Chevron wins 90-day Venezuela waiver despite opposition

Bloomberg/Houston

Chevron Corp and four oil services companies won a last-minute US government reprieve to continue producing oil in Venezuela, albeit only for a 90-day period.
The US Treasury Department supported Chevron’s request to extend its sanctions waiver by six months, but the majority of other government agencies involved opposed any extension at all, a senior administration official told reporters on a call on Friday. President Donald Trump backed a compromise between the two positions, resulting in the three-month time period.
The extension allows San Ramon, California-based Chevron to essentially keep the lights on and the facility running, but another extension will be harder, the official said.
The company has operated in Venezuela for almost a century, since the discovery of the Boscan field in the 1920s. It has outlasted many other oil companies, including Exxon Mobil Corp, which left after a series of industry nationalisations during Hugo Chavez’s tenure as president.
The US Treasury Department’s Office of Foreign Assets Control said in a statement Friday that Chevron can continue its joint venture with state-owned Petroleos de Venezuela SA until October 25. The previous waiver was due to end yesterday.
Oilfield service companies Schlumberger Ltd, Halliburton Co, Baker Hughes and Weatherford International Plc were also allowed to continue their work in Venezuela for three months. Chevron closed 1.5% lower in New York, at $123.72.
It’s a partial victory for Chevron that leaves the Trump administration with the option of pulling the company out later this year. The impact of any eventual refusal of a Chevron waiver is rising as other production falters, giving the company a bigger and bigger size of the market in the country, the official said.
“Our advice to Chevron would be to start preparing to leave after October,” Joseph McMonigle, an analyst for HedgeEye Risk Management, wrote in a note. “We are highly doubtful there will be another extension granted.” While Venezuela only accounted for 1% of Chevron’s global crude production last year, it remains strategically important as home to the world’s largest oil reserves. As the only US major still in the country, it could be first in line for any investments under a new government.
“Our operations in Venezuela continue in compliance with all applicable laws and regulations,” Chevron spokesman Ray Fohr said in an e-mailed statement.
In recent months, Chevron made the case to the Trump administration that if it were to leave, its Venezuelan assets could easily be turned over to another operator with little effect on overall production. That could mean the state, or even Russian or Chinese interests would benefit.
The ruling “does indicate Chevron has the ear of key government officials,” said Muhammed Ghulam, a Houston-based analyst at Raymond James & Associates.
Venezuela has seen its oil output drop precipitously in recent years. Production is currently below 800,000 barrels a day, down from as much as 3.71mn in 1970, according to data from the oil ministry. At least half of that oil is produced by joint ventures with foreign companies.
Chevron’s joint ventures with PDVSA produce more crude in Venezuela on average than those with other companies — including China National Petroleum Corp and Russia’s Rosneft Oil Co The US producer only receives a portion of that supply, however, amounting to about 40,000 barrels a day from its Venezuelan affiliate in 2018.
The US has refused to recognise Nicolas Maduro as Venezuela’s president after an election last year. Sanctions have become its main tool for depriving Maduro of cash and pressuring the military to turn against him.
Earlier this week, Venezuela’s opposition-led National Assembly issued a decree that guaranteed Chevron’s assets in the country would be protected under a new government led by Juan Guaido.
Oil purchases from Venezuela have become complicated since the US expanded its sanctions regime to include any business done with PDVSA, as the national oil company is also known. Other companies, including Spain’s Repsol SA and Italy’s Eni SpA, continue to do business with Venezuela.

Sasol’s SA plants threatened by emission standards

Sasol said some of its South African plants are under threat from sulfur dioxide emission standards that it will need to comply with by 2025.

The company, South Africa’s biggest by revenue, operates plants that convert coal into motor fuel and chemicals in Secunda, east of Johannesburg, and Sasolburg to the south. Flue-gas desulfurisation equipment needed to cut emissions of the gas, which causes acid rain and a range of health complications, is too costly and technically difficult to install, Sasol said.

Globally, as well as in South Africa, the company produces a range of chemicals.

Air pollution in the area around coal-fired plants operated by Sasol and Eskom east and south of Johannesburg rivals levels in some of the most polluted cities on earth. The government has proposed doubling the new limit, but is coming under increased pressure to act against the two companies as it’s being sued by environmental activists over the breach of current emission limits.

Sasol will have to comply with new sulfur dioxide emission limits for coal boilers of 500 milligrams of the pollutant per normal cubic meter. Its 2018 emission reports show that some equipment at both Secunda and Sasolburg regularly exceeds 1 000 milligrams.

“The new plant standard for sulfur dioxide will pose a compliance risk challenge for Sasol post 2025 from both a technical and financial feasibility point of view,” the company said in an emailed response to questions. “All commercially available technologies for the abatement of sulfur dioxide to meet new plant standards have been evaluated and we continue to scan for new technologies.” A failure to comply could lead to fines and the closing of plants.

While Sasol has already won a postponement, Eskom is yet to hear whether its applications to have its compliance with the sulfur dioxide emission standards delayed from 2020 until 2025 are successful. It has argued that it would only be economic and feasible to fit the pollution abatement technology on its two newest plants.

Eskom, which operates about 15 coal-fired power stations, has said that flue-gas desulfurisation equipment can cost between R20bn and R40bn per plant. Environmental activists including Greenpeace put the cost significantly lower.

“Sasol is still saying they can’t afford flue-gas desulfurisation,” said Robyn Hugo, program head for pollution and climate change at the Cape Town-based Centre for Environmental Rights. “Sasol itself has confirmed that there are no other means to meet these minimum emission standards.”

In addition to being technically difficult and costly, flue-gas desulfurisation equipment would require that additional water and limestone are brought in from the Northern Cape province. Existing limestone mines in that province are 450 kilometers (280 miles) to 800 kilometers away from Sasol’s plants.

“Flue-gas desulfurisation technology is proven,” Sasol said. Still, “it would be significantly challenging to retrofit” the equipment at the existing plants, it said.

In a separate application for a delay in meeting emission limits for a range of other pollutants, Sasol has asked for permission to significantly exceed caps for nitrogen dioxide, particulate matter and carbon monoxide until 2025. By that time, it says in the application, new equipment should enable it to comply.

On incinerators at its Secunda plant, it wants limits of as much as 90 times the new cap to be applied for carbon monoxide and particulate matter.

Sasol shares have declined by 27% this year as the company battles cost overruns at its Lake Charles chemicals project in Louisiana.

The world economy’s biggest week of 2019 as Fed prepares cut

There will be no chance of a summer break for investors or policy makers in coming days as they brace for what might be the busiest week for the world economy this year.

The highlight is Wednesday’s decision by the Federal Reserve with markets and economists virtually united in predicting Chairman Jerome Powell and colleagues will cut interest rates for the first time in more than a decade.

What’s Likely to Happen?

Some Fed watchers predict officials will cut their benchmark by half a percentage point, but the signal is that they will eschew a bigger move in favor of a quarter point reduction. They will likely also leave open the possibility of further action down the road as they seek to sustain the record-long U.S. expansion and kick start inflation.

“While the Fed cutting rates by a quarter point will hardly be a surprise to financial market participants — as it has been well advertised and is priced in with a relatively high probability — the broader question will be how the Fed telegraphs its intentions regarding additional easing,” said Carl Riccadonna, chief U.S. economist at Bloomberg Economics. “Policy makers are keen to avoid getting ‘bullied’ by the markets into more than 50 to 75 basis points of rate reductions.”

The Fed isn’t the only event with the ability to shape the outlook for the global economy this year.

On Monday, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin are set to travel to China for for the first high-level, face-to-face trade negotiations between the world’s two biggest economies since talks broke down in May.

Then on Friday, the monthly payrolls report will shed light on whether the Fed’s move was necessary. Economists surveyed by Bloomberg predict a 166,000 gain in non-farm jobs in July, slower than the 224,000 of June.

If that’s not enough, Bank of Japan policy makers meet on Tuesday amid calls to reinforce their commitment to low rates and Brazil’s central bank may cut rates on Wednesday. Thursday sees the release of global manufacturing data amid concerns many industries are already suffering recession.

Here’s our weekly rundown of other key economic events:

U.S.

As Fed officials begin their discussions on Tuesday they will have some more data with which to assess the economy. Personal income, pending home sales and consumer confidence statistics are all due that morning. Then on Thursday, the ISM manufacturing report is expected to show industry is stabilizing and continuing to expand. Friday’s trade data will be pored over for evidence that the skirmish with China is having an effect. Also next week, the Treasury will say on Wednesday how much money it needs to borrow amid rising budget deficits.

relates to Get Ready for the World Economy’s Biggest Week of 2019 — Source: Bloomberg Economics

First Annual Eastern Mediterranean Energy Leadership Summit

Interest in the Eastern Mediterranean has increased during the last years with the discovery of major gas fields such as Tamar, Leviathan and the giant Zohr field in Egypt. These have opened up major opportunities for new discoveries, but also for oil and gas investments in the region.

The First Eastern Mediterranean Energy Leadership Summit will be held at the Divani Apollon Palace & Thalasso in Athens, Greece, from October 1 – 2, 2019. The event is organized by the Transatlantic Leadership Network, the University of Piraeus – MSc in Energy: Strategy, Law & Economics of the Department of International & European Studies, and SGT S.A.

Held at the Ministerial level, the Summit will gather together senior government officials and business executives from the energy market to identify crucial opportunities and challenges for continued commercial and geopolitical cooperation. Invited countries include the United States, members of the Three Seas Initiative, and countries surrounding the Eastern Mediterranean Region. During the conference diverse thoughts, ideas and best practices will be presented on how Eastern Mediterranean countries can best take advantage of their geographical positions and exploit available energy resources to secure a more reliable, self-sufficient and environmental sustainable energy supply.

Download Summit Details

Topics of discussion:

The Future of Oil & Gas in the Eastern Mediterranean: Alternative Scenarios and Policy Perspectives
Security Dimensions of Transatlantic Energy Cooperation: The Effects on the Eastern Mediterranean
Opportunities for Energy Cooperation in the Eastern Mediterranean: Project View
Building a Framework for Regional Energy Cooperation and Integration
Energy Developments in South East Europe. The Challenge for the Region
Market Trends: Predicting Winners and Losers
Regional Electricity Market Dynamics
Investment Outlook: Required Financial Resources and Remaining Challenges
Removing Barriers and Exploiting Opportunities

SPEAKERS

Kocho Angjushev

Deputy Prime Minister

Republic of North Macedonia

Enver Hoxhaj

Deputy Prime Minister

Republic of Kosovo

Francis R.Fannon

Assistant Secretary, Bureau of Energy Resources

U.S Department of State

Mirko Šarović

Minister of Foreign Trade and Economic Relations

Bosnia and Herzegovina

Roudi Baroudi

CEO

Energy & Environment Holding, Qatar

Yannis Bassias

President & CEO

Hellenic Hydrocarbon Resources Management

Dr. Stephen Blank

Senior Fellow for Russia

American Foreign Policy Council

Ambassador John B. Craig

Senior Partner

Manaar Energy Group, Abu Dhabi

Ioannis Desypris

Director, Regulatory Affairs

Mytilineos S.A., Greece

Prof. Nikolaos Farantouris

Chair, Legal Affairs, EUROGAS, Brussels & General Counsel, DEPA, Greece

Michael Haltzel

Chairman of the Board

Transatlantic Leadership Network

Dr. Symeon Kassianides

Chairman

Natural Gas Public Company (DEFA)

Athanasios G. Platias

Professor of Strategy

University of Piraeus

H.E. Geoffrey Pyatt

U.S. Ambassador to the Hellenic Republic

Megan Richards

fmr. Director, Energy Policy in Directorate General for Energy

European Commission

Jean-Luc Saquet

General Manager

GreenPower 2020, France

Dr. Ali Abu Sedra

Law expert in Petrochemicals, Former Legal Advisor to the Ministry of Oil, Libya

Piotr Sprzączak

Head of Infrastructure Unit

Naczelnik Wydziału Infrastruktury

Sasha Toperich

Senior Executive Vice President

Transatlantic Leadership Network

Dr. Aristotle Tziampiris

Professor of International Relations, Chair of the Department of International and European Studies

University of Piraeus

Joseph F. Uddo III

Deputy Assistant Secretary for Energy Innovation and Market Development

United States Department of Energy

How Trump’s Steel War on Turkey Is Set to Change Trade Flows

By Thomas Biesheuvel, Elizabeth Burden, and Susanne Barton

August 10, 2018, 4:51 PM GMT+3 Updated on August 10, 2018, 11:53 PM GMT+3

U.S. plans to raise tariffs on Turkish aluminum and steel
The country ranks as the world’s sixth-biggest steelmaker

President Donald Trump’s latest broadside against Turkish steel is a fresh blow to one of the country’s most important industries and will reshape global trade flows.

Under a higher level of tariffs, Turkey will continue to lose American customers, once its most important steel market. The new tariffs won’t put Turkish steelmakers out of business, but force them to find new markets, likely across North Africa or the Middle East, or displace other imports to Europe.

“It’s certainly a challenge for Turkey’s steel,” Colin Hamilton, managing director for commodities research at BMO Capital Markets, said in an email. “They mainly import scrap, which has just become more expensive in Lira terms, and export products. ”

The U.S. plans to double tariffs on the nation’s steel to 50 percent, and raise the rate on aluminum to 20 percent, Trump said on Twitter Friday.

Turkey exported about 500,000 tons to the U.S. in the five months to May, compared with more than 1 million tons in the same period last year, according to data from the U.S. Census bureau. The U.S. has fallen from Turkey’s main steel buyer to number three.

Steel, in its more basic form of slabs, sheet or reinforcing bar, is a highly liquid market and it’s usually easy for a company to find a new buyer. Attacking imports has become a favorite tool of politicians from Europe to the U.S., causing flows to be rerouted. The global industry has been described as a game of whack-a-mole; if exports are blocked in one market, the action shifts elsewhere.Turkey ranks as the world’s sixth-biggest steel producer. In aluminum, it’s 31,

a tiny player. The U.S. imported about 4,500 tons of aluminum bars, rods and profiles from the country in 2017, according to World Bank statistics.

The U.S. measures are designed to add pressure on Turkey to release an American pastor and will further squeeze an economy that’s being engulfed by a financial crisis and plunging currency. An index of Turkish steel stocks sank almost 10 percent after the announcement, before recovering some of those losses.

In response to U.S. tariffs earlier this year, Turkey turned its exports toward European countries, such as Italy and Spain. The new U.S. tariffs will heighten fears that even more steel will head to the region, pressuring European producers. Regulators have introduced so-called safeguard measures, which slap tariffs on steel if imports exceed historical averages.

“The tariffs on Turkey itself won’t form a big threat” to Europe, Philip Ngotho, an analyst at ABN Amro Bank NV, said by email. “Europe has measures in place to limit imports of steel into Europe, so that will continue to offer some protection from potentially cheaper and more steel from Turkey.”

— With assistance by Mark Burton, and Luzi-Ann Javier

TANAP to deliver first commercial gas on June 30

– The project came in under budget from the original $11.7 billion down to $7.99 billion

First commercial gas from the Trans Anatolian Natural Gas Pipeline Project (TANAP) to Turkey will begin transit by June 30, Saltuk Duzyol, TANAP’s general manager said on Tuesday.

TANAP, which will carry Azeri gas to Turkey and then onto Europe, is currently 93.5 percent complete, Duzyol confirmed at TANAP’s Eskisehir Measurement and Compressor station where Turkey receives Azeri gas.

“Phase 0, which starts from the Turkey-Georgia border and ends in Turkey’s Eskisehir province is almost completed,” Duzyol said and added that the second part of the project – Phase 1 – starts from Eskisehir and continues to the Ipsala district of Edirne on the Turkey-Greece border, where TANAP will be connected to the Trans Adriatic Pipeline (TAP), the pipeline that will bring Azeri gas to European markets.

“We completed 80.7 percent of Phase 1. When we finish building this phase, we will wait for TAP. The percentage of the total completion of TANAP is currently 93.5 percent,” he said.

Phase 0, which started testing on Jan. 23, is still ongoing but from June 30 commercial gas transfer will start, Duzyol said.

The TANAP project has seen the employment of around 13,000 and currently has around 7,000 employed. The project had 82 million man-hours worked and the equivalent length of 175 million kilometers driven.

The project has also revealed many unexpected surprises during its construction phase, Duzyol said, disclosing that nine species of bugs were discovered along with a new plant species, previously unknown to the scientific community.

“We also discovered 154 archeological sites during the route selection and construction,” he added.

He said the total value of contracts signed for the project to date is $5 billion.

– Project cost is under budget

Duzyol lauded the project management and the procurement process as a success in bringing the costs of the project under budget.

The estimated investment cost was $11.7 billion at the start of the project, he explained adding that, and “We have successfully pulled this figure down to $7.99 billion with the procurement process and project management we have successfully provided. I am proud to say that this is a huge financial success.”

He disclosed that project partners awarded $3.75 billion in credit from international financial institutions and the European Union provided $10.2 million in grant aid.

The stakeholder numbers for the project have also increased from three to four.

“The Southern Gas Corridor Company (SGC) had previously a 58 percent share but transferred a 7 percent stake to SOCAR Turkey. Currently, the SGC holds 51 percent, Turkey’s BOTAS 30 percent, BP 12 percent and SOCAR Turkey 7 percent,” he explained.

Duzyol also stressed that the TANAP pipeline could also be used to transfer gas from the Eastern Mediterranean or Iraq, conditional on sufficient demand and agreements.

TANAP’s initial capacity per year will be 16 billion cubic meters from which Turkey will withdraw 6 billion cubic meters while the remaining 10 billion cubic meters will be delivered to Europe.

TANAP project to enter into service in June: Turkish minister

The Trans-Anatolian Natural Gas Pipeline (TANAP) project will enter into service as of June 12, Energy and Natural Resources Minister Berat Albayrak said on May 11.

“The opening ceremony will be held with the attendance of Turkish President Recep Tayyip Erdoğan and Azerbaijan President Ilham Aliyev on June 12,” Albayrak said during his speech at a sector meeting in the northwestern province of Bursa.

Project officials announced in April that the first gas would be pumped on June 30.

TANAP, running from the eastern province of Ardahan on the border with Georgia towards borders with Greece and Bulgaria, is the central and longest section of the Southern Gas Corridor (SGC). The main aim of the SGC is to connect the giant Shah Deniz gas field in Azerbaijan to Europe through the South Caucasus Pipeline (SCP), TANAP, and the Trans Adriatic Pipeline (TAP). The SCP runs from Azerbaijan to Turkey through Georgia and the TAP starts in Greece and runs to Italy through Albania and the Adriatic Sea.

The initial capacity of TANAP is expected to be 16 billion cubic meters (bcm) of gas per year, gradually increasing to 31 bcm. Around 6 bcm of gas will be delivered to Turkey and the remaining volume will be supplied to Europe.

Albayrak also said Turkey would start its first solo oil and gas deep-sea drilling in the Mediterranean before the end of this summer.