Euroil  News Analysis EUROPE OIL & GAS Intelligence MONITOR Published by Newsbase

23 January 2014 Week 03 EurOil  News Analysis EUROPE OIL & GAS Intelligence MONITOR Published by NewsBase

        After a mixed 2013, there is confidence that merger   and acquisition activity in 2014 will maintain the

  momentum seen in the fourth quarter.

  Asset divestment by the majors is opening the market to mid-level independents. (Page 2)    The valuation of E&P assets is still low, as many

  companies are cash-constrained. Greater access to capital is necessary for this to change. (Page 2)   Shell has said it plans to sell US$15 billion worth   of assets over the next two years. (Page 7)

  The company is to sell off some of its North Sea oilfields as well as parts of its refining portfolio   and some early-stage projects. (Page 7)  

   Major gas developments in the East Mediterranean   are advancing more slowly than expected as  economic and political problems take their toll.   US firm Noble does not plan to drill more wells in    the East Med until late 2014 at the earliest. (Page 4)

  Cyprus’ fragile economy makes investment in key energy infrastructure difficult. (Page 4)

   COMMENTARY  After a fluctuating 12 months, there is confidence that deal-making in 2014 will maintain the momentum that began to build in the final quarter of 2013 By Sam Wright M&A activity in Europe in 2013 started slowly but had picked up by the end of the year There is optimism that the uptick in activity will continue into 2014 Divestment by the majors is opening the market to mid-level independents

It is fair to say that 2013 was a mixed new fields in 2013, said that it was worth US$300 million, involved the bag for Europe’s oil and gas sector. seeking more revenue to develop its giant acquisition of a 29.99% stake in Exillon While investment soared, rising costs, a Johan Sverdrup field in the Norwegian Energy by the Russian private investor general lack of exploration success and a North Sea along with its further-flung Alexei Khotin. Exillon Energy, much bleak economic climate dented interests in Brazil. Meanwhile, Rosneft like Severenergia, is an oil and gas confidence across the industry, meaning signed deals with both ExxonMobil and exploration business, highlighting the that few firms were willing to spend Statoil. Morgan Lewis’ international growth in the exploration and distribution capital or take the risks associated with energy and infrastructure partner, Lewis market.” mergers and acquisitions. Jones, described the accords as heralding According to a recent report by Wood “the return of significant new foreign Blurred lines Mackenzie, total M&A expenditure investment into Russian oil and gas, Interestingly, this also emphasises across the UK’s oil and gas industry fell though on much different terms than the another trend. “Joint venturing has to GBP1.1 billion (US$1.8 billion) in optimistic days of the 1990s.” become increasingly challenging over the 2013 from GBP6.1 billion (US$10 Intriguingly, the biggest European deal last decade,” says London School of billion) the previous year. Throughout of the final three months of 2013 largely Business and Finance’s (LSBF) head of Europe, overall deal figures closed at a flew under the radar. In November, research, Steve Priddy. “It was always 20-year low. Italy’s Eni sold its stake in the seen as a vehicle for allowing IOCs and During 2012, the M&A landscape was Severenergia gas project in Russia’s NOCs to work together, giving IOCs dominated by Rosneft’s US$60 billion Yamal Peninsula for US$2.94 billion to access to the acreage, while they enhance buyout of TNK-BP. Yet in 2013, the Yamal Development, an equal joint the traditional inefficiency and largest deal worldwide was just a tenth of venture between Gazprom Neft and bureaucracy of NOCs,” he added. this sum, with Devon Energy making a Novatek. Speaking to NewsBase, “However, JVs have taken a US$6 billion acquisition of GeoSouthern Imprima – a firm that provides virtual hammering – think of BP in Russia, for Energy’s assets in the Eagle Ford shale data rooms for clients undergoing M&As example, while NOCs are pursuing more oil play in the US. – CEO Torgny Gunnarsson, said that the aggressive growth strategies such as deal marked the continuing rise of gas Statoil’s plans and achievements beyond Slim pickings transactions in recent months, which the Norwegian Continental Shelf.” In Europe over the past twelve months climbed four-fold from 2012 to 2013. This pattern reflects the successes of BP and Rosneft again took centre stage, “There’s a specific appetite for these China’s state energy firms, the biggest with the UK-headquartered firm agreeing M&As in Southern and Eastern Europe spenders on M&As during 2013 by far. It a US$4.9 billion deal in March for 5.66% as the potential for cross-continent sales seems likely that as 2014 progresses the of the Russian firm’s shares from OFSC grows,” Gunnarsson explained. “Another boundaries between some IOCs and Rosneftegaz. In the first half of the year, similar deal, completed in December and NOCs will continue to become indistinct there was very little further M&A during exploration. “We can see a activity of any note. transition taking place, with the However, after the nadir of the second “It would not be surprising monopoly of traditional operators quarter, where deal volumes fell to just to see a pick up from the dissipating in favour of a more open US$500 million, Q3 saw Austrian firm market,” said Edinburgh-based OMV make a high-profile US$2.65 lows of 2013, but not back accountancy firm Campbell Dallas’ billion purchase of a number of Statoil’s to the frenetic pace of 2012 corporate finance partner, Tom assets in the North Sea and Atlantic Faichnie. margin. Statoil, the biggest discoverer of and earlier”

“Statoil is expanding and its Eurasian Since September 2013, crude oil prices Speaking from the firm’s Houston operations include long-term activities in have dropped sharply from a peak of office, he continued: “It would not be the UK, Ireland, Faroe Islands, US$110 to current levels of around surprising to see a pick-up from the lows Azerbaijan and Russia. Its acquisition US$94. Given that production from the of 2013, but not back to the frenetic pace activities have allowed many of these US shale oil sector is set to increase over of 2012 and earlier, unless there’s a operations to come to fruition. Gazprom, the coming months, while output from surprising shift in prices, or similar Saudi Aramco, Apache and Talisman both Libya and Iran – the latter owing to factors.” Sinopec are also putting down roots in a seeming breakthrough in the standoff He went on to attribute this to a Europe.” over its nuclear programme – is also settling of the dust caused by the shale poised to rise, the signs appear to boom, where some US independents An unsteady outlook indicate that this trend will continue. offloaded their international assets in Outside of the state firms, the view for This is a sentiment backed by order to focus on acreage back in North 2014 remains unclear. Berwin Leighton consultancy firm ECON Oil & Gas, with America. Whilst some of this activity Paisner’s global co-head of mining, its managing director, Ole Njaerheim, may continue into the coming year, it Alexander Keepin, believes the optimism saying: “Given that there seems to be less seems that the majority of big spenders in the market is positive given the cash available for transactions, it is also and sellers have had their fill. sluggishness of early 2013, but is still likely that prices could be lower going Either way, the global marketplace unlikely to lead to a spate of expansions forward.” remains heavily tied to the performance by smaller companies. He added: “The main driver for more of the US energy sector, whether it is “It was a very difficult year for deals transactions in the market would be because of falling crude prices, global last year, as the focus, particularly in the higher oil and gas prices. If they stay at divestments or the flood of cheaper gas integrated oil companies, was on capex today’s level we expect the market to be that has entered the market. reduction, which meant that there were slow because of expected prices not As Lewis Jones from Morgan Lewis fewer mergers and acquisitions and less being achieved.” concluded, the overall impact is money spent on development and Njaerheim also noted that several profound: “Many US independent are exploration,” he said. “We believe that appealing assets had come onto the retreating from their international there is increased optimism going market. “A number of companies and investments and their places are being forward but we are expecting a large part assets have been put up for sale, taken by a diverse range of new entrants: of that to be with the mid-market including Marathon’s assets in northwest Asian SOEs, frontier-focused juniors, independents,” Keepin added. Europe, Talisman in Norway and RWE private equity investors searching for “Elsewhere, the focus on shareholder DEA. These are significant transactions, returns and even service companies returns is likely to continue. The and should be of interest for a number of venturing into E&P. valuation of E&P assets is still low, as players. But the big question [whether] “Middle East gas is flowing east, not many companies are cash-constrained the owners will get a bid they are likely west; Russia’s dominant position as and it needs greater access to capital for to agree to?” Western Europe’s gas supplier is no this to change. Stronger economic Morgan Lewis’ head of the Energy longer assured and Africa sees its energy performance from the US will help in Transactions practice and partner, David future inexorably tied to Asia. In short, this regard but the other key factor is the Asmus, added: “We are perhaps more there’s disruption to the old order.” oil price, which a number of sceptical about the overall level of oil commentators predict will fall.” and gas M&A in 2014.”  Major gas developments in the East Mediterranean are advancing more slowly than expected as economic and political problems prevail By Gary Lakes

The Ensco 5006 drill rig is due to set sail last rig to be seen in the East finished its work for the only active from the Cypriot port of Limassol to Mediterranean for some time. operator in the Levant Basin, US Singapore for refurbishment in the next The Ensco 5006 arrived in Limassol explorer Noble Energy. few days. Once it leaves, it could be the during the first week of January having

Noble used the Ensco 5006 for an country’s government took months to subsidiaries of the Delek Group, over the exploration well in Israel’s Tamar determine gas resource export policy. terms of a framework agreement for the Southwest prospect, where a discovery of This in turn jeopardised a deal to bring LNG project at Vassilikos. Talks 700 billion cubic feet (19.8 billion cubic Australia’s Woodside Petroleum into the adjourned over Christmas – described as metres) of natural gas was reported, and Leviathan project. a “time out” for the Cypriot government for the first appraisal well in the It remains unclear whether Woodside so that it could consider a number of Aphrodite structure offshore Cyprus, will join Leviathan as a strategic partner. important issues – and are due to resume which finished in early October. That decision will likely hinge on how early this year, but as yet a date to restart That appraisal well, which happened to Leviathan gas will be exported: by has not been set. be only the second well drilled offshore pipeline to Turkey; by pipeline to Jordan Cyprus, proved to be a disappointment and the West Bank; by pipeline to Egypt, Economic headaches for everyone with a stake in it, but for where it will be routed into the idle LNG One of the main issues that the Cypriot Nicosia most of all. export plants at Damietta and Idku; by government must consider is its share of The Cyprus A-2 appraisal well showed pipeline to Cyprus, where it will feed participation in the LNG project, which a gross mean gas resource of 5 trillion into Vassilikos LNG, or by a floating is estimated to cost US$6 billion for the cubic feet (141.6 bcm) compared with LNG vessel anchored over the Leviathan first train. A two-train project would cost the earlier 7 tcf (198.2 bcm) gross mean field. some US$9 billion. Ultimately, Cyprus that was estimated when the field was Israel did manage to decide that it would like to see at least three 5 million discovered in December 2011. The would make 40% of its natural gas tonne per year trains operating at results meant that the island’s plan to resources available for export, but now it Vassilikos, exporting its own gas as well move forward swiftly to construct an is wrestling out a tax policy for its as Israeli gas and establishing the island LNG export facility at Vassilikos, east of hydrocarbon industry. In the meantime, as an East Mediterranean energy hub. Limassol, would have to wait for a better Noble has decided to occupy itself In March 2013, Cyprus was forced to appraisal result, new gas discoveries or a elsewhere. During a conference in request an economic bailout of US$10 deal with Israel to export gas from the 19 Houston last month, Noble reported that billion from its European partners. And tcf (538 bcm) Leviathan field through it had discovered gross resources in its since last spring the country has been Vassilikos. East Mediterranean acreage in the living under economic restrictions set by Cyprus and Israeli offshore of almost 40 the EU/ECB/IMF troika. Noble intentions tcf (1.1 trillion cubic metres), and added The government of Cyprus is bankrupt. It was a frustrating year for Noble in the that “significant exploration potential It has been forced to make stringent East Mediterranean in 2013. Plenty remains.” But Noble executives let it be cutbacks in its budget, its financial sector happened, but little of it contributed to known that no further drilling is planned is tightly restricted, the private economy speeding the development of the natural in the East Mediterranean until late 2014 is suffering and unemployment has gas resources the Houston-based at the earliest – a signal that decisions grown. But the country is keen to hold as company has discovered in the region. need to be made by governments in the big a stake as it possibly can in the While Noble was busy discovering gas East Med. During the last six months, planned LNG facility. and bringing the Tamar gas field on Cyprus has been in negotiations with Sources close to the talks estimate that stream for Israeli consumers, the Noble and its Israeli partners, for Cyprus to secure a 50% share of the LNG project, it would need to raise at least US$900 million in equity. And while it is clear that Cyprus wants a large stake in the project, the question is how it would raise that sort of money. Cyprus entered 2013 with a head of steam. Following a successful offshore licensing round in 2012, the Cypriot government awarded Block 2, 3 and 9 to Italy’s Eni and its joint venture partner South Korea’s KOGAS. In February, it awarded Blocks 10 and 11 to France’s Total. Eni and Total have acquired seismic in their respective blocks, and talk in Nicosia suggests that Eni may plan to start drilling in the fourth quarter of 2014.

Lebanon decrees essential for the final stage of the licensing round and award blocks, but Lebanon, too, has had its licensing round to take place: a decree that would push the original plan back by disappointments. In February last year it approving the model for the production- about six months. launched the pre-qualification phase for sharing agreements (PSAs), and a decree Despite the prospect that not a lot of its first offshore licensing round. Many approving the demarcation of the exploration work will take place in the big international energy companies country’s 10 offshore blocks. East Mediterranean during 2014, the year applied and were accepted to participate. After nearly a year without a is going to be an important one for Lebanon has gathered considerable government, Lebanon’s political parties Cyprus, Israel and Lebanon. The seismic in its offshore territory and initial and factions are finally in negotiations decisions that these countries make this interpretations of the data as reported in over the formation of a new government. year will have an impact on the energy the Lebanese media suggest that large If a new government should be formed, it futures of each other as well as the hydrocarbon resources exist. is anticipated that one of the first matters region. And the events in the region will But Lebanon’s government resigned on its agenda will be the approval of the certainly have their role to play in the last March and the caretaker government two decrees. Once they are passed, decisions that these three countries in place since then lacks the Lebanon’s Ministry of Energy will likely make. constitutional authority to pass two move as fast as possible to complete the PIPELINES & TRANSPORT  Njord Gas Infrastructure, which has Norway’s previous government argued The company has not, however, interests in the Gassled pipeline, has filed that the price cuts would encourage specified a compensation amount in the a lawsuit against the Norwegian exploration by oil companies in lawsuit, he said. government aiming to overturn a cut in Norwegian waters. Silex will decide at a board meeting to gas transport tariffs. Njord’s objection claims that the be held in the next “week or two” The company’s partners in the Gassled government’s “decision to reduce the whether to join Njord in its lawsuit, its pipeline network estimate the cuts will Gassled tariffs does not have sufficient CEO Kurt Georgsen told Bloomberg last cost them US$5.5 billion in lost earnings legal basis and must therefore be ruled week. Solveig and Infragas Norge also over 20 years. invalid,” according to a statement last said in December that they would file a Norway’s new government has backed week. “The company also claims lawsuit against the government but have the decision by the previous compensatory damages for the loss the been silent since. administration to push through cuts to the company incurs as a result of the Njord Gas is controlled by funds run tariffs as deep as 90%. These set the decision.” by Swiss bank UBS and France’s Caisse amount that gas pipelines operators can The Gassled owners, which also des Depots et Consignations and charge to transport the fuel from North include Solveig Gas Norway, Silex Gas headquartered in Stavanger, Norway. Sea platforms to processing plants in Norway and Infragas Norge, estimate Other investors in Gassled include the Norway and terminals in the UK, that the cuts will reduce their income by Abu Dhabi sovereign wealth fund, Germany, France and Belgium. The price around 34 billion krone (US$5.5 billion), German insurer Allianz, the Canada cuts, announced in June, will come into Njord chief executive officer Dan-Jarle Pension Plan Investment Board and effect from October 2016. Floelo told Bloomberg. Public Sector Pension Board.  Moscow and Brussels have failed to European Energy Commissioner European Commission’s energy policy reach agreement on a number of issues Guenther Oettinger and Russian Energy department, said that both sides had related to Gazprom’s South Stream Minister Alexander Novak met for agreed to create a working group to natural gas pipeline project, but they discussions on South Stream in Moscow address all legal and technical issues have also agreed to look for possible last week. Following negotiations, Nicole related to the pipeline project. solutions. Bockstaller, a press officer for the

The Russian Energy Ministry agreements with Gazprom, Russia’s project from the regulations in question. confirmed this plan in its own press state-owned gas monopoly. It explained For his part, Russian Deputy Energy statement. However, neither side the request by asserting that these Minister Anatoly Yanovsky said at a addressed the questions of whether a key accords violate EU laws governing European Parliament event last sticking point – namely, the EC’s competition and security. Specifically, it December that his country rejected the demand that the bilateral agreements said the project could give Gazprom proposition that EU rules applied to signed between Moscow and several control over production, export and cross-boundary projects such as pipelines European Union member states on the transport of natural gas, which goes that are not executed solely on EU South Stream project be renegotiated. against the EU market principle of territory. According to the Russian business “unbundling.” South Stream is designed to pump up daily Vedomosti, Oettinger told Gazprom and the Russian government to 63 billion cubic metres per year of journalists after last week’s talks that responded by declaring that they viewed Russian gas to Europe. It will include an Brussels and Moscow would “find a the inter-governmental agreements as underwater pipeline across the Black Sea solution to honor the previous inter- valid under international law, which has and an onshore network serving the governmental agreements Gazprom has supremacy over EU law. Moscow also Balkans, Southern Europe and Central made with European transit countries.” said that all accord had been were signed Europe. Gazprom officially broke ground Last December, the EC announced that before the EU adopted the laws and on the link last year and aims to launch it it wanted the EU members that are regulations that restrict such projects. by 2015. participating in South Stream to Additionally, it reiterated its call for renegotiate their inter-governmental Brussels to exempt the gas pipeline   Kyiv has signed a draft contract on and Romania last October. He had speculated that the deal with Bratislava reverse natural gas flow via Slovak especially high hopes for the Slovak will never be signed. They have asserted territory and forwarded it to Bratislava route, which is capable of pumping up to that Ukraine can no longer afford gas for signing, Ukrainian Energy and Coal 10 billion cubic metres per year of gas to from the EU, which will be far more Industry Minister Eduard Stavytsky Ukraine. expensive than Gazprom’s gas this year. announced on January 15. By comparison, the Polish and Slovak Stavytsky announced earlier in January Ukraine forwarded the document to routes can only handle around 2 bcm per that Ukraine stopped gas imports from Slovakia in mid-December, around the year. Ukraine has imported just about 2 Poland and Hungary, so his statement on time when the Russian government bcm of gas along these routes since the agreement with Slovakia on January agreed to cut its gas price for Ukraine to shipments began in late 2012. 15 was unexpected. But on January 16, US$268.5 from US$400 per 1,000 cubic Ukraine has conducted talks with the business daily Kommersant quoted a metres from January 1, 2014. The two Slovakia with EU mediation. However, source inside Ukraine’s Energy and Coal sides had been scheduled to sign an the discussions have been difficult Industry Ministry as saying that the agreement on December 4, but the deal because Russia’s Gazprom, which option of gas import from Slovakia was postponed after the Ukrainian supplies the gas on which Slovakia would serve as a bargaining chip in talks delegation failed to arrive. depends, has pressed Bratislava so as to with Russia, which has said it would be Ukraine began importing gas from the prevent reverse flows to Ukraine. Such revising the price for Ukraine each European Union under a contract with shipments would involve gas that quarter. RWE. The German company began Gazprom considers its own. The EU understands that Ukraine and delivering gas via Poland in autumn 2012 Last autumn, the Slovak pipeline Slovakia have not abandoned their and via Hungary in spring 2013. operator Eustream finally gave intention to sign the gas agreement, EU Kyiv signed the contract with RWE as preliminary approval to a gas delivery Energy Commissioner Guenther part of a wider-ranging effort to cut its deal with Ukraine. However, Kyiv Oettinger’s press secretary Sabine Berger dependence on Russian gas. delayed the signing, apparently in told the Ukrainian news agency UNIAN In line with this campaign, Stavytsky anticipation of a pricing deal with on January 17. announced plans to sign gas import Moscow. contracts with Slovakia last September Some Ukrainian media outlets have

Copyright © 2014 NewsBase Ltd. www.newsbase.com Edited by Ryan Stevenson All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents    INVESTMENT  Royal Dutch Shell revealed last week January 30. In a statement, the nasty” in Shell’s latest results. “In recent that it was planning to sell US$15 billion company’s new CEO, Ben van Beurden, years [it] has become a bloated, high- worth of assets over the next two years. said: “Our 2013 performance was not spending beast of a company,” it said. The company then issued a profit what I expect from Shell.” Despite the bad news, there is some warning in which it said its fourth- The super-major’s fourth-quarter cause for optimism. The new CEO has quarter 2013 figures were “expected to profits were hurt by a range of factors, made it clear to shareholders that he is be significantly lower than recent levels including higher exploration costs, going to implement key changes, which of profitability.” security problems in Nigeria, and will likely result in a shake-up of the In terms of its divestment strategy, maintenance work that hit oil and gas company’s management and assets in Shell is to sell some off its North Sea production. In December, it also 2014. This should ultimately result in oilfields as well as parts of its refining cancelled a US$20 billion project to improved shareholder returns. portfolio and some early-stage projects. build a gas-processing plant in Louisiana Furthermore, Fitch ratings agency Meanwhile, the Anglo-Dutch super- in the US. And last week, it outlined believes Shell’s strategic goal of major anticipates profits for the fourth plans for its North Sea oilfield sell-off. investing US$130 billion between 2012 quarter to be about US$2.2 billion and Commenting on the development, and 2015 is achievable. The super-major profits for 2013 as a whole to be Santander analyst Jason Kenney said: “In announced US$10 billion of acquisitions US$16.8 billion. The FT reported that the the North Sea, something like 80% of its in 2013, which included the purchase of expected profits of US$2.2 billion for Q4 production comes from 20% of its asset Repsol’s LNG business for US$4.4 include impairments of US$700 million. base, so there’s a long tail of smaller billion and US$1.4 billion for a 20% in a When these are discounted, the profits positions.” consortium to develop the Libra field would be US$2.9 billion. Shell’s official Meanwhile, the Motley Fool financial offshore Brazil. annual results are due to be published on services company talked of a “hidden PERFORMANCE  Premier Oil’s overall production volume although its active oilfields have the Falkland Islands, which Premier took for 2013 will come in at the bottom end capacity to yield over 75,000 bpd. control of last year in a deal with partner of its estimates, despite the figure having Premier’s CEO Simon Lockett said Rockhopper Exploration, will now be already been revised downwards several that 2013 had been a challenging year for developed with a tension leg platform, times throughout the year. the company and the industry, but that “it rather than a floating production, storage On January 16, the company – which is, however, pleasing that production and offloading (FPSO) vessel. Lockett has operations in the North Sea, Brazil reached record levels towards the end of explained that this offered a more “robust Vietnam and the Falklands – said that the year, that four new projects will and lower cost” solution. output for the year stood at around achieve first oil and gas in 2014 and that “The final investment decision [FID] is 58,200 barrels per day. Previously, the our mid- to longer-term projects, now likely to be taken in the first half of company had placed the figure at 65,000 including Bream, Catcher and Sea Lion, 2015 and Rockhopper continues to bpd, which was lowered following issues have taken significant steps forward." expect first oil three and a half to four at its Huntington field in the North Sea Meanwhile, the Sea Lion project in the years after project sanction,” said Oriel and a leak at the Chim Sao discovery in Securities analyst Dragan Trajkov in a Vietnam. Premier said it expected to note. “Rockhopper expects a rig contract Looking ahead to 2014, Premier went to be awarded in the first half of this year on to say that it anticipated producing an produce an average of and the first well to spud in late 2014 or average of 58,000 to 63,000 bpd in 2014, 58,000-63,000 bpd in 2014 early 2015,” he added.

Copyright © 2014 NewsBase Ltd. www.newsbase.com Edited by Ryan Stevenson All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents    PERFORMANCE  The Dutch government has given in to considered to be most at risk, around the by Nederlandse Aardolie Maatschappij pressure from local residents and scaled northern Dutch town of Loppersum. (NAM), which is a 50:50 joint venture back production quotas at the Groningen The government’s decision will also between Royal Dutch Shell and gas field, amid public concerns about mean a drop in its own income. State ExxonMobil. All output is sold to the extraction-related earthquakes and revenues from the gas field amount to Groningen-based gas trading company subsidence. Output will drop by about around 12 billion euros (US$16.3 billion) GasTerra, which is owned jointly by the 25% over the next three years, the per year. The cuts will reduce this by 600 same two oil and gas majors and the Ministry of Economics Affairs said. million euros (US$814 million) in 2014, Dutch government. Gas is mostly sold to Production at Western Europe’s largest 700 million euros (US$950 million) in utilities and industry in the domestic onshore gas field was 53.8 billion cubic 2015, and by 1 billion euros (US$1.36 market, although some is exported to metres in 2013, higher than normal billion) in 2016, according to the France, Germany, Italy and the UK. owing to an unusually long winter. ministry’s own calculations. Moreover, But according to data from the Dutch Previous forecasts had predicted the the government has said it will make a Meteorological Institute (KNMI), around figure to remain around 49 bcm per year further 1.2 billion euros (US$1.6 billion) 1,000 earth tremors have been recorded until 2020. But annual production will available to cover damage repairs and in the area since 1986, with the strongest now drop to 42.5 bcm in 2014 and 2015, reinforcement of homes and other measuring 3.6 on the Richter scale. Local and to 40 bcm in 2016. The ministry said buildings and infrastructure. residents had been calling for gas it was technically possible to reduce The gas field has produced more than 2 production to stop since the quakes output to 30 bcm and still meet domestic trillion cubic metres since it was began causing damage to homes and demand. The biggest production cut – by discovered in 1959, and is estimated to buildings. up to 80% – will occur in the area contain a further 700 bcm. It is operated POLICY  The Polish Supreme Audit Office (NIK) corruption. Beyond legislation, NIK’s explored. Last week Italian oil giant Eni has criticised the government for being report was also critical of the slow became the latest company to abandon too slow in developing its shale gas progress being made in estimating the Polish shale gas, by allowing two of its industry. The NIK issued a report saying size of the country’s reserves. It three exploration licences to expire, with the licence-issuing process was both calculates that at current rates of test the third likely to follow. Insiders blamed time-consuming and unreliable. drilling, it will take another 12 years to this decision on unclear regulations and NIK said work on the legal framework work out the total accurately. “In order to difficult geology. ExxonMobil ended its for shale gas exploration and extraction carry this out, it would be desirable to operations in 2012, with Marathon and was behind schedule when it started in have about 200 wells,” the report said, Talisman following suit in 2013. Of the 2011. Some aspects have yet to be pointing out that only around 50 wells international majors, only Chevron clarified, and the delays are putting off had been drilled to date. Besides remains. potential investors. Describing the criticising the government, the report Foreign interest has also waned since Environment Ministry as slow to act, it also accused the companies that have the US Energy Information Agency said current licensing processes were been granted exploration licences of (EIA) began lowering its estimate of the unreliable and did not promote equality, delaying paying the licensing fees, and of total Polish shale gas. Initial figures had and were taking longer than necessary to either not conducting the necessary suggested there might be 5.3 trillion complete. It currently takes an average of geological studies, or of conducting them cubic metres of gas in the country, but 130 days to issue a licence, something with major delays. this has since been downgraded to NIK said should take no more than 30 It said that while 113 licences had been around 346-768 billion cubic metres. days. The report concluded that such issued, only a small proportion of the irregularities could potentially lead to territory in question had actually been

Copyright © 2014 NewsBase Ltd. www.newsbase.com Edited by Ryan Stevenson All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents    PROJECTS & COMPANIES   Denmark’s Maersk Oil has sought well at the high-temperature and high- Suncor owns 40%. In the Barents Sea, government approval to drill a wildcat pressure (HPHT) prospect in a water Maersk was awarded licences PL764, well at the Tvillingen South prospect in depth of 260 metres. The energy explorer PL765 and PL766. For the first two, the Norwegian Sea, it said last week. The operates PL510 with a 50% stake. Its Lundin is the operator with a 40% announcement came just days before it partners include Edison with a 30% interest, while Maersk holds 40% and revealed that it had won another five holding and North Energy with 20%. Bayerngas owns 20%. For PL765, Statoil licences in Norway. On January 22, Maersk also revealed is the operator and has a 40% stake. The planned wildcat well 6406/6-4 will that it had been awarded five new Lundin, Bayerngas and Maersk Oil each be drilled in Maersk’s operated licences in Norway, as part of the the have 20%. Maersk also announced production licence 510, in the Halten latest round of the government’s earlier this month that it had agreed an terrace area. Drilling will start in August Predefined Areas awards. Two of the acquisition deal for two exploration at the earliest and will last an estimated licences are in the North Sea and three blocks in the Kurdistan region of Iraq. 120 days, according to Petro Media are in the Barents Sea. In the southern The Kurdistan Regional Government News. The well is intended to test part of the North Sea, Maersk was (KRG) has approved Maersk’s hydrocarbon potential in the Jura awarded licences PL728 and PL732. The acquisition of a 40% non-operating formation – in this case the reservoir is former is operated by DONG with a 45% interest in the Piramagrun and Qala Dze expected to contain gas condensate. stake, while Maersk holds 35% and production-sharing contracts (PSCs) Maersk intends to use the semi- Petoro 20%. Maersk is the operator of from Repsol Oriente Medio, the submersible Leiv Eirikksson to drill the PL732 with a 60% stake, while partner company said it in a statement.   Serbia’s Finance Ministry has barred supplying Serbia with up to 1.5 billion euros (US$406.9 million), partly because Srbijagas, the country’s natural gas cubic metres per year of gas at of late payments from state-owned supplier, from paying salaries to its 1,300 preferential prices. companies in restructuring. employees, citing the firm’s failure to In 2012, Serbia bought 1.5 bcm of gas Dusan Bajatovic, the general manager settle debts owed to Russia’s state-run from Gazprom at an average price of of Srbijagas, has repeatedly said that the energy giant Gazprom. US$545 per 1,000 cubic metres. In 2013, company was losing money because Finance Minister Lazar Krstic said that by contrast, prices averaged US$380- government-regulated gas prices were the move was in line with new legislation US$390 per 1,000 cubic metres. below what the company was paying for requiring all public companies to settle State-run Srbijagas is Gazprom’s imports from Russia. The gas company is their debts to suppliers within 45 days. major partner in the South Stream slated to be unbundled and divided into According to Serbian media reports, project. It holds a 49% stake in a joint two parts, separating trade and Srbijagas recently missed a deadline for venture set up to build the Serbian stretch distribution from storage and payment of a US$7 million tranche of its of the gas pipeline. The ministry’s move transportation, in line with European US$305 million debt to Gazprom for gas is seen as an attempt to pressure Union requirements. Its trade and supplies. Serbia is heavily reliant on Srbijagas to start a long-awaited distribution units will continue operating Russia for gas. The country consumes restructuring programme. After years of as Srbijagas, while its transportation and around 2 billion cubic metres per year of bad business, debt-for-equity swaps in storage operations will be assigned to a gas, but domestic production accounts loss-making companies and below- company called Transgas. Both will be for only around 25% of the total. market retail gas prices, Srbijagas has closed joint-stock companies controlled In 2013, Srbijagas and Gazprom accrued a debt burden of around 1 billion by the state. signed a long-term gas supply agreement. euros (US$1.36 billion). In 2012, it Under the 10-year deal, Gazprom will be posted a loss of more than 300 million

The following news items are sourced activity from a small number of large, The report provides a snapshot of from local and international news highly robust projects, plus a greater industry sentiment for 2014 and is based sources. NewsBase is not responsible for number of smaller ones.” on a survey of over 430 oil and gas the contents of the stories and gives no But production from existing fields has professionals and in-depth interviews warranty for their factual accuracy. fallen significantly. with more than 20 industry executives. Webb added: “Unless we do something Confidence in the sector is lowest in  about exploration now, we face a risk of Europe. Only 24% of those polled a collapse in capital spending in a few expressed strong confidence about the  years’ time and lower future production. overall outlook for the oil and gas “The top rate of tax in the offshore industry for 2014, compared with 44% in  industry is 81 per cent. We pay North America and 38% in Asia Pacific.  corporation tax at a combined total of 62 Also, 20% of operators in Europe believe  per cent. There’s a high tax take and I the oil and gas industry’s prospects for Analysts yesterday called for urgent think that’s acting to some degree on growth in 2014 are less certain than they action to boost spending on exploration day-to-day business. It’s a significant were in 2013. and avoid job losses. One industry leader part of the issue.” Executives in Europe express the least said that even where wells are being A spokeswoman for the Scottish certainty about hitting their goals sunk, companies are not finding enough Government said: “Investment is compared to those in the USA and Asia oil and gas. booming at all-time record levels. Pacific, although only 10% predict The findings are a worry for the UK “But that investment needs to be matched falling short on profits; 49% cite skills Treasury but an even bigger one for Alex by Government policies which encourage shortages and the ageing workforce as a Salmond, who has based the economy of exploration, something Westminster has major concern. an independent Scotland largely on North failed to do. Liv Hovem, DNV GL’s Divisional Sea revenues. “An independent Scotland would provide Director for Europe, commented: Despite record investment over the last the industry with fiscal and regulatory “Uncertainty in the industry has a lot to 12 months exploration has fallen, with 15 policies which help it to thrive. There are do with cost, which is one of the biggest wells drilled in 2013 compared to 48 in around 24 billion barrels of recoverable challenges for the year ahead. We’re 2007 and 47 in 2008. oil and gas remaining in the North Sea seeing signs of a softening in the mega Industry body Oil and Gas UK said the with a potential wholesale value of up to projects, but smaller projects are still Treasury and energy firms had to act. GBP1.5trillion. happening. Capex is rising, but subsea is Chief executive Malcolm Webb said: “This means that more than half the mitigating some of those costs and it’s a “We are just not drilling enough wells value of North Sea oil is still to be positive signal that investment in R&D and those that we are drilling are not extracted.” will be highest in Europe, which will EXPRESS NEWS, January 20, finding enough oil and gas. help ensure that mature fields remain 2014 “This worrying trend started in 2011 with viable and safe.” ENERGY GLOBAL, January 21, a 50 per cent drop in the number of 2014 exploration wells drilled, which has since   failed to recover. This clearly illustrates  the parlous state of exploration. Drilling  rig availability and the ability of smaller The latest report from DNV GL reveals companies to secure equity capital are  that the North Sea and Norway have major hurdles. become less attractive as investment  “It is clear we now face a crisis which destinations in 2014, according to a Cairn has not included the Arctic demands urgent concerted action by the survey of oil and gas professionals. The territory in a US$400m programme of Department of Energy and Climate UK and Norway have fallen from joint znine oil and gas exploration wells it will Change, HM Treasury and the industry if 4th position in 2012 to 7th and 9th place drill this year as it ramps up activity we are to maximise economic recovery respectively in 2014. Meanwhile, China, around the world. of our offshore oil and gas resource and Malaysia and Canada have moved up the Last year the Edinburgh-based company sustain future production. ranks, while the US, Brazil and Australia said it planned to drill its ninth well off “The paradox is that the UK continues to lead the way in the top three spots. Greenland in 2014. In yesterday’s update record annual levels of capital investment The findings come from a new report, Cairn said only that is was maturing at over GBP13billion. We now have a Challenging Climates: The outlook for plans for the Pitu block, off north-west two-speed North Sea. On the one hand the oil and gas industry in 2014, which Greenland, with Norway’s Statoil. we have seen a tremendous spurt in was undertaken on behalf of DNV GL.

A spokesman for the company said Cairn acquire a 20% interest in the nearby Between 2010 and 2011, the Scottish still saw significant potential in Atlas prospect, for an undisclosed sum. It company Cairn Energy spent more than 1 Greenland but had been busy finalising was awarded three more Norwegian billion euros on oil drilling off the planning for the nine wells it would drill licences yesterday. western coast of Greenland. in coming months. The company has planned an active Denmark and Greenland are currently Chief executive Simon Thomson said drilling programme on the licences it has discussing plans to allow uranium Cairn had the potential to generate more acquired in relatively under-explored exploitation in Greenland. big returns for investors after amassing a areas of the Atlantic Margin, where EURACTIV, January 20, 2014 portfolio that combines frontier Cairn’s geologists believe there is exploration acreage, in places such as potential to make big finds.  Senegal, with lower-risk assets in the HERALDSCOTLAND, January 20,  North Sea. 2014  The company made its name with a series of bumper finds in India, which  GDF Suez can achieve most of its funded payouts to investors worth around  planned growth without resorting to GBP2.2bn in 2011. It launched a acquisitions, its chief executive said on None of the oil companies that have a US$300m share buy back programme in Tuesday, after banking and industry licence to drill in the seas surrounding October. sources said Talisman Energy had Greenland have applied for one in 2014, “Over the past 12 months, Cairn has built rebuffed a takeover approach by the according to the environment NGO a long-term sustainable business,” said French utility. Greenpeace. Thomson. “The exploration programme The sources said on Monday that GDF Oil companies that want to drill in will provide investors with exposure to was still seeking acquisitions of up to Greenland will have to apply before material growth potential alongside US$20 billion outside Europe and had February 1, but according to Greenland’s mature basin development and pre- looked into buying companies including Mining Agency, no applications have development assets, all against a US utility AES after being rejected by been received thus far. backdrop of continued balance sheet Canadian oil and gas producer Talisman. This will be the third year in a row that strength.” CEO Gerard Mestrallet denied any such no company has expressed interest in oil This year’s drilling programme includes plans on Tuesday and insisted on the drilling around the Arctic country. three exploration wells in the UK North strong organic growth prospects of the Though oil has never been found in Sea and one in Norwegian waters. gas and power utility’s existing Greenland, the deposits are estimated to Cairn acquired extensive acreage in the businesses, notably its energy services be huge, especially in the northeastern North Sea through the takeover of Agora provider Cofely. and western parts of the country. Oil & Gas and Nautical Petroleum in GDF is playing down the prospect of However, oil drilling is complicated due 2012, for around GBP700m in total. The game-changing, multi-billion-dollar tie- to icebergs, rough weather and drifting company has been pleased with the ups for now. Cofely said last month it ice. progress it has made in the area and wanted to buy several smaller peers with “For the third year in a row, the oil hopes to develop a series of fields that combined revenue of 1 billion euros companies stay away from the risky could be used to generate cash to fund (US$1.4 billion) to drive home its drillings and the release of big amounts exploration work around the world. advantage as Europe’s biggest provider of chemicals into the Greenlandic seas,” Cairn Energy and Enquest have won UK of energy services for buildings. Jon Burgwald from Greenpeace Government approval to develop the “In an environment with economic Denmark told the newspaper Politiken. GBP4bn Kraken heavy oil field east of growth around zero and with energy “An oil spill in Greenland would be a Shetland. First oil is expected by summer demand falling by 1 to 2% per year, we catastrophe for both the environment and 2017, with Cairn’s share forecast to be are seeing growth of around 2.5% per the fishery, and no one – not even the 12,500 barrel oil per day. It expects a year in demand for energy efficiency Danish defence or the companies – can development plan for the Catcher field, services,” Mestrallet told reporters in clean up if there’s an accident,” he east of Aberdeen, to be submitted to the Paris. explained. Government in the first quarter. Alongside its push in energy efficiency According to Burgwald, Greenpeace The results of recent appraisal drilling on services, GDF wants to consolidate its hopes that the Greenlandic government the Skarfjell find made off Norway position this year as the biggest will use the break to reconsider whether following the acquisition of Agora were independent power producer in emerging oil drilling is the right way forward for encouraging. economies, in particular by expanding its the country. Cairn was so impressed it has agreed to energy services in those countries too.

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“I believe efficiency needs will also grow to US$4.0 billion with its existing group in the emerging world,” Mestrallet said, of 25 banks. The credit facility will  adding that this was why GDF last year provide the necessary financial flexibility  bought a 51% stake in Emac, a Brazilian to fund the ongoing development,  air-conditioning maintenance company exploration and appraisal programmes with 850 staff. including the Johan Sverdrup The largest 3-D seismic survey in the In 2012, GDF also bought Chilean development. Black Sea and in OMV’s history of 7,740 energy services firm Termika and LUNDIN, January 21, 2014 square km has been completed, and the invested in the urban cooling network of company says this is a major step to Cyberjaya city in Malaysia.  explore hydrocarbon resources in the 1- 21 Han-Asparuh block offshore Bulgaria. Mestrallet said GDF had no plans for Following its acquisition by Cairn The seismic acquisition activities took major takeovers, and voiced confidence Energy, Nautical Petroleum Limited has 210 days and the 3-D survey is in the group’s current balance of decided to withdraw from the P1918 complemented by an additional 2-D traditional, asset-heavy power generation licence. A farm out agreement with seismic survey of 3,000 km which was and labour-intensive and capital-light Nautical has been terminated and completed in October 2013. The 1-21 energy services. InfraStrata, together with partner Corfe Han-Asparuh block is offshore in the REUTERS, January 21, 2014 Energy Limited, will acquire their 10% Bulgarian sector in the western part of licence interest, subject to DECC the Black Sea and covers an area of  approval. InfraStrata will acquire an 8% 14,220 square km with water depths up  interest for no consideration and will to 2,200m. Partners are OMV (30%) include this licence interest in the DONG Energy has signed an agreement currently the operator, Total 40% ongoing farm out process. Prior to the to divest its sales activities in the (operator for the drilling phase) and farm out InfraStrata will hold a direct Netherlands – DONG Energy Sales B.V. Repsol 30%. 78% interest in the licence and a further – to Eneco. DONG Energy has agreed OMV, January 21, 2014 with the buyer that the sales price will 8.8% via a shareholding in partner not be disclosed. The divestment is still company Corfe Energy Limited.  INFRASTRATA, January 21, 2014 subject to certain conditions, including  merger control clearance in the Netherlands. The divestment will not   alter the focus on the Netherlands as a  Hungarian oil and gas group MOL said part of DONG Energy’s geographical The formal granting of planning on Saturday that it had not been notified footprint, including inter alia activities in permission to InfraStrata for the by Croatia about a case against it at an offshore wind and LNG shipping through proposed onshore to offshore exploration international arbitration court but was the terminal in Rotterdam. well in Licence P1918, Wessex Basin, in ready to face any procedure. DONG, January 21, 2014 December 2013 included a condition that A Croatian government source confirmed construction and drilling activities must to Reuters late on Friday that the  take place between September 2014 and government had filed a case taking  March 2015. The company says that Hungary’s MOL to an arbitration court in Geneva to seek cancellation of a 2009 During the fourth quarter of 2013 Lundin drilling may start in November 2014. deal that gave the Hungarian company Petroleum achieved a production rate of Arrangements will also be required to full management rights in the Croatian 31,100 barrels of oil equivalent per day drill from an onshore licensed area, energy firm INA. resulting in production for the full year of across which the well will be “We are not informed about any 32,700 boepd. The profitability of the directionally drilled for 600 metres to arbitration process by the Croatian fourth quarter of 2013 will be negatively access offshore licence P1918. Drilling negotiation team. Nevertheless we are impacted by certain expensed exploration will be subject to completing funding for very well prepared and do believe that costs. These items are non-cash charges the well through a farm out process. The we have a strong position regarding any which will impact on profitability but dataroom opened in January 2014. The arbitration,” MOL said in a statement. will have no impact on operating cash well will target prospective resources MOL added that it would continue flow or EBITDA, Lundin said. The net within the licence estimated by the joint negotiations with Croatia about INA. The debt position of Lundin Petroleum at 31 venture at 10 million barrels of oil Croatian source also said talks about the December 2013 amounted to US$1,182 equivalent. partnership in INA would continue million. Lundin Petroleum has increased INFRASTRATA, January 21, 2014 despite the court case. its existing US$2.5 billion credit facility

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State television HRT said on Friday that bound by Hungarian law. energy companies find Norwegian Zagreb wanted to void the 2009 MTI – ECONEWS, January 20, offshore reserves attractive prospects. agreement on management rights in INA, 2014 The NPD, the country’s energy regulator, as well as a separate agreement on awarded 65 production licences to 48 divesting INA’s gas business.  companies for work on the Norwegian MOL is INA’s biggest shareholder with continental shelf. just under 50%, while the Croatian  “It is clear that the oil companies still government has a stake of almost 45% consider it interesting to explore for oil and accuses MOL of acting as a majority  and gas in mature areas,” she said in a owner. Croatia wants the right to  statement Tuesday. influence major decisions. The Norwegian Petroleum Directorate, Of the 65 production licences, the NPD Croatia’s action on Friday came a day the nation’s energy agency, said said 38 are in the Norwegian waters of after the two sides took a step towards a Thursday oil production from November the North Sea, 19 are in the Norwegian possible compromise over INA’s future, to December increased but less than it Sea and eight are in the Barents Sea. saying they had held talks in a more expected. Norwegian energy company Statoil constructive spirit and would soon NPD said an average 1.9 million barrels secured 10 licences off the coast of continue them. of oil were produced from Norway in Norway and will serve as the operator at REUTERS, January 18, 2014 December, about 12,000 barrels per day seven of the reserve areas. more than in November. Irene Rummelhoff, a vice president in  “The oil production is 2% below the charge of exploration in the region, said  NPD’s prognosis for December and 4% the licences are necessary to maintain  below the oil production in December offshore production levels through 2020. last year,” it said in a statement. Lundin Petroleum, which secured nine MOL chairman/CEO Zsolt Hernadi is Nevertheless, the regulator said oil licences, and Maersk Oil, which secured contesting an arrest warrant issued for his production in 2013 overall was in line five licences, were among the other person at Croatia’s Constitutional Court, with the NPD’s predictions. companies securing access to the a court official confirmed to the national It offered no assessment of the Norwegian continental shelf. news service MTI today. The unnamed production figures. Norway is one of the leading oil and official said the court would discuss the NPD said Wednesday interest in oil and natural gas producers in Europe. matter in an accelerated procedure, but natural gas areas off the Norwegian coast Combined, discoveries off the decline to comment on when a decision reached a record level. Norwegian coast last year amounted to was expected. “A record number of fields are in more than 600 million barrels of oil and Hernadi filed the case on January 10. operation on the Norwegian shelf,” it 2 trillion cubic feet of natural gas, NPD Daily newspaper Magyar Nemzet said. “Discoveries in 2013 offset roughly said. reported in its Monday issue that Hernadi half of what was produced in the same UPI, January 22, 2014 had turned to the court; he is arguing that year.” the failure of a lower court to allow him Last year, there were seven oil and  to appeal the warrant until in custody is a natural gas discoveries in the North Sea,  violation of his constitutional rights. eight in the Norwegian Sea and five in  The Zagreb County Court issued a the Barents Sea. warrant for Hernadi’s arrest in September Combined, the new discoveries amount  after he failed to show up for a hearing to as much as 666 million barrels of oil OMV, the biggest central European called on suspicion that he had bribed and as much as 2 trillion cubic feet of energy company, is seeking to buy more former Croatian Prime Minister Ivo natural gas, NPD said. assets off Norway as Statoil becomes Sanader to give MOL management rights Norway is one of the leading oil and more selective in its investments and in Croatian peer INA. natural gas producers in Europe. other producers cut the size of their After the warrant was issued, MOL said UPI, January 16, 2014 operations, pushing down prices. the manner in which Croatian authorities “It might be becoming a little bit of a were proceeding was “in contradiction to  buyer’s market,” Bernhard Krainer, supra-national European law.” It noted  OMV’s general manager for Norway, that Hungarian authorities had earlier said in an interview in Sandefjord today. dismissed the case for lack of  “There are a lot of sellers out there right wrongdoing, and these decisions were Sissel Eriksen, exploration director in the now.” legally binding on MOL, a company Norwegian Petroleum Directorate, said

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Any acquisitions by Vienna-based OMV producing assets and three fields under spudding of the VNG-operated Pil would be smaller than last year’s development. On this basis the company exploration well 6406/12-3S (Faroe US$2.65 billion deal with Statoil, which has over the last years focused on organic 25%). The Pil prospect (Licence PL 586) operates more than 70% of Norwegian growth. The awards reinforce the is within tie-back distance (33 oil and gas output, Krainer said. OMV is potential for organic growth. Bayerngas kilometres) to the Njord platform in seeking both oil and gas assets and is now has (69) licences of which 51 are in which Faroe holds a 7.5% interest. The “open” when it comes to their location, Norway. prospect is a combined structural and as long as they fit its current portfolio of BAYERNGAS, January 22, 2014 stratigraphic closure and the primary 23 licences in Norway, he said. target is at the shallower upper Jurassic Offshore-asset sales in Norway may this  Rogn formation sandstone which has year surpass a record 19 billion kroner  proved to be an effective reservoir in the (US$3.1 billion) reached in 2012 as producing Draugen field, located 60 Det norske oljeselskap (DNO) has been Statoil reaps the benefits of exploration kilometres to the north east. The Pil awarded six new licences, of which two success and becomes more selective on licence drilling operations are operated as operator. Det norske said it is very which projects it invests in after record by VNG Norge (30%) using the pleased with the awards. The Ministry of spending last year, industry consultant Transocean Arctic drilling rig with Petroleum and Energy announced the Wood Mackenzie said earlier this month. partners Spike Exploration Holdings awards of new production licences in Other companies seeking to sell assets in (30%) and Rocksource Exploration mature areas on the Norwegian Norway include Talisman Energy and Norway (15%). Continental Shelf (APA 2013). A total of Marathon Oil, who have said they will FAROE, January 21, 2014 48 companies were awarded ownership leave the Nordic country, while RWE is interests in 65 new production licences, looking to sell its Dea oil and gas unit.  and 29 of these companies will be Royal Dutch Shell, which issued a profit offered operatorships. Det norske is very  warning this month, will also sell North pleased with the awards, said Project  Sea upstream assets, the Financial Times Manager Evy Glørstad-Clark. has reported. Ashley Heppenstall, president of Lundin DNO, January 22, 2014 BLOOMBERG, January 22, 2014 Petroleum, said Wednesday oil and gas production from the company should   more than double within two years.   Heppenstall said the company should Faroe Petroleum has been awarded 10 increase production to more than 75,000 Bayerngas Norge has been awarded nine new prospective exploration licences, barrels of oil equivalent per day with the licences in the Awards in Pre-defined including two operatorships, under the help of the launch of four fields -- Areas and says it is happy to further 2013 Norwegian APA Licence Round on Brynhild, Boyla, Bertam and Edvard strengthens its position on the Norwegian the Norwegian Continental Shelf. These Grieg -- off Norway. Continental Shelf. “Through these 10 licences equate to the largest number “We have today reserves and contingent awards we have strengthened our awarded in this APA round, equal with resources in excess of 1 billion barrels of position further in our core areas around Centrica and Statoil. Faroe has been oil equivalent and our reserve position the Frøya Hights and the Utsira Hights awarded one licence in the northern will increase by over threefold on and we have reinforced our position in North Sea. This licence offers exciting submission of the Johan Sverdrup the Northern ares. In addition we have exploration opportunities in an area with development plan expected by the end of been awarded licences we see as strategic established nearby production 2014,” he said in a statement. important to our portfolio. The awards of infrastructure in the Brage Field, the The Johan Sverdrup field is estimated to two operatorships is in addition in line company said. Faroe has been awarded contain more than 1.8 billion barrels of with our long term ambition to run four licences in the North Sea, where the oil equivalent reserves. continuous drilling operations on the company already holds a number of Lundin said Norwegian developments Norwegian shelf. I am very happy with licences, including the Butch oil field, represent 72% of its production forecast the work our employees have done and discovered in 2011. for 2014. Lundin said it set aside US$380 the results we have achieved”, says Arne FAROE, January 22, 2014 million for exploration this year and the Westeng, managing director Bayerngas major focus of that spending would be on Norge. Bayerngas pursues a long term  Norway. Lundin secured 9 new strategy with the aim to establish a exploration licences during the latest substantial producing portfolio and cash  auction from the Norwegian government. flow. The portfolio today includes six Faroe Petroleum has announced the UPI, January 22, 2014

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will prolong production, after the world’s is the acquisition of a 500 square km 3-D  seventh-biggest crude oil exporter saw its seismic survey over the area, with survey  oil output fall to a 25-year low in 2013. planning having already started. Potential The licensing rounds were the first after prospectivity has been identified in Lundin Norway has been awarded nine the previous centre-left government, Upper Jurassic and Lower Cretaceous exploration licence interests in the 2013 which left power in October, introduced intervals similar to those which Norwegian Licensing Round. The an oil tax hike opposed by oil and gas previously successfully tested oil and gas licences include five licences in the companies. in the adjacent Spanish Point 35/8-2 and North Sea and four licences in the The tax increase, together with sharply Burren 35/8-1 discovery wells. Capricorn Barents Sea. Four of the awarded higher costs and lower oil prices, has led Ireland Limited (38%, Operator (wholly licences will be operated by Lundin to delays in the development of flagship owned subsidiary of Cairn Energy)), Petroleum. Arctic projects as well as of smaller Providence Resources (32%), Chrysaor LUNDIN, January 22, 2014 oilfields further south. E&P Ireland (26%) and Sosina “Tullow’s appetite for Norwegian Exploration (4%) were awarded Spanish  acreage, based on the number of licences Point South as part of the 2011 Irish  pursued, would appear undiminished” Atlantic Margin Licensing Round. The  said Goodbody stockbrokers. Spanish Point South area lies in c. 400 INDEPENDENT, January 22, 2014 The Norwegian Petroleum Directorate metre water depth in the northern has granted Statoil Petroleum a drilling Porcupine Basin and is about 160 km off permit for appraisal well 16/2-19, to be  Co. Clare, west of Ireland. PROVIDENCE, January 21, 2014 drilled from the Ocean Vanguard drilling  facility at position 58°54’12.3’ north and Trapoil, after consultation with the UK  2°29’37.8’ east in production licence 265 Department of Energy and Climate in the central part of the North Sea. Change, has successfully retained and  Statoil is the operator with an ownership secured an extension until December 21, Rose Petroleum (formerly VANE interest of 40%. The other licencees are 2014 of its interest in the P.1267 licence Minerals) has announced the completion Petoro with 30%, Det norske oljeselskap (Blocks 12/25a and 13/21b), which of its purchase of the entire issued share with 20% and Lundin Norway with 10%. contains the Surprise and Nutmeg oil capital of Parkyn Energy Holdings which The area in this licence consists of part of discoveries. The firm, which holds a 90% in turn owns 100% of Parkyn Energy block 16/2. The well will be drilled about stake in these assets, said that it has Germany, the sole owner of two 2.1 kilometres north to northeast of the performed significant technical work on hydrocarbon licences in southwestern 16/2-12 well in the Geitungen segment them and is also working to secure a Germany. Rose has acquired a 100% on Johan Sverdrup. suitable farm-out partner ahead of an interest in the two concessions covering NPD, January 22, 2014 appraisal well to assess flow rates and over 635,000 acres for 400,000 euros. In unlock upside potential. Trapoil also addition, the licences are subject to a 2%  reported that the Athena field, in which it overriding royalty interest in favour of  holds 15%, is currently producing at a 3Legs Resources of gross sales of  rate of 7,000 barrels of oil per day (1,050 hydrocarbons less certain costs, plus a bopd net to Trapoil), compared to an 0.5% ORRI to the original finder. The  already-reduced rate of 7,500 bpd at the Konstanz and Biberach licences in The eight licences, four of which Irish- end of December. southwestern Germany (state of Baden- founded Tullow is the designated TRAPOIL, January 22, 2014 Württemberg), are within the large operator for, are located off the coast of Molasse Basin and contain both Norway.  conventional and unconventional A total of 65 offshore licences were up  petroleum plays. Several conventional for grabs. There was high interest from Oil & Gas fields exist in the Molasse Having made the mandatory 25% areal oil firms, despite a recent oil tax hike and Basin. relinquishment, the Spanish Point South increased industry costs. ROSE, January 21, 2014 Other successful bidders included partners have been offered a follow-on Premier Oil, which gained an interest in Frontier Exploration Licence (FEL1/14)  two licences, both of which it will by the Minister of State at the Department of Communications, Energy operate.  Norwegian authorities hope the interest and Natural Resources. The principal element of the forward work programme

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storage operating company. With the Administration said optimism has waned  successful financial close of this deal, because of “unsatisfactory exploration  MOL has sold its entire stake in MMBF. results.” MMBF will ultimately be 51% owned by BNK Petroleum said Wednesday its PGNiG, the Polish gas monopoly, the Hungarian Development Bank analysis of previous drilling samples doubled production of crude oil last year (which is in turn wholly owned by the leads it to believe the area is “highly to about 1.1 million tonnes (8 million government) and 49% by the Hungarian prospective for shale gas.” barrels) and raised output of natural gas Hydrocarbon Stockpiling Association, an UPI, January 16, 2014 to 4.6 billion cubic metres from 4.3 independent association of all oil, oil billion metres in 2012. In the fourth products and gas traders in Hungary.  quarter alone, crude production MMBF signed the new 114 million euro amounted to 310,000 tonnes (2.3 million  (US$154 million) and Ft 60 billion barrels, or around 20,000 barrels per  (US$269 million) facility agreement with day), compared with 139,000 a year a group of banks, in which the EBRD Poland can expect its first commercial earlier, it said. The jump was due to the was joined by ING Bank, ING Bank, a gas flows and a doubling of the number opening of the Lubiatow oil and gas rig, Branch of ING-DiBa, MKB Bank, of shale wells this year, according to the the biggest in Poland, and the start of Raiffeisen Bank, and OTP Bank. OTP chief executive officer of the nation’s operations in Norway by PGNiG Bank acted as agent for the transaction. largest provider of hydraulic fracturing Upstream International. EBRD Managing Director for Energy services. POLISH PRESS, January 21, and Natural Resources, Riccardo Puliti, About 30 reservoirs will be drilled, up 2014 said: “We see this as a successful from 14 in 2013, thanks to improved completion of a strategically important techniques and regulations, Dennis  project – important not only for Hungary McKee, founder and CEO of United but for energy security in the wider Oilfield Services, said in an interview in  region. Warsaw. The company, based in the  EBRD, January 15, 2014 Polish capital, was involved in 70% of  the wells completed in the past eight  months, he said.   Poland, ranked as Europe’s biggest The European Bank for Reconstruction holder of shale gas by the US Energy and Development (EBRD) has  Information Administration in 2013, has participated in a syndicate to refinance a BNK Petroleum, which has headquarters sought to revive exploration after foreign strategic gas storage facility in Hungary, in California, said it was upbeat about the investors including Marathon Oil and following the sale of MOL’s majority shale potential in Poland following the Talisman Energy withdrew amid stake in the gas storage to the Hungarian start of a drilling campaign. regulatory constraints and government Development Bank and the Hungarian BNK said it started a horizontal drilling plans to increase taxation. Prime Minister Hydrocarbon Stockpiling Association. program at Polish shale well Gapowo B- Donald Tusk in November fired the In 2009 the EBRD co-financed the 1 and expects to spend the next 30 days deputy minister in charge of drawing up original construction of the storage on the operation. The company said it shale gas regulations and nominated a facility at the Szreg-1 reservoir in the was targeting gas deposits encountered in new environment minister. south of the country, close to Serbia, with similar operations, where “the average “Regulations have been very rigid and a 200 million euro loan to MOL, and maximum total gas readings were it’s improving now and I think it’ll Hungary’s leading oil and gas company. much higher than those seen in the improve more in the near future,” McKee Following a series of supply crises, the company’s other Baltic Basin wells.” said. “The industry will have some very gas storage in a depleted oil field was New drilling technologies like horizontal good news in the next few weeks or next needed to improve energy security in drilling and hydraulic fracturing, dubbed few months, we perform many jobs and Hungary and in the region. The EBRD fracking, are used in shale deposits to we’re seeing gas flow.” has also financed gas storage in Croatia access oil and gas reserves previously out United Oilfield Services provided and allocated funds for storage in Serbia. of reach. That helped put the United fracking, which blasts open rock with In the current transaction, 100 million States in a leadership position in terms of water and chemicals to free natural gas euros of the amount outstanding from the production of those resources. and oil, to explorers including San Leon original EBRD corporate loan to MOL Poland is one of the Eastern European Energy, PKN Orlen and 3Legs Resources was converted into a long-term secured countries thought to be rich in shale gas, and its partner ConocoPhillips. project finance loan to MMBF, the though the US Energy Information

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Enterprise Investors, Poland’s biggest demarcated blocks, especially since the private-equity fund, bought a minority 1970s. No commercial production has  stake in United Oilfield Services for 21 ever been achieved. million euros (US$28.7 million) in 2012. The Poseidon gas fields in the Cadiz  Commercial flows may help investment basin suggest that deposits in the in Polish shale projects, Trevor Sikorski, neighboring Algarve basin are more  the head of natural gas, coal and carbon likely to contain commercial quantities of  at Energy Aspects, a consulting company natural gas rather than oil. Expro International Group, the oilfield- in London, said by e-mail. A Repsol spokesman told Portugal services business controlled by Arle BLOOMBERG, January 15, 2014 Newswatch this week that environmental Capital Partners, has attracted interest and safety studies are being carried out from Schlumberger and General Electric  before any drilling takes place. This as the UK buyout firm prepares to sell,  comes amid public concerns about the according to three people with  possible impact of drilling on regional knowledge of the situation. tourism and the economy, as well as the Halliburton, which bid for Expro in The multinational Repsol-Partex oil and fishing industry, marine ecosystems and 2008, may also look at the asset, said two gas consortium says it will commence coastal landscapes. of the people, who asked not to be “clean and safe” exploratory drilling off “Environmental and safety studies are identified because the matter is private. the south coast of Portugal late this year being conducted to guarantee a clean and The potential buyers haven’t decided to or early next, but it may be another four safe drilling operation,” the spokesman make an offer for the business, which or five years before it can accurately said. “Repsol does environmental and could fetch about GBP 3 billion (US$4.9 gauge if hydrocarbon deposits are safety studies prior to any operation, billion), they said. sufficient to make it worthwhile to taking into account the social, economic Arle, private-equity firm Alpinvest proceed to commercial extraction. and environmental issues and following Partners and Goldman Sachs Group, The consortium has already carried out legislation and the highest international which jointly own Expro, are working seismic surveys and other preparatory standards in the industry. The company with Goldman and Deutsche Bank to studies since acquiring the offshore takes into consideration such studies in advise on options, the people said. While concession for blocks 13 and 14 in the planning of the operations and works Arle is soliciting bids for Expro, the Algarve waters in October 2011. As the closely with national and local London-based buyout firm sees an initial exploration is still in the preliminary authorities.” public offering as bringing the highest stages, no firm date can yet be set for the On the subject of pollution, the valuation, two of the people said. start of drilling. spokesman added: “One basic difference Expro, based in Reading, England, Repsol, with its headquarters in Madrid between gas and oil is that gas evaporates provides exploration and appraisal and 90% of the shares in the partnership and oil needs containment on water testing along with drilling technologies with Lisbon-based Partex, is the main surfaces. In the event of a well failure, and services. operator in the Algarve project. gas spills are easier to control than oil Energy-services companies are attracting In September 2012, Repsol in partnership spills, as the gas is not retained in the interest from potential acquirers as with Petrobras, Galp and Partex acquired seawater. No water pollution is generated exploration expands in deepwater oil and the rights to prospect in Peniche Bay and the hydrocarbon bubbles into the gas fields and unconventional resources north of Lisbon. The Brazilian atmosphere until well control is such as shale gas. Irish engineering firm corporation Petrobras withdrew from the achieved. In the Algarve, as no Kentz last month agreed to pay US$435 consortium last May leaving Repsol as hazardous gas is expected, a gas million for the field-solutions unit of US- the project operator with 65% of the pollution case is an extremely based Valerus, allowing it to expand into shares. Galp has 30% participation and improbable situation.” shale-gas production. Partex the remaining 5%. Drilling off It is still too early in the exploration Amec, the second-biggest UK oil and gas Peniche is not expected to start until at process to know exactly where the engineer, agreed earlier this month to buy least 2016. Algarve or Peniche drilling rigs will be US-traded Foster Wheeler for US$3.2 While much more sophisticated located, “but they will always be some billion to expand foreign and fuel- exploratory techniques exist these days, tens of kilometres off the coast and will product business. onshore and offshore searches have been not be visible from the shore,” said the A spokeswoman for Goldman Sachs carried out in Portuguese waters for spokesman. referred questions to Arle, whose many decades. Several major companies, PORTUGUESE AMERICAN spokesman declined to comment. A including Shell, Chevron and Esso, have JOURNAL, January 16, 2014 spokeswoman for Alpinvest declined to drilled scores of wells in various comment.

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A Deutsche Bank spokeswoman declined responsible for the implementation of the to comment, as did representatives for  project. Schlumberger, GE and Halliburton.  As the building is over in Genoa’s BLOOMBERG, January 20, 2014  shipyard, the vessel will go to Norway’s Polar Institute, and the fist Arctic   campaign is due in 2017 already.  The Kronprins Haakon modern The Kronprins Haakon, named in honor  icebreaker for exploration of resources in of the heir of Norway’s throne, will be a the Arctic will be ready by 2016, most high-technology icebreaker in the Spectrum has successfully completed its Norway’s Minister of Fishery Elisabeth world. The project meets modern Multi-Client 2-D seismic acquisition Aspaker said at the opening of the Arctic ecology standards to minimize negative survey offshore Croatia. This new Borders international conference in effects on the environment. The jury seismic survey provides, for the first Tromso, Norway. “For Norway it will be chose the name “Kronprins Haakon” time, approximately 15,000 kilometers of its ever biggest investment in a sea because it is a name with long royal modern long-offset 2-D data. The research project,” the minister said. “The Polar traditions, at the same time seismic survey covers the majority of new icebreaker will be used both for reflecting the crown prince’s big offshore Croatia using a 5 km x 5 km monitoring of the ecology situation in the engagement and deep knowledge on grid. The survey connects to Spectrum’s Arctic and for further exploration of the climate and environment in Polar reprocessed Italian Adriatic seismic data, hydrocarbon resources at high latitudes.” regions, the Polar Institute says. providing scope for basin-wide The minister continued saying Norway The new research vessel will have ice- evaluation and comparisons with had an agreement on construction of a class Polar 10 Icebreaker. It will have analogous producing oil and gas fields in 100-meter vessel, capable of a six- cabin-space for a crew of at least 50 and the neighbouring Italian Adriatic. months’ autonomous navigation in ice, be fitted for research voyages of up to six Seismic acquisition started in September with Italy’s biggest shipbuilder, weeks in ice-covered waters. The vessel 2013 and was completed on January 19 Fincantieri-Cantieri Navali Italiani S.p.A. will be 100 metres long and 21 metres 2014. Final processed products will be The contract’s price is 1.4 billion krone wide. available by April 2014. The seismic is a (US$227 million). The icebreaker’s VOICE OF RUSSIA, January 20, precursor to the offshore licensing round design was carried out by the UK’s 2014 that Croatia plans to hold in 2014. Rolls-Royce Marine. Norway’s Institute SPECTRUM, January 22, 2014 for marine research in Bergen is

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AfrOil Following further exploration success, Tullow is in talks with the Kenyan government on oil exports.

AsianOil Production from Indonesia’s largest gas field is to fall this year as a result of ongoing investment uncertainties.

ChinaOil China’s gas imports accounted for more than 30% of annual demand in 2013.

FSU OGM Tethys, CNPC and Total will begin exploring Tajikistan's Bokhtar field this year.

GLNG Chilean copper firm Codelco has bought two LNG cargoes to arrive at the Mejillones terminal in 2014 and 2015.

LatAmOil Petrobras’ proven reserves grew by 0.8% in 2013 to over 16 billion barrels of oil equivalent.

MEOG Bids were submitted in mid-January for the first EPC package for full-field development of the UAE’s Nasr field.

NorthAmOil TransCanada has started crude deliveries via its Gulf Coast pipeline project.

Unconventional OGM Eni is pulling out of shale exploration in Poland.

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