into petrochemical projects like PVC, styrene, acrylonitrile, polymethyl methacrylate and ethylene oxide in future, the company said.

“There is consensus across the board that petrochemicals integration is the way forward for the refining sector. Current refinery expansions and new capacity additions are expected to improve petrochemical feedstock availability in future,” Vaidya said.

The other infrastructure project planned under the agreement with the Gujarat government is a new flare system at the Gujarat refinery.

“Today, Gujarat is charting a new path of prosperity. To power that journey, IOC’s Gujarat refinery is now poised to grow to 18 million mt/year capacity,” Vaidya said.

Vaidya said the pandemic would not alter India’s robust long-term energy demand fundamentals despite creating short-term hurdles, making it imperative to pursue refining expansion as well as an expand footprint in CNG, LNG, biodiesel and ethanol.

Crude-to-chemicals

IOC is also looking at crude-to-chemicals, which is a technology frontier to capture the potential in petrochemicals demand, although it comes with high capital expenditures, Vaidya said.

In addition, IOC has undertaken a series of initiatives in the hydrogen sector.

“Hydrogen is the fuel of the future. IOC plans to set up several hydrogen production units on pilot basis,” Vaidya said.

Last year, IOC inaugurated its hydrogen-spiked CNG, or H-CNG, plant in the Indian capital while the Petroleum Ministry launched trial runs of buses using H-CNG as fuel.

To produce H-CNG, the entire CNG of a station passes through this new reforming unit and part of the methane gets converted into hydrogen, with the outlet product having 17%-18% hydrogen. IOC officials said emission levels would come down substantially for vehicles using H-CNG as fuel.

H-CNG blends can be produced directly from CNG, bypassing the energy-intensive electrolysis process and high-pressure blending costs. The flexible process allows the production of H-CNG on-site, in less severe conditions and under low pressure, IOC said, adding that the cost of H-CNG production by the above process would be about 22% cheaper than conventional physical blending.

Within liquid fuels, Vaidya expects that IOC will be playing a big role in blending of biofuels like ethanol and biodiesel.

India has brought forward its target of blending gasoline with 20% ethanol by five years in efforts to accelerate the push toward renewables and a cleaner energy basket. Prime Minister Modi said the country will now aim to achieve the target of 20% blending by 2025, instead of 2030.

“To achieve a target of 20% ethanol blending, India will be required to increase the current pace of ethanol capacity addition by 3.5 times, which could be a challenge. However, raw material aggregation and timely investment would be key factors to be monitored,” said Vivek Sharma, senior director at CRISIL, a separately managed unit of S&P Global.

S&P Global Platts, by Sambit Mohanty, June 14, 2021