Venezuela exposed by looming debt payments
Venezuela's government and state-owned oil company PdV have combined debt of more than $3bn due before the end of 2018, an amount equivalent to more than a third of the central bank's hard currency reserves of $8.44bn.
Both are already in default on $6.4bn in sovereign and corporate debt accumulated over the past year. Four financial sector executives consulted by Argus say the government will accumulate more arrears during the rest of the year as PdV's production continues to decline, although part of the payments could be made.
The Maduro government theoretically could tap the bank´s reserves to cover its fourth quarter debt maturities. But with the bank's liquid cash reserves presently totaling a little over $1bn, some gold holdings would have to be sold to secure the cash needed to pay all bond debt and other liabilities due over the next 90 days.
Gold accounts officially for almost three-quarters of the bank's reported hard currency reserves, but it is unclear if all of the reported gold assets are under central bank control. Two former bank economists believe the government has secretly shipped up to 200 tons of the bank's gold out of the Venezuela since 2016. Current bank officials declined to comment, citing national security.
Oil exports account for over 95pc of Venezuela's annual hard currency revenues, and international oil prices have strengthened in recent months. But Venezuela´s tumbling production has cancelled out any gains from rising prices.
PdV's weekly average export price reported by the energy ministry climbed to just over $73/bl as of 28 September 2018 compared with an average of $50/bl a year earlier. In the same period, crude output declined to about 1.2mn b/d in September 2018, from 1.95mn b/d in September 2017, according to Argus estimates and official production data communicated directly to Opec by the energy ministry.
The crisis has driven the Maduro government to plead for more financial support from Beijing and Moscow. China recently committed to a series of joint ventures in Venezuelan oil and minerals, but has resisted Venezuela´s petitions to reschedule oil-backed debt.
The government this week launched a redesigned version of its petro, a controversial financial instrument that it is calling it a "digital currency" whose value will be set by a weighted basket of Venezuelan commodities that includes oil, gold, iron ore and diamonds. The instrument is widely seen as a hollow and likely fraudulent way for the government to get around its financial crisis.
Venezuela´s looming debt obligations include $500mn that PdV pledged to pay US independent ConocoPhillips before the end of November, the first installment on a $2bn settlement of an arbitration claim stemming from the 2007 takeover of the US company´s Venezuelan assets.
If PdV does not meet the payment, it risks the restoration of judicial seizures of its Dutch Caribbean oil assets that ConocoPhillips lifted after the settlement was reached in late August.
Combined sovereign and PdV bond maturities totaling $1.598bn are due in October, including an $842mm amortization payment and an associated $107mn interest payment on a PdV 2020 bond, both due on 27 October. The principal payment has no grace period, but the interest payment has a 30-day window.
The PdV 2020 bond is backed by 50.1pc of the shares in PdV Holding, the indirect parent of PdV´s US refining subsidiary Citgo. This is the only bond that PdV and the government have honored since falling behind on the payments a year ago.
The other 49.9pc of PdV Holding is pledged to Russia´s state-controlled Rosneft for a 2016 oil-backed loan of $1.5bn.
Combined sovereign and PdV debt maturities in November total a further $1.22bn, followed in December by over $242mn more, according to Caracas Capital Markets.
Caracas blames US financial sanctions, first imposed in August 2017 and since tightened to close loopholes, for cutting off its access to capital. The sanctions were extended in March 2018 by the US Treasury to include the petro in all its variations.
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UK eyes new environmental guidance for oil, gas: Update
UK eyes new environmental guidance for oil, gas: Update
Adds comment from Shell London, 29 August (Argus) — The UK government will develop new environmental guidance for oil and gas firms, in the light of a recent Supreme Court decision that ruled consent for an oil development was unlawful, as the scope 3 emissions — those from burning the oil produced — were not considered. The ruling means that "end use emissions from the burning of extracted hydrocarbons need to be assessed", the government said today. The government will consult on the new guidance and aims to conclude the process "by spring 2025", it said today. It will in the meantime halt and defer the assessment of any environmental statements related to oil and gas extraction and storage activities until the new guidance is in place, including statements that are already being assessed. The Supreme Court in June ruled that Surrey County Council's decision to permit an oil development was "unlawful because the end use atmospheric emissions from burning the extracted oil were not assessed as part of the environmental impact assessment". The government also confirmed that it will not challenge judicial reviews brought against the development consent granted to the Jackdaw and Rosebank oil and gas fields in the North Sea. A judicial review in the UK is a challenge to the way in which a decision has been made by a public body, focusing on the procedures followed rather than the conclusion reached. Environmental campaign groups Greenpeace and Uplift launched legal challenges in December seeking a judicial review of the government's decision to permit Rosebank. Norway's state-owned Equinor and London-listed Ithaca hold 80pc and 20pc of Rosebank, respectively. Greenpeace in July 2022 separately filed a legal challenge against the permitting of Shell's Jackdaw field. "This litigation does not mean the licences for Jackdaw and Rosebank have been withdrawn", the government said. The Labour government, voted into office in July , pledged not to issue any new oil, gas or coal licences, but also promised not to revoke existing ones. Equinor is "currently assessing the implications of today's announcement and will maintain close collaboration with all relevant stakeholders to advance the project. Rosebank is a vital project for the UK and is bringing benefits in terms of investment, job creation and energy security", the company told Argus today. Shell is "carefully considering the implications of today's announcement... we believe the Jackdaw field remains an important development for the UK, providing fuel to heat 1.4mn homes and supporting energy security, as other older gas fields reach the end of production", the company told Argus . North Sea oil and gas production "will be a key component of the UK energy landscape for decades to come", the government said today. The UK government introduced a climate compatibility checkpoint in September 2022, designed to ensure that oil and gas licensing fits UK climate goals. The UK has a legally-binding target of net zero emissions by 2050. The checkpoint, though, does not take into account scope 3 emissions. These typically make up between 80pc and 95pc of total oil and gas company emissions. By Georgia Gratton Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Baghdad issues ultimatum to KRG to drive output down
Baghdad issues ultimatum to KRG to drive output down
Dubai, 29 August (Argus) — The federal Iraqi government has issued an ultimatum to northern Iraq's Kurdistan Regional Government (KRG) to reduce its crude output to "the minimum required", or face the possibility of not receiving its share of the budget. The move, communicated today by a senior official at Iraq's state marketer Somo, represents the latest attempt by Baghdad to pressure the KRG into cooperating to help bring Iraqi output below its Opec+ production target. KRG was asked "on several occasions" to cut its production according to the budget law "to the minimum required for their local refineries" — around 50,000 b/d, the official said. "Otherwise, the KRG will have to pay [the federal government] all the revenues they receive, for the extra barrels beyond what their refineries need". Iraq has emerged as the Opec+ group's biggest overproducer, failing to meet its target in any of the first seven months this year. The country, along with Kazakhstan and Russia, which are overproducing too, submitted updated plans to the Opec secretariat last week outlining how it intends to compensate for the extra volume. Iraqi officials said that a lack of visibility on KRG production are complicating efforts. Output has been gradually recovering in Kurdistan this year, even though the 400,000 b/d export pipeline that links fields in the north to the Turkish Mediterranean port of Ceyhan has been shut-in since March 2023 because of a dispute between Baghdad and Turkey. Crude production from the region collapsed below 100,000 b/d in the months following the pipeline closure, but has risen steadily, particularly from fields operated by foreign companies, as they find new outlets for their crude. Foreign operators operating in Kurdistan said they rely on trucking crude to local refineries to stay in business, but Kurdish crude is also being smuggled — by truck — across the border to neighboring Turkey, Iran and Syria, Argus understands. Different accounts Crude output from Iraqi Kurdistan is currently averaging around 350,000 b/d , a spokesperson for the Association of the Petroleum Industry of Kurdistan (Apikur) told Argus. Apikur is an industry body representing the foreign operators in the northern region . Argus assessed KRG production at 200,000-250,000 b/d on average in the first half of the year. But the federal government disputes those numbers, insisting that production from Kurdistan is around 150,000 b/d. "Any more than that will put huge pressure on the KRG," the official said. Assuming refining capacity of 50,000 b/d, the official labelled the higher estimates as "illogical." He pointed to the fact that about 500 trucks are already needed on a daily basis to export the region's 100,000 b/d, and that the state of the roads and service stations does not allow for the double amount of vehicles. Earlier attempts by the federal government to scale back Iraqi Kurdish production have failed, but the official thinks that Baghdad's latest ultimatum will have the desired impact. "These are serious steps," the official said. If KRG production remains above the 50,000 b/d needed for domestic refining, and it does not deliver the proceeds to Baghdad, it will not receive its share of the budget, which it is heavily dependent on to support its economy. Getting back on track Iraq's latest compensation plan put its overproduction in January-July at 206,000 b/d, compared with 197,000 b/d in January-June. Opec+ secondary sources estimated that output rose by 57,000 b/d on the month to 4.251mn b/d in July, some 251,000 b/d above the Opec+ target. The official said Iraqi production should fall to required levels from September. Somo canceled a spot cargo of 1mn bl this month, and Iraq is "working on deferring two similar shipments, before the end of the month," the official said. "That means we will be down around 3mn bl, or 90,000 b/d". He added that a 50,000 b/d decrease in domestic crude consumption resulting from increased gas imports from Iran and stronger domestic gas output will also help with the country's compliance. He said Iraq's August output levels will be down on the month, but dependent "on the position of the KRG". By Nader Itayim and Bachar Halabi Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
UK plans new environmental guidance for oil and gas
UK plans new environmental guidance for oil and gas
London, 29 August (Argus) — The UK government will develop new environmental guidance for oil and gas firms, in the light of a recent Supreme Court decision that ruled consent for an oil development was unlawful, as the scope 3 emissions — those from burning the oil produced — were not considered. The ruling means that "end use emissions from the burning of extracted hydrocarbons need to be assessed", the government said today. The government will consult on the new guidance and aims to conclude the process "by spring 2025", it said today. It will in the meantime halt and defer the assessment of any environmental statements related to oil and gas extraction and storage activities until the new guidance is in place, including statements that are already being assessed. The Supreme Court in June ruled that Surrey County Council's decision to permit an oil development was "unlawful because the end use atmospheric emissions from burning the extracted oil were not assessed as part of the environmental impact assessment". The government also confirmed that it will not challenge judicial reviews brought against the development consent granted to the Jackdaw and Rosebank oil and gas fields in the North Sea. A judicial review in the UK is a challenge to the way in which a decision has been made by a public body, focusing on the procedures followed rather than the conclusion reached. Environmental campaign groups Greenpeace and Uplift launched legal challenges in December seeking a judicial review of the government's decision to permit Rosebank. Norway's state-owned Equinor and London-listed Ithaca hold 80pc and 20pc of Rosebank, respectively. Greenpeace in July 2022 separately filed a legal challenge against the permitting of Shell's Jackdaw field. "This litigation does not mean the licences for Jackdaw and Rosebank have been withdrawn", the government said. The Labour government, voted into office in July , pledged not to issue any new oil, gas or coal licences, but also promised not to revoke existing ones. Equinor is "currently assessing the implications of today's announcement and will maintain close collaboration with all relevant stakeholders to advance the project. Rosebank is a vital project for the UK and is bringing benefits in terms of investment, job creation and energy security", the company told Argus today. North Sea oil and gas production "will be a key component of the UK energy landscape for decades to come", the government said today. Argus has also contacted Shell for comment. The UK government introduced a climate compatibility checkpoint in September 2022, designed to ensure that oil and gas licensing fits UK climate goals. The UK has a legally-binding target of net zero emissions by 2050. The checkpoint, though, does not take into account scope 3 emissions. These typically make up between 80pc and 95pc of total oil and gas company emissions. By Georgia Gratton Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Iraqi Kurdistan’s oil output at 350,000 b/d: Apikur
Iraqi Kurdistan’s oil output at 350,000 b/d: Apikur
Dubai, 29 August (Argus) — Crude production in northern Iraq's semi-autonomous Kurdistan region is around 350,000 b/d, according to a local industry body, just 50,000 b/d below what it was before the closure of a key pipeline to Turkey shut Kurdish producers out of international export markets in March last year. The production estimate relates to fields under the control of the Kurdistan Regional Government (KRG) and excludes those in the region that are controlled by the federal government in Baghdad. It was provided to Argus by the spokesperson for the Association of the Petroleum Industry of Kurdistan (Apikur), Myles Caggins. "The volume of production has generally increased since the shuttering of the pipeline in March 2023. All Apikur members remain focused on ultimately having the pipeline reopened for exports," Caggins said. Apikur represents eight foreign oil firms operating in the Kurdistan region — DNO, Genel Energy, Gulf Keystone, HKN Energy, Shamaran Petroleum, Western Zagros, Mol and Hunt Oil. Producers in the region have been selling their crude to local buyers since the pipeline was closed but they have had to settle for steep discounts. Caggins estimates local sales of Iraqi Kurdish crude are averaging $30-35/bl, which is around $45-50/bl lower than prevailing international oil prices. Apikur's estimate tallies with an operational update from Gulf Keystone today , which put crude output from the Shaikan field in the Kurdistan region close to capacity at 48,200 b/d in August and the current value of local crude sales at around $27/bl. Besides local refiners taking Iraqi Kurdish crude, Argus understands that some of the production is being smuggled into Turkey, Iran and Syria. Such robust production levels in the Kurdistan region are unlikely to be welcomed by Iraq's federal government in Baghdad, given the challenge it faces in keeping Iraqi output below the country's Opec+ cap. Iraq has failed to stick to its target in any month this year. Along with fellow overproducers Kazakhstan and Russia, Baghdad submitted updated plans on 23 August detailing how it intends to compensate. Iraqi officials say efforts to compensate for exceeding the Opec+ target are complicated by a lack of visibility on production in Iraqi Kurdistan, which they currently put at around 100,000 b/d, less than a third of the Apikur estimate. The KRG does not provide monthly production figures as part a wider clampdown on issuing data following the pipeline's closure. Sources at Iraq's oil ministry have told Argus that it will be easier to deliver compensation cuts after the summer season ends and temperatures begin to drop. By Bachar Halabi Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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