Caracas hopeful on shrinking oil debt to Rosneft
Venezuela plans to finish paying off oil-backed debt to Russia's state-controlled Rosneft by March 2020, opening the way to generate cash revenue and appeal for upstream investment from Moscow.
In contrast to its commercial debt, Venezuela has been steadily servicing the Russian oil debt despite US sanctions that have created export bottlenecks.
State-owned PdV serviced $300mn in equivalent oil shipments owed to Rosneft in the third quarter, leaving $800mn outstanding, according to the Russian company's latest quarterly earnings. At the end of the second quarter, the outstanding balance was $1.1bn.
PdV expects to cancel the remaining debt "during the fourth quarter of the current year and first quarter of the new year," a Venezuelan oil ministry official said.
Since the US imposed oil sanctions on Venezuela in late January 2019, Rosneft has emerged as the main lifter of Venezuelan cargoes, with much of the volume going to the company's 400,000 b/d Nayara Energy refining system in India.
PdV export revenues and commercial flexibility will improve once its debt to Rosneft is paid off in full, the oil ministry official said. But Rosneft likely will remain the top lifter of Venezuelan crude at least until the US removes the sanctions against PdV.
Even after PdV pays off the Rosneft debt, the government still would owe Russia about $3bn on loans for arms sales contracted by late president Hugo Chavez over 10 years ago. Venezuela's government has defaulted twice on weapons-related debt payments, but those obligations are treated separately from the debt PdV owes Rosneft.
PdV's debt to Rosneft is at least partially secured by 49.9pc of the shares in PdV's US refining subsidiary Citgo. The balance of the shares is collateral on the controversial PdV 2020 bond that is the subject of an acrimonious dispute between investors and Venezuela's political opposition.
The US government says escalating sanctions will force Venezuela's president Nicolas Maduro out of power. Maduro is no longer recognized as president by the US and more than 50 other Western countries, but he is still backed by Russia, China, Turkey and Cuba, among others.
The Russian diplomat and a Rosneft official told Argus that Moscow's relations with PdV and the government have improved this year as PdV has serviced the loans.
But Rosneft is holding off on any upstream investment in Venezuela until after the Opec country completes the oil-backed payments.
"Rosneft is pleased with the efforts PdV has made to cancel its debt quickly despite difficult operating conditions created by the American government," the Russian diplomat said.
Rosneft has multiple oil assets inside Venezuela, led by the PetroMonagas project originally built as a heavy crude upgrader by ExxonMobil in the 1990s. The plant is currently blending about 80,000 b/d of crude, a PdV Orinoco division official said.
The Russian company's future investment is likely to focus initially on its 30-year concession to develop the Patao and Mejillones offshore natural gas fields, which hold combined reserves of over nine trillion cubic feet.
Venezuela's government-controlled National Constituent Assembly (ANC) issued a decree in late October approving an agreement signed in July exempting Rosneft and Russian suppliers from all value-added and import tax liabilities related to the gas development.
But Rosneft is seeking more tax incentives and stronger legal safeguards, as well as more control over procurement and labor, stable electricity supply and tighter security around its operations.
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Elliott bids $7.3bn for Citgo assets
Elliott bids $7.3bn for Citgo assets
Houston, 27 September (Argus) — An affiliate of private equity group Elliott Investment Management has been selected as the top bidder in an auction for US refiner Citgo, with a bid of $7.286bn. The special master for the auction, being held in the US District Court for the District of Delaware, will need to make a final formal recommendation the court choose the Elliott affiliate, Amber Energy, pending a 1 October hearing with parties disputing the auction. But a final a hearing to ratify the sale of over 800,000 b/d of refining capacity could be held in November. Final bids for Citgo's US refineries, lubricant plants, midstream and retail assets were submitted on 11 June, with the auction aiming to satisfy debts owed by the company's parent firm, Venezuelan state-owned PdV. If the sale to Amber moves forward, following a successful November hearing, it will mark the largest purchase of US refining assets since Andeavor's acquisition by Marathon Petroleum in 2018. Since 2019 Citgo has operated under a board appointed by the Venezuelan opposition and vetted by the US government after the US rejected Venezuela's 2018 presidential election as illegitimate. But its ultimate parent company, state-owned PdV, remains under control of the Maduro government. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Haftar’s lucrative oil blockade
Haftar’s lucrative oil blockade
The general's eastern power base appears to be benefiting financially, but the country's economy is suffering, writes Aydin Calik London, 27 September (Argus) — Libya's oil blockade has entered its second month with more than half of its typical crude production of 1.2mn b/d off line. Although the UN's Libya mission reports progress in efforts to resolve a leadership crisis at the central bank that sparked the blockade, a workable solution could yet prove elusive. But whether the blockade is lifted in days or endures for weeks, the shutdowns have demonstrated eastern-based general Khalifa Haftar's ability to choke his rivals in the west of oil revenues at little cost to himself. Previous wide-scale blockades instituted by Haftar exacted a heavy toll on both the internationally recognised administration in the west and parallel administrations he has propped up in the east. But this time around, Haftar has managed to design the blockade to avoid the financial and political costs associated with past shutdowns. For one, the current shutdowns at oil fields can only really be described as a partial oil blockade. Libya has exported more than 400,000 b/d of crude so far this month, with almost all of this from eastern terminals where operations were ordered to stop in late August. Argus estimates Opec member Libya's current crude production at about 500,000 b/d. Most of this production is part of state-owned NOC's crude-for-products programme, which feeds a booming fuel-smuggling industry in the east. There has been no let-up here. Imports of refined products this month are at their highest on record at 300,000 b/d, according to Kpler, far beyond Libya's real domestic needs. Some crude is also being exported by eastern-based Libyan firm Arkenu Oil, which analysts suspect was set up to create a direct oil revenue stream independent of the central bank in Tripoli. "The Haftar family has managed the feat of orchestrating an economically lucrative oil blockade," senior fellow at the Atlantic Council Emadeddin Badi says. And some crude output is being kept on line to feed domestic refineries and allow associated gas production to supply power plants. Past blockades have tended to cause power cuts and reduce domestic supplies of diesel and gasoline, putting pressure on Haftar to lift them. But now, he can keep revenue channels open and mostly absolve himself from any backlash resulting from insufficient domestic energy supplies. General practice Haftar's ability to design the blockade to suit his interests partly derives from an informal deal in July 2022 that saw him end a months-long oil blockade in return for installing Farhat ben Gudara as chairman of NOC. In this role, ben Gudara has proven far more co-operative than his predecessor Mustafa Sanalla, who refused to allow Haftar to benefit from any blockade he imposed. That "deal" had underpinned the relative peace between the country's east and west since. If a durable solution to the current leadership crisis at the central bank is to be achieved, a new arrangement between east and west will need to be worked out. Horse-trading behind the scenes continues. "There's still a lot of negotiations to go as far as Libyan politics is concerned," an oil industry source says on the possibility of the blockade being lifted. The longer the central bank crisis persists, the more precarious Libya's economic predicament becomes. Oil revenues that usually flow into the bank have all but stopped and its ability to conduct international financial transactions has been degraded. But even if a resolution is found and oil production returns to normal levels, this would at best represent a fragile and temporary solution to a long-term problem — the lack of a coherent central authority. Worryingly, Libya is a long way from any sort of political process that could heal its divisions. Libya crude production Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Japan's Shigeru Ishiba to be PM after winning LDP vote
Japan's Shigeru Ishiba to be PM after winning LDP vote
Osaka, 27 September (Argus) — Former Japanese Defense Minister, Shigeru Ishiba, is set to replace Fumio Kishida as the country's new prime minister early next month. Ishiba's appointment is expected to restore public trust following a series of political scandals and continue the country's carbon-neutral policy, ensuring energy security and economic growth. Ishiba, 67, was elected as the new leader of the ruling Liberal Democratic Party (LDP) on 27 September, defeating economic security minister Sanae Takaichi by a narrow margin of 21 votes. He is expected to be confirmed as Japan's new prime minister on 1 October at a special session in parliament, where the LDP holds a majority. The new administration is likely to maintain the policies of the Kishida's administration, including those on diplomatic and energy issues. Kishida has updated the country's energy policies under his green transformation (GX) strategy, which aims to achieve the country's net-zero emissions goal by 2050, since he took office in October 2021. The GX approach has gained momentum, particularly after Russia's invasion of Ukraine in February 2022, which altered global commodity trade flows and prompted advanced economies to reevaluate their energy priorities. Kishida has focused on maximising nuclear and renewable energy while enhancing conventional fuel security. Industry groups, including the Japan Business Federation, have supported the GX strategy, hoping the new administration will maintain this energy policy. To further advance Kishida's GX policy, Ishiba has pledged to increase the development of the country's "rich" maritime resources in its vast territorial waters, aiming to make Japan more energy independent. This aligns with the country's push in March to explore national maritime resources to strengthen economic security. Ishiba also has a special focus on lesser-utilised renewable energies in Japan, such as geothermal and hydroelectric power. The country has not fully utilised their high potential, he told Argus during the presidential campaign on 6 September. Japan's power generation averaged 94GW in the April 2023-March 2024 fiscal year, of which hydroelectric and geothermal output accounted for 10pc and 0.3pc respectively, according to data from the country's trade and industry ministry Meti. Ishiba's energy policy, which focuses on domestic resources, stems from his concern about the country's low energy self-sufficiency rate, which is just above 12pc. The rate is even lower than that of 1941 when the country entered World War II, Ishiba said, stressing that the country must make more efforts to raise the number. As a defense expert, Ishiba is advocating to establish an Asian version of Nato to enhance collective security within the region. But his long-standing policy is facing opposition because the idea requires the country to amend the constitution that prohibits collective security measures. By Motoko Hasegawa, Yusuke Maekawa Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
US Gulf oil shut-ins drop as Helene nears landfall
US Gulf oil shut-ins drop as Helene nears landfall
New York, 26 September (Argus) — US Gulf of Mexico oil production shut-in levels fell today as Hurricane Helene bore down on Florida's west coast as a category 3 storm, bringing the threat of dangerous storm surge and winds. Around 441,923 b/d of US offshore oil output, or 25pc, was off line as of 12:30pm ET, according to the Bureau of Safety and Environmental Enforcement (BSEE). That is down from 29pc on Wednesday as the eastern Gulf path of the storm took it farther away from most offshore production facilities. About 363.39mn cf/d of natural gas production, or 20pc of the region's output, was also off line today, up from 17pc on Wednesday. Operators have evacuated workers from 27 offshore platforms. Helene was last about 145 miles west-southwest of Tampa, Florida, packing maximum winds of 120mph, according to a 4pm ET advisory from the US National Hurricane Center. Further intensification is likely and Helene could approach the coast at category 4 strength, with winds of at least 130mph. Landfall is expected near Port Leon on Apalachee Bay Thursday evening before Helene is forecast to turn northwestward and slow down over the Tennessee Valley on Friday and into the weekend. Earlier this week, offshore operators including BP, Equinor and Chevron took the precaution of suspending some operations and evacuating workers from offshore facilities in advance of the hurricane. Some facilities have since started back up as the hurricane's track shifted away from the main oil and gas hub in the region. By Stephen Cunningham Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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