This will be the fourth reduction in the last 18 months following the formula approved by the government in October 2014.
Politicians, environmentalists, fishermen and even oil analysts have expressed outrage and dismay at Norway’s plans to open up two new areas for petroleum exploration close to fish spawning grounds and one of the most picturesque parts of the Arctic.
Norway’s oil ministry is inviting companies to nominate exploration blocks , just inside the Arctic Circle and home to the world’s largest cold water coral reef, as well as in More in mid-Norway, an important spawning ground for herring.
The move by the centre-right government — a year ahead of parliamentary elections — has caused consternation because the 2013-17 coalition agreement explicitly ruled out oil exploration in Lofoten, More, and other Arctic areas such as Vesteralen and Jan Mayen.
“Of course, it’s an act of war. It’s a stupid act. This kind of politics belongs to 20 years ago. They are missing what is happening in the world,” said Jonny Berfjord, chairman of the Norwegian Fishing Vessel Owners’ Association.
Nina Jensen, head of environmental group WWF in Norway, said: “I am so furious. It’s a complete denial of the changes that are happening in the world. It’s just back to business as usual.”
A Norwegian official conceded that the move was “very provocative”. Potential exploration of the Lofoten and Vesteralen islands has long been controversial, pitting those who argue it would deliver more jobs for Norway’s remote north against environmentalists.
Mr Berfjord said the jobs argument was bogus as opening up these areas would cost more jobs than it would provide. “The reputation of the Norwegian fish industry, the Norwegian government, and the Norwegian oil industry is going to suffer,” he added.
The disputed decision could also become a political headache for Conservative prime minister Erna Solberg: the Liberal party and Christian Democrats, whose support is crucial for the centre-right government to have a majority in parliament, are both against drilling in these areas.
“Oil minister Tord Lien must clean this up. There is no doubt that the More blocks and Nordland 6 [next to Lofoten] should not have been on the list,” Ola Elvestuen, a Liberal MP, told the NTB news agency. A public demonstration against the move is planned for Thursday afternoon in Oslo.
, the government-controlled oil company, has been one of the most vocal proponents of opening up the area around Lofoten for development, arguing that Norway’s oil production would otherwise continue to decline. , Statoil’s chief executive, even recently declared that oil from Lofoten would be “good for the climate” because Norwegian oil production has lower emissions than the global average — a claim that is refuted by environmentalists.
Oil analysts expressed scepticism over the new areas would be, given that they would be unlikely to start producing oil until about 2030 when technology — including the likes of electric cars and 3D printing — could have changed the demand for petroleum. “I’m not really sure that these areas will be profitable. The more expensive producers such as Norway will have a lot of challenges going forward,” said Thina Saltvedt, analyst at Nordea, the Nordic bank.
The outcry comes as the one oilfield producing in the Norwegian Arctic — the Goliat platform run by Italian oil company — is under intense scrutiny from regulators after a series of mishaps including an electricity blackout and a serious accident involving a worker. Production is stopped at the moment until Eni can convince the regulator on safety.
Shah Committee last week opined that Reliance Industries should pay the government for the “unjust enrichment” by way of drawing natural gas from an adjacent block of ONGC in the KG basin.
ONGC initially was not keen to buy stake in the block as it felt the block had reserves far less than what GSPC was claiming and the asking price for stake was not commensurate with returns.
Harold Hamm, Donald Trump’s top energy adviser, has urged Russia and Opec to rein in oil production in an effort to raise prices, saying US companies have already lowered output during a two-year price war that has upended the energy industry.
Mr Hamm, a billionaire pioneer of the North American shale boom who has been tipped as a potential energy secretary should Mr Trump win the US presidential election, said Opec and Russia should agree to freeze production when they meet this month to discuss ways to stabilise the market.
His comments mark a rare backing from someone advising a US presidential candidate for market intervention by Opec, which is still closely associated in the US with the Arab oil embargoes of the 1970s.
This week Russia, the largest oil exporter outside Opec, with Opec kingpin Saudi Arabia to work together in the oil market.
“I think it would be high-time for them to come to an agreement,” Mr Hamm told the Financial Times at a conference in Singapore. “US producers have cut back, we’ve done our part. It would finally make sense for a freeze in production to be implemented.”
As the founder and chief executive of , one of the largest US shale producers, Mr Hamm would stand to gain personally from any effort to raise oil prices.
Opec ministers are due to meet Russian officials in Algiers this month to discuss a possible output freeze, with the aim of raising or at least stabilising oil prices, which fell below $30 a barrel at the beginning of this year amid a long-running glut.
Mr Hamm’s comments may also reflect a growing dichotomy in the US. While low prices have long been feted as a boon for consumers, the oil price crash has been painful for energy-producing states such as Texas and North Dakota.
Lower prices have also slowed plans to wean the US off imported oil, with domestic production falling and drivers turning back to gas-guzzling cars.
Jason Bordoff, a former Barack Obama energy adviser, who now runs Columbia University’s Center on Global Energy Policy, said major oil importing countries had long opposed efforts to control the market.
“Higher US oil production means the drop in prices has given less of a boost to the US economy,” Mr Bordoff said.
“But calling on the world’s largest oil producers to manipulate the market and prop up the price is a short-sighted move that could come back to bite us in the future.”
Oil prices have halved in the past two years as the world’s largest producers have raised production in an effort to head off shale and other higher-cost methods of production, which had helped almost double US oil output between 2008 and 2015 when crude largely traded near $100 a barrel.
US oil production has slipped by about 10 per cent since peaking at 9.6m barrels a day in April 2015, though the US Energy Information Administration has said that the pace of the decline is slowing. On Wednesday the agency cut its forecast for the drop in US output in 2017, saying it now expects it to decline by just 260,000 b/d after forecasting a 420,000 b/d fall last month.
Companies have squeezed down costs and are now closer to profitability at $50 a barrel than they were at the beginning of the price crash, raising fears among Opec countries who have seen their budgets decimated by the slump.
“Everyone was expecting mass bankruptcies,” Mr Hamm said at the Platts Asia Pacific Petroleum Conference. “They’re showing a discipline that no one thought would be possible.”
Mr Hamm’s personal fortune was hit hard by the oil crash, with more than $9bn wiped off his net worth as Continental’s shares slumped 80 per cent between late 2014 and early 2016.
Since then, however, Continental’s share price has jumped by more than 250 per cent as oil has recovered to near $50 a barrel and the company’s production has proven resilient to the downturn. Mr Hamm’s net worth is calculated at $14.5bn by Forbes.
Mr Trump has vowed to unleash the full power of in US energy policy, warning that attempts by his Democratic rival Hillary Clinton to restrict fracking would leave the US “begging” for Middle Eastern oil.
In July he praised Mr Hamm as “the kind of guy we want telling us about energy”.
“That guy takes a straw, puts it in the ground and oil pours out of it,” Mr Trump added.
Mr Hamm also attacked President Obama’s handling of the economy, saying the growth rate in the US was disappointing and would have been lower without the drop in oil prices.
“What would have happened if we hadn’t had those cheap energy prices?” Mr Hamm asked. “It would have been a disaster in America.”
If you cannot build, buy. Canadian pipeline companies have been trying to extend their networks southward, most famously with the proposed Keystone XL pipeline, rejected by the Obama administration last year. On Tuesday , the Canadian oil and gas transporter, to buy the American natural gas pipeline operator . The C$36bn ($28bn) deal is notable for its rationality in price and structure.
Organic growth in the sector is hard to come by. Low energy prices have reduced demand for pipelines. Despite this, in the past year Enbridge and Spectra have registered dividend growth of 14 and 7 per cent, respectively. Enbridge estimates that between 2014 and 2019 the combined cash flow available for dividends will grow at a double-digit rate.
The premium that Enbridge has offered Spectra shareholders is generous, but not mad. Spectra will contribute just above a third of the combined company’s profits; its shareholders will own 43 per cent of the group’s shares. Looked at this way, Spectra shareholders are getting a premium worth about 8 per cent of the new company’s market cap — worth perhaps C$6.5bn, at pre-deal prices.
Taxed and capitalised, the $540m of cost savings the companies foresee are worth about $2bn less than that. But Spectra’s shares were more richly valued by the market, relative to its profits, before the deal was done. This reflects rosier growth expectations. If these are fulfilled, the premium and the savings roughly match.
Of course, incremental dividend growth might prove harder to generate than expected. Despite their protests to the contrary, pipeline operators are affected by energy price volatility. And cost savings are easier projected than collected. But because the deal is done all in shares, both groups of shareholders bear that risk. In a time of feverish all-cash bids, there are worse rules than these: use shares, and keep the premium under control.
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Oil minister Dharmendra Pradhan held a meeting with senior officials and representatives from 20 cities to discuss ways to increase gas use.
A labour dispute involving workers on platforms in the North Sea has moved closer to resolution after , the oil services provider, reached provisional agreement with unions on a compromise deal.
Maintenance workers employed by Wood Group held a on Shell platforms over the summer in the first significant strike by North Sea workers for almost 30 years.
The dispute, over pay and conditions, highlighted rising labour tensions in the UK offshore energy industry as companies look for in the face of protractedly low oil and gas prices.
Wood Group said on Tuesday it had drawn up a “mutually agreeable proposal” with union representatives that was in “the best interests of all parties”. The deal would be put to a ballot of members by the Unite and RMT unions next week, it added.
The dispute has been closely watched as a test of the industry’s ability to reduce labour costs in the North Sea, as well as unions’ appetite to resist cuts.
A spokesman for Unite said the deal was “the best that can be achieved in the current circumstances”. Neither side would reveal details of the agreement.
Wood Group employees working on Shell platforms had faced an average 3 per cent pay cut under original proposals that prompted the dispute. Unions claimed that some people would see earnings fall by 30 per cent when benefits were included.
“The new proposal recognises the skills, flexibility and capabilities of the incumbent offshore workforce, the challenges facing the industry and demonstrates collective leadership in shaping the future of the North Sea,” said Wood Group in a statement.
Paul Goodfellow, head of UK upstream operations for Shell, said: “Shell is pleased with this proposal and looks forward to working with Wood Group, Unite and the RMT to ensure that the North Sea remains competitive.”
Industry leaders say changes in working practices are unavoidable if the basin is to survive in an era of low oil prices and declining production. Unions say workers are being asked to bear a disproportionate share of the pain.
By the end of this year, the number of oil and gas jobs in the UK is forecast to have fallen 8,000 from its peak of 41,700 in 2014, according to the industry group Oil & Gas UK. When support jobs are included, the number is expected to have fallen from 453,800 to 330,400 — a .
The brunt of the decline has been felt in Aberdeen, capital of the UK oil industry and home of Wood Group. Figures from oilandgaspeople.com, a recruitment site, show that average pay for an offshore worker has fallen from about £80,000 a year in 2014 to £62,000.
“The country is moving towards a gas-based economy, and it is working to increase the share of gas in the country’s energy basket from the present 6.5 per cent,” he said.
of Canada and of the US have agreed a merger to create the largest oil and gas pipeline group in North America, with an enterprise value of $127bn, in the latest of a wave of deals that has swept through the industry in the past couple of years.
The deal comes as the slowdown in the North American oil and gas industry caused by the slump in prices has raised about the growth prospects of pipeline operators.
The all-share transaction values Spectra at about $28bn, or $40.33 per share, based on the closing prices on Friday evening. That valuation is at an 11.5 per cent premium to Spectra’s share price on Friday.
The deal would give Enbridge shareholders 57 per cent and Spectra shareholders 43 per cent of the merged group. It is scheduled to close in the first quarter of next year.
Enbridge operates about 33,000 miles of oil and gas pipelines and 79 liquids terminals in Canada and the US. Spectra specialises in gas, with about 88,000 miles of pipelines and storage capacity of 300bn cubic feet.
In the year to the end of June, the two companies would have generated combined revenues of $31bn and earnings before interest and tax of $4.4bn.
The deal is expected to generate ultimate cost savings of $415m per year from cost cuts, and a further $200m per year in tax benefits.
Al Monaco, chief executive of Calgary-based Enbridge, said in a statement the deal would be “transformational” for both companies, giving them “unmatched scale, diversity and financial flexibility with multiple platforms for organic growth.”
He added that the merged group would have $20bn of projects under construction and another $37bn under development, allowing Enbridge to extend its planned annual dividend growth of 10-12 per cent out to 2024. It is proposing a 15 per cent increase in the payout next year.
Greg Ebel, Spectra’s chief executive, said the strength of the combined company would “support a large capital programme to fund the continued development of Spectra Energy’s existing, pre-eminent project inventory”, as well as allowing the combined company to compete for the most attractive growth projects.
Mr Monaco is intended to remain chief executive and president of the merged company, which will be called Enbridge and keep its headquarters in Calgary. Mr Ebel is to be non-executive chairman.
The agreed deal follows a couple of years in which the pipeline business has been the most active sector of the North American oil and gas industry for merger and acquisition activity.
Last year MPLX for $17.4bn including debt, and Energy Transfer Partners bought its affiliate for $17bn.
Williams agreed a deal to be bought by Energy Transfer Partners, which , and subsequently rebuffed a from Enterprise Products Partners.
The slide in oil prices that began two years ago has raised investors’ fears that pipeline operators, which typically distribute a high proportion of their revenues to investors, may not be able to sustain their payouts. Kinder Morgan, the largest US pipeline company, cut its dividend last year.
Enbridge and Spectra said the merged company would be able to deliver its dividend growth while maintaining a “conservative” payout of 50-60 per cent of available cash flow from operations.
Mr Monaco said the deal would “preserve and enhance our shareholder value proposition, which centers on delivering consistent growth with a low-risk business model.”
India at present is incurring a massive Rs 4.5 lakh crore on crude imports which was earlier Rs 7.5 lakh crore, said Nitin Gadkari.
The Directorate General of Central Excise Intelligence (DGCEI) here has started a probe in the case and sought certain clarification from RIL, official sources said.
A consortium of trying to get out from under the shadow of powerful state-owned rivals has laid out plans for co-ordinated international crude sourcing, and exports of diesel and other oil products.
Independent refineries, known as “teapots”, account for about a fifth of China’s refining capacity and have been gaining market share since Beijing granted them crude import . But their eagerness to capitalise on the new clearance resulted in chaotic buying in the spring that led to severe port congestion and high storage charges in China’s northern province of Shandong.
The new consortium opens the door for more co-ordinated purchases and could help the teapots diversify their crude imports and lower their sourcing costs. It is led by Pacific Commerce, the Singapore-registered trading arm of Dongming Petrochemical, one of the largest of the teapots and which will represent the 16-strong group in international crude sourcing and product sales.
On Tuesday, Pacific Commerce signed an agreement on behalf of the group to source 8m barrels a year of crude oil through Unipec, the trading arm of state-owned Sinopec. The deal follows a similar agreement with .
The structure of the consortium means that Dongming is shouldering the risk for its Shandong-based partners. The refineries are discussing taking shares directly in Pacific Commerce and setting up a bank-backed fund in Shandong to absorb some of the risk, a step that would strengthen the group’s plans to trade oil as a unified block.
“We are all brothers. We know each other. None of us would endanger the others,” said Dongming vice-president Zhang Liuchang. “We can’t ruin our credit because then the banks won’t lend to us.”
The independent refiners have for years scraped by on spare domestic crude and imported fuel oil while facing official hostility. Their fortunes turned when they were issued crude import licences, and were able to buy higher-quality crude due to the glut in international markets.
However, the reprieve was threatened when the National Development and Reform Commission warned in August that it could revoke crude import licences for refiners that had not paid taxes. Various loopholes and complications in the Chinese tax code have in the past allowed teapots to avoid paying taxes on oil products refined from fuel oil.
“That will raise our costs but sooner or later we need to regularise ourselves,” Mr Zhang said.
The teapots’ resurgence has had an impact beyond the domestic market, as they have contributed to in China that is pressuring middle distillate markets in Asia and as far away as the Middle East. Their licences to export refined products expire at the end of this year, another disadvantage versus the big state-owned companies.
To be truly a part of the international oil markets the independent refiners still need to convince global oil traders that they are creditworthy partners, especially after Baota Petrochemical, a teapot not part of the consortium, failed to get letters of credit last winter for $50m of crude purchased from traders Vitol and Mercuria.
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Officials at the oil ministry and its technical arm, the Directorate General of Hydrocarbons, are now figuring out every operational detail for a smooth launch of HELP.
AP Shah Committee report accepted the consultant’s report on the dispute over migration of gas from ONGC’s blocks to RIL’s block in the eastern coast.
AP Shah Committee report accepted the consultant’s report on the dispute over migration of gas from ONGC’s blocks to RIL’s block in the eastern coast.
Israel says some of the world’s biggest oil and gas companies have expressed interest in its forthcoming auction of exploration rights as the country attempts to restore confidence among investors after years of regulatory uncertainty.
Yuval Steinitz, Israel’s energy minister, will hold talks with potential Asian investors in Singapore this week after meetings in London last week.
Bids are due in November for 24 blocks being opened for drilling off the Israeli coast.
The roadshow represents an attempted relaunch of Israel’s natural gas resources among overseas investors after delays to the led by of the US and of Israel.
The project was finally approved by the Israeli government in June after surviving an antitrust investigation and a by opponents who claimed Noble and Delek would have too much control over the country’s gas reserves.
Uncertainty over Leviathan has deterred further investment in exploration but Mr Steinitz said the regulatory framework had now stabilised.
“Israel is back in business,” he told the Financial Times.
Interest in eastern Mediterranean gas has been fuelled by , where of Italy and of the UK have committed to large developments this year. Cyprus is also thought to have significant untapped resources.
Mr Steinitz said the region was emerging as an important new source of gas for Europe as North Sea reserves decline. “If you want to be part of what’s happening in the eastern Mediterranean, you need a presence in Israel,” he said. “Most of the natural gas in Israeli economic waters is still to be found.”
The latest geological surveys were presented at a conference in London last week and in Houston earlier this year. Once the Singapore wing is completed, most large and medium-sized oil and gas groups will have attended one of the presentations, Mr Steinitz said.
BP is among those known to have attended the London event but it and other companies contacted by the FT declined to comment on their potential interest.
Analysts said the industry remained wary of Israel after the Leviathan delays and cautioned that attracting anywhere in the world was currently difficult with energy companies under pressure from low oil prices.
Israel is already self-sufficient in gas from its field, operated by Noble and Delek; Mr Steinitz said Leviathan and any further finds would be used for export.
Deals have been struck with and Jordan for gas from Leviathan but the longer-term aim is to establish an export route to western Europe. Three main options are under consideration: shipping by sea from liquefied natural gas terminals in Egypt and potential pipelines through Turkey or through Cyprus and Greece.
The region’s tense diplomatic relations could complicate the push to link eastern Mediterranean gas with international markets but Mr Steinitz said there was a strong incentive for co-operation. Israel had received more visits from Cypriot and Greek leaders in the past year than for decades previously, he added.
IOC will expand its refining capacity to 104.55 million tonnes by 2022 from the current 80.7 million tonnes with an investment of about Rs 40,000 crore.
As per the 14th Finance Commission wards, the Centre has to part 42 per cent of the incremental excise mop up on oil products with the states from 2015.
The Maduro government of Venezuela does not have many friends left. It is pointing the army’s firepower at its citizens, blaming the US for its economic and political troubles, and can only watch as other oil exporters eat away its market share. Even the Chinese government is meeting the Venezuelan opposition parties. That must hurt.
So far, though, there is one group the Venezuelan government is making every effort to please: its foreign bondholders, in particular the New York distressed bond investors. Yes, the vulture funds. One might think Bolivarian socialism would not bend the knee to those openly planning for its demise, but up to now Venezuela has issued by the republic and PDVSA, the national oil company.
Venezuela’s hospitals do not have medicine, the stores do not have food or toilet paper, but there is an almost surreal confidence that bondholders will do quite well out of the coming restructuring, even with the damage done by governmental incompetence and corruption. Venezuelan dollar bonds are among the best-performing fixed income assets this year; holders of some issues are racking up returns of over 25 per cent.
The next big moments in the Venezuelan bond theme park ride come with the $3bn-plus PDVSA principal payments coming up in October and November. A non-professional observer might wonder why PDVSA and the government that owns it do not declare a moratorium before then, rather than selling off yet more billions of into a weak market.
And, indeed, over the past year, Venezuelan officials have had their coats pulled by investment bankers and law firms offering draft documents of exchange offers for PDVSA bonds, the republic’s bonds or the whole $61bn of traded paper. In recent weeks, though, that talk has quieted. As one lawyer says: “It must be complete chaos down in Caracas. Phone calls are not being returned, and it does not appear anyone other than [President] Maduro or the military has any decision-making ability. They are not even able to find any banks willing to act as the agent for any transactions.”
There are ways for PDVSA to make the October and November payments. Perhaps half of the $3bn is held by government-controlled entities, whose remaining managers will agree with any exchange offers suggested by PDVSA. And there is still some gold that can be sold.
When there is a default on foreign bondholders, the immediate consequences will be severe. Lee Buchheit, a sovereign debt restructuring partner at Cleary Gottlieb, the law firm, says: “Most [market] people are assuming the Venezuelans are terrified that if they default, on PDVSA or the republic, the [bondholders’ lawyers] will interrupt the flow of oil into the US. After that, they would have to find refineries [outside the US] that would be willing to take that stuff, and the refiners would have to be in a jurisdiction that would not recognise US judgments.”
One such jurisdiction could be China, but it has already lent more than $30bn to Venezuela, and over half a million barrels of oil per day are going there. It appears that China is reluctant to give any more credit to Venezuela, even against the security of more oil shipments.
Also, before the relatively heavy, or viscous, Venezuelan oil is shipped, it has to be blended with lighter oil, and that has to be imported. Once the vulture funds’ lawyers get a US judge’s injunction, making payments to get that lighter oil will be more circuitous and expensive.
Eventually the long-postponed default is almost an arithmetic certainty. If it happens under the current regime, bondholders will offer little more than a strict deal under which they are kept whole in net present value terms in exchange for some extension of principal maturities.
But with a regime change, Venezuela will be in a better position to negotiate. Then there will be an interesting shoving match among foreign bondholders. The Chinese do not intend to take a position behind anyone else. After China, about $5bn of older Venezuelan bonds, including the $4bn issue due in September 2027, require 100 per cent of the holders to agree to any change in terms. This means they are virtually “unrestructurable” under New York law. Trading between 46 and 50 cents on the dollar, or around 10 points higher than otherwise comparable Venezuelan bond issues, they have a yield to maturity over 22 per cent.
Mitu Gulati, professor at Duke University Law School, says the “Vennie 2027” owners are highly likely to eventually prevail in any negotiations. He bases his opinion in part on the outcome of with its dollar bondholders. “The Vennie27s would be a good bet as far as I am concerned. Just wait. Eventually the Venezuelans will pay in full.”
You just need a great deal of nerve, patience, and indifference to headline risk.
Chinese oil group stands to lose about $2.5bn on ageing oilfields in Argentina purchased at the peak of the in a vivid illustration of the costs of Beijing’s pricey attempt to secure natural resources overseas.
At the peak of the oil boom, Chinese state-owned companies’ willingness to pay far more than other bidders for was legendary, as executives responded to Beijing’s political goal of guaranteeing energy security with direct investments in natural resources.
Since then, the steady slide in oil prices to below $50 a barrel has left many of those Chinese purchases deep in the red. has suffered operating losses of $550m during the past three years on Argentine assets purchased from Occidental Petroleum in 2011 for $2.45bn, according to an internal company audit.
At oil prices of $60 a barrel or less, Sinopec stands to lose $2.5bn over the life of the project, the audit found. As of the end of 2015, with prices hovering below $40, projected losses reached $2.9bn, it was first reported by the respected Chinese magazine Caixin this week.
Sinopec said on Friday that rather than being “a slap in the face”, the audit served the function of a “woodpecker” in identifying problems.
“A the moment, the Argentine project has met some difficulties in its operation. However, overseas oil and gas mergers and acquisitions are very complicated and high-risk deals,” the statement said. No one would have thought that the oil price could drop from more than $100 a barrel to $40.”
The company disputed the $2.5bn loss projection, saying: “What if the oil price picks up again soon?”
Sinopec’s Hong Kong-listed arm reported an operating loss of Rmb21.9bn ($3.3bn) on its upstream oil and gas business in the first half of this year, although better returns from refining and marketing kept it profitable overall. It 11 per cent in the first half because of lower prices.
About two years ago Sinopec began an internal review of its overseas acquisitions to figure out which were profitable at lower prices. The process has revealed that it spent billions on underproducing fields in Angola, among other issues.
Its rivals have also run into difficulty with expensive assets, including Cnooc’s oil sands in Canada, and very low production for China National Petroleum Corp’s controversial investments in South Sudan amid renewed conflict there.
Additional reporting by Luna Lin and Benedict Mander
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