LONDON (Bloomberg) — Premier Oil Plc is considering a bid for a package of North Sea oil and gas assets put on the block by U.S. oil major Chevron Corp. that’s worth about $2 billion, according to people familiar with the matter.

The first round bids is due before the end of the month, the people said, asking not to be identified as the matter is private. Premier, which has a market value of about 578 million pounds ($733 million), may tap a partner or buy only the operating rights for the assets, the people said. No final decisions have been taken and the independent energy firm may decide against a bid, they said.

Representatives for Chevron and Premier Oil declined to comment.

Premier is among the independent explorers seeking to expand in the UK North Sea as some of the largest U.S. oil majors seek to exit the region to focus on other opportunities. Assets that have been put on the block recently include oil and gas fields from ConocoPhillips, which has entered into exclusive talks to sell a package valued at as much as $3 billion to British billionaire Jim Ratcliffe’s Ineos Group.

Chevron has decided to market all its UK central North Sea assets, including the Alba, Alder, Captain and Erskine producing fields as well as the Britannia, Elgin/Franklin and Jade non-operated projects, a spokeswoman said last month. Chrysaor Holdings Ltd. and Neptune Oil & Gas Ltd. are among suitors weighing bids, people familiar with the matter said at that time.

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• Leaders on both sides stress need for peaceful resolution amid tensions; observers welcome it

As the stand-off between Singapore and Malaysia over maritime boundaries enters its second week, leaders on both sides have made calls for talks to resolve the simmering dispute.

Both countries, though, have their own views on how to do so and the way forward.

Weighing in for the first time, Finance Minister Heng Swee Keat said on Sunday (Dec 9) that the intrusions by Malaysian government vessels into Singapore territorial waters are a “violation of Singapore’s sovereignty and international law” and a “serious matter of national interest”.

He also called on Singaporeans to “remain calm and united at a time like this”.

Singapore Environment and Water Resources Minister Masagos Zulkifli also called the intrusions “provocative and unacceptable”, adding that Singapore needed to stay firm to defend its sovereignty.

“Above all, we must maintain good relations and resolve this issue in a peaceful and diplomatic manner,” he said in a Facebook post.

Their remarks came a day after Trade and Industry Minister Chan Chun Sing said Singapore welcomed talks to resolve the matter.

“The Singapore Government is hopeful that through the engagement of both countries, the governments of Malaysia and Singapore can reach a swift and amicable resolution to this dispute,” he said.

“If such talks do not eventually produce an amicable resolution, the Singapore Government would be prepared for this matter to be settled by recourse to an appropriate international third-party dispute settlement procedure.”

Mr Chan added: “Importantly, let us calm down the ground situation first. Revert to the pre-Oct 25th status quo ante. Have the Malaysian ships leave the area peacefully, immediately.”

Malaysian Prime Minister Mahathir Mohamad had last Saturday signalled Kuala Lumpur’s plan to pursue negotiations to resolve the matter.

Tun Mahathir did not address the Malaysian Foreign Ministry’s proposal last Friday for both sides to “cease and desist” from sending assets into the area, which Singapore had said it did not agree with.

On Oct 25, Malaysia published a notice in the Federal Government Gazette to extend the Johor Baru port limits.

The new lines encroach into Singapore territorial waters off Tuas. And they go beyond Malaysia’s territorial claims, which it published in a 1979 map that Singapore has not agreed to.

The Republic has lodged diplomatic protests over the new port limits, but Malaysia has maintained they are within its territorial waters.

Between Nov 24 and Dec 5, there were 14 intrusions by Malaysian government vessels into the area, which Singapore regards as its territorial waters.

Singapore’s Transport Ministry made the issue known to the public last Tuesday, saying that the Republic had protested against the unauthorised movements of, and assertions of sovereignty by, these vessels, which are inconsistent with international law.

Last Thursday, Singapore extended its own port limits, and reiterated its call for Malaysian ships to leave Singapore territorial waters, a point that Mr Chan also made last Saturday.

Malaysian Foreign Minister Saifuddin Abdullah said last Friday that Malaysia had sent the draft agenda for a meeting aimed at the resolution of maritime boundary issues between the two countries, and said his government hoped the meeting could be held some time in the middle of this month.

Observers welcomed these latest developments seeking a settlement, but noted that the dispute might take some time to resolve.

“It is good that both countries are talking about the need to talk,” said Associate Professor Bilveer Singh of the National University of Singapore’s political science department.

Prof Singh said there is a pattern to how disputes between Singapore and Malaysia are resolved. “At the end of the day, after all the (heat), we will sit down and talk,” he added.

He expects the negotiations to be protracted, and possibly even be referred to an international tribunal.

Former Nominated MP Zulkifli Baharudin said that course of action is usually the “last resort”.

“We don’t want to have a situation where you win, I lose, or I lose and you win. At the end of the day, it is still best dealt with bilaterally,” Mr Zulkifli added.

Malaysia and Singapore have held negotiations on boundary and other issues in the past.

Both countries agreed on a large part of their maritime boundary along the Johor Strait in a 1995 bilateral agreement.

They have also mutually agreed to refer disputes to third-party settlement procedures, such as that over Pedra Branca.

In 2008, the International Court of Justice awarded the island to Singapore, and nearby Middle Rocks to Malaysia.

A three-year dispute over reclamation in the Johor Strait was also headed for international arbitration, but a settlement agreement was reached and inked in 2005 between Singapore and Malaysia.

Malaysia had claimed that Singapore’s reclamation caused serious and irreversible damage to the environment, but international experts found that the works caused no major impact.

Observers who spoke to The Straits Times said tensions need to be defused.

Prof Singh said: “The danger of an accidental clash is very high. The ships are too close to each other. Meanwhile, both countries have also politicised this domestically, and this makes it difficult for each to take a step back.”

Added Mr Zulkifli: “Matters on the ground can escalate and take away the flexibility that political leaders have.”

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LONDON (Bloomberg) — Saudi Arabia’s energy minister emerged from days of heated OPEC talks joking that he wasn’t an easy man to be friends with.

Yet, the deal Khalid Al-Falih hammered out to reduce production by 1.2 MMbopd, which sent oil prices soaring on Friday, was based on Saudi Arabia shouldering the lion’s share of the cuts. It also relied, to an unprecedented extent, on Russia to broker an agreement between the Saudis and their arch-rivals, Iran, and acknowledged implicitly that there’s little the kingdom could do to hurt surging U.S. oil shale without causing itself pain.

“Saudi economic self-interest trumps Trump,’’ said Mike Rothman, president of Cornerstone Analytics Ltd., a veteran of three decades of OPEC meetings.

The outcome of the marathon talks in Vienna shows how OPEC was able to pull off a juggling act. Al-Falih’s dilemma: cut production and anger President Donald Trump, or let oil prices plunge and risk damage to a Saudi budget that requires oil prices above $70/bbl in 2019.

“Low prices are actually not good for the U.S. economy,’’ Al-Falih said, a riposte to Trump’s repeated calls for OPEC to open the taps. “I know for a fact that oil and gas producers in the U.S. are probably breathing a sigh of relief that we’re providing some certainty and visibility for 2019.’’
Trump’s Tweet

On Twitter Wednesday, Trump urged OPEC not to restrict oil flows, but since then has not publicly addressed the market.

For Al-Falih, the willingness to cut production represented a shift. In a speech last year in Houston, he insisted that his country would not surrender market share to the U.S. The kingdom, he said, supported intervening in the market to address “short-term aberrations’’ and not “long-term structural imbalances.’’

As Al-Falih is surely aware, the U.S. this month briefly became a net exporter of oil for the first time in seven decades, with August production rising at the fastest rate in a century.

On Friday, though, the Saudi energy minister insisted OPEC could tolerate shale-oil growth.

Trump “wants the oil and gas industry in the U.S. to grow,’’ Al-Falih said. “We have no problem with that. Hopefully, we can grow together, not one at the expense of the other.’’

Implicit in the Saudi minister’s words was an assumption that this week’s production cut may be temporary. Soon enough, the market will need both the U.S. shale industry and Saudi Arabia to increase production to offset falling output from Iran, due to economic sanctions, and Venezuela, because of political turmoil.

U.S. waivers allowing eight countries to continue purchases of Iranian oil expire at the start of May. Not coincidentally, OPEC and its allies agreed to meet again in April to review this week’s deal — several months earlier than usual.

Over a crucial week of negotiations, the U.S. loomed large. Russia loomed even larger.

For weeks, the market had been sliding amid talk Saudi Crown Prince Mohammed bin Salman might not be able to defy Trump’s desire for lower oil prices. Amid worldwide pressure over the Oct. 2 killing of Jamal Khashoggi in the Saudi consulate in Istanbul, it seemed that MBS needed the support of the White House too much.

Tuesday warning

But it was clear the Saudis did want cuts, though Al-Falih warned on Tuesday that it was “premature’’ to talk about them.

“The next road to cross is whether all countries are willing to come on board and contribute to that cut,’’ he told Bloomberg in his only media interview during the week.

On Wednesday morning, things got even more complicated. Brian Hook, an American diplomat handling Iran sanctions, was spotted by reporters leaving the Hyatt Hotel in Vienna, where he’d had breakfast with Al-Falih. The Iranian delegation fumed. Hook, after all, is the person in charge of the waivers that Washington has granted to a handful of Asian buyers of Iranian crude.

Diplomatically explosive

The meeting was so diplomatically explosive that the Saudi Energy Ministry, at first, denied it happened. A few hours later, Al-Falih was forced to come clean.

“We discussed how the energy market is evolving and the availability of supply in the event that waivers are not renewed,’’ Al-Falih told reporters.

The Hook meeting, just 24 hours before OPEC was scheduled to meet, threatened to scuttle an agreement, said Helima Croft, commodities strategist at RBC Capital Markets LLC and a former CIA analyst.

A day later, at OPEC headquarters, heated words were exchanged between Bijan Zanganeh, Iran’s oil minister, and Al-Falih, according to people familiar with what happened. Iran insisted it should be exempt from the reduction deal. After a full day of meetings, Zanganeh and Al-Falih failed to reach agreement.

Al-Falih said he was “not confident’’ the cartel would agree on a deal. The OPEC meeting appeared on the brink of collapse.

Enter Novak

The oil market plunged. On the second day of talks, it fell to Alexander Novak, the poker-faced Russian energy minister, to help break the impasse. He met separately with Al-Falih and Zanganeh — an unprecedented demonstration of Russia’s newfound role at OPEC despite not being a member.

With Novak’s help, OPEC was able to reach a solution. Iran would get its exemption, but it wouldn’t be mentioned in OPEC’s written communique. The ploy allowed everyone to sell the deal at home as a victory.

It was not the only fudge. Libya and Venezuela would also be exempt from the cut, while Russia’s contribution — which Novak said was about 230,000 bopd would be implemented gradually.

Headline number

Another hedge: The headline number would be based on October production. Output from some countries, such as Iraq, has already fallen since then, meaning that in reality they may not need to reduce further. On the other hand, Saudi Arabia’s output in November was significantly higher than in October.

That means Saudi Arabia will cut more than any other country. Al-Falih said the kingdom would downshift to about 10.2 MMbopd in January, down 900,000 bpd from November. That’s equivalent to the entire production of a medium-sized OPEC country like Libya.

Novak, the Russian minister, made a point of thanking Saudi Arabia for “taking a bigger burden than its share to balance the market.’’

Al-Falih and his OPEC colleagues claimed victory on Friday. In a skeptical landscape, they agreed to continue their cooperation and succeeded in delivering an oil-price rally.

But Saudi Arabia’s willingness to tolerate soaring U.S. oil production is unlikely to last forever.

Stay tuned for April.

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NORWAY — Since 2014, global jackup utilization has fallen from almost 80% to around 55%, where it has remained quite steady over the last two years. There have, however, been large regional differences with regards to jackup utilization over the past four to five years, and several regions are now seeing promising developments.

While the Middle East active rig count has been stable through this period, an influx of rigs (newbuilds and rigs from other markets) has moved utilization down from above 80% throughout 2014 and 2015 to around 65% for the past two years. It is still one of the regions with best utilization.

Norway saw very high utilization during the development period in 2015 to 2016, but has since fallen to Middle East levels from early 2017 and onwards. The market has seen an uptick in utilization in 2018.

The UK and West Africa have been hit harder than the other basins, bottoming out at around 40% and 25% utilization, respectively.

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HOUSTON (Bloomberg) — Chevron Corp. will hike spending by 9.3% next year to $20 billion, its first budget increase since 2014 as it expands investments in the Permian Basin and its Tengiz project in Kazakhstan.

The world’s No. 3 oil producer by market value will spend $3.6 billion in the West Texas and New Mexico basin, 18% of its total budget. The amount is up about 9% from this year’s budget.

Key insights

CEO Mike Wirth said in March he’s “very confident” that annual capital spending will remain below $20 billion for the next three years regardless of oil prices. Chevron’s annual spending is now about half of what it was half a decade ago, when oil prices were more than $100/bbl and it was exceeding its budget on giant Australian gas-export projects. Major oil explorers are setting 2019 spending plans during a period of considerable price volatility: New York crude futures have lost about a third of their value since early October, prompting OPEC, Russia and other significant producers to consider production curbs.

Market reaction
Chevron was little changed in after-market trading. The stock earlier fell 1.1% to $115.91.

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Loan growth will slide across the region.

Banks in Asia Pacific should brace for a more challenging year in 2019 as macro uncertainties deepen and growth becomes hard to come by, according to Moody’s Investors Service.

“GDP growth in APAC has peaked and will moderate, and credit expansion will continue to slow down, with the trade conflict between China and the US posing a risk for the banks,” the firm said in a report.

Private sector leverage also remains high across many APAC economies, stoking risk of asset quality deterioration as interest rates rise.

Banks should also be wary of property-related risks with Moody’s identifying Australia, New Zealand, Korea and Malaysia facing the greatest risk in the form of real estate investment purposes.

Nonetheless, APAC banks’ creditworthiness, capital, provisions and profit will remain broadly stable in 2019 as economic fundamentals hold steady and banks enjoy strong credit buffers, Eugene Tarzimanov, Moody’s vice president and senior credit officer said in a statement.

“In addition, recent developments on bank resolution in APAC cement our view that government support for the banks will stay strong, and that senior creditors will not be required to pay for bank rescues; although Hong Kong remains an exception,” adds Tarzimanov.

Banks across the region are also poised to remain active issuers of green bonds although growth in green financing has slowed down slightly in 2018.

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The US holds nine out of the top 10 global locations for investment in the upstream oil and gas sector in 2018, according to a wide-sweeping survey released Thursday by Canada’s Fraser Institute.

In last year’s survey the US represented six of the top 10 spots.

The organization surveyed more than 250 individuals in the oil and gas industry, including CEO’s, vice presidents, division managers and various specialists to discover what barriers might cause companies pause before investing in certain regions or plays. Those barriers include issues such as tax rates, regulatory obligations, uncertainty over environmental regulations, and the interpretation and administration of regulations governing the upstream industry. The survey also covered concerns of political stability and security of personnel and equipment. For the first time in five years no Canadian province made the top 10 with the top two producing provinces in the nation, Alberta and British Columbia, ranking 43rd and 58th, respectively, of regions to invest out of 80 worldwide locations. The ranking is based on the policy perception index, which is created by compiling respondents’ answers to the various potential barriers to investment facing each region. The highest score a region can score is 100, which was only achieved by Texas this year, followed closely by Oklahoma.

“Onerous regulations, higher taxes and a lack of pipeline capacity are taking their toll on Canada’s energy sector, and as a result, investors are looking elsewhere to invest,” said Kenneth Green, research chair in energy and natural resource studies at the Fraser Institute and co-author of the 2018 Global Petroleum Survey.

US states and regions scoring high enough to make the top 10 in the policy perception index included Texas, Oklahoma, Kansas, Wyoming, North Dakota, Alabama, Montana, Gulf of Mexico and Louisiana. The UK’s offshore development in the North Sea was the only non-US area to crack the top 10. “Investors are saying very clearly they prefer the competitive taxes and regulatory regimes of the energy-producing American states over Canadian jurisdictions,” said Ashley Stedman, Fraser Institute senior policy analyst and study co-author. “Policymakers at the federal and provincial levels must be aware of the impact their decisions have on attracting or deterring valuable investment dollars.”

Said one of the survey respondents: “As long as the current administration maintains its tax and regulatory policies new capital will to flow to the United States.”

COLORADO CONCERNS
Although almost every US producing state saw an increase in its policy perception index score. Colorado was the only state to drop in the index, falling from 55th to 59th year over year. Even California improved from its 91st ranking in 2017 to 67th in 2018.

When it comes to regulatory enforcement, 14% of all respondents said Colorado’s regulatory climate would deter them from pursuing any oil and gas investments in the state. This was even higher than California where only 9% said regulations would prevent any investment.

“Colorado is becoming more difficult to operate in as political activism directed towards the oil and gas industry increases,” according to one of the survey respondents.

Much of the concern in Colorado stems from a 2018 ballot initiative to drastically increase drilling setbacks. Although the measure failed during the November 6 elections, its passage would have eliminated nearly all new drilling locations in the Piceance and Denver-Julesburg basins. Also, proponents of the initiative said they would continue efforts to increase drilling setbacks in the state.

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SINGAPORE (REUTERS) – The Maritime and Port Authority of Singapore (MPA) said on Friday (Nov 30) that it is banning the discharge of “wash water” used in ships to scrub engine exhaust, with effect from Jan 1, 2020.

The ban on so-called open-loop scrubbers in Singapore, home to the world’s top ship refuelling or bunkering hub, is a potential setback to shippers that have invested millions in the exhaust gas cleaning systems.

The move is to help prepare one of the world’s busiest ports for new International Maritime Organisation (IMO) rules that come into force in 2020 and oblige ships to use cleaner fuels.

“To protect the marine environment and ensure that the port waters are clean, the discharge of wash water from open-loop exhaust gas scrubbers in Singapore port waters will be prohibited,” said Mr Andrew Tan, chief executive officer of the MPA during an event in Singapore.

“Ships fitted with hybrid scrubbers will be required to switch to the closed-loop mode of operation,” Mr Tan said, adding that Singapore will be providing facilities for the collection of residue generated from the operation of scrubbers.

The MPA told Reuters separately that the ban “is already part of our current legislation” but that its enforcement would start from Jan 1, 2020.

The IMO, the United Nations shipping agency, shook the fuels and maritime industries in 2016, when it said it would ban ships from using fuels with sulphur content above 0.5 per cent from Jan 1, 2020, compared with 3.5 per cent now.

To comply with the new rules, shippers can switch to burning costlier but cleaner fuels like marine gasoil or low-sulphur fuel oil, shift to alternative fuels like liquefied natural gas, or invest in exhaust gas cleaning systems, known as scrubbers.

Open-loop scrubbers use seawater as a scrubbing liquid, and the waste stream is treated before being discharged back into the sea. In closed-loop systems, scrubbing is performed using water treated with additives, and the liquid is recycled back into the scrubber. Hybrid scrubbers are a combination of both.

A spate of scrubber installation orders this year has led energy researchers to raise their demand forecasts for high-sulphur fuel oil (HSFO) bunkers, as the scrubbers will let the ships continue to burn HSFO once the IMO’s sulphur regulations go into effect.

A switch to low-sulphur fuels is still widely seen by industry observers and participants as the most practical form of compliance, however, given the high investment and operational costs associated with scrubbers and uncertainty around future emissions regulations.

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SINGAPORE – Bank lending in Singapore rose in October from a month ago, reversing from a slight contraction in September, preliminary data from the Monetary Authority of Singapore showed on Friday (Nov 30).

Loans through the domestic banking unit – which captures lending in all currencies, but reflects mainly Singapore-dollar lending – stood at $672 billion, up from $670 billion a month ago. This represents a 0.3 per cent expansion from September, reversing from a 0.1 per cent fall a month ago.

Business lending was up 0.5 per cent to $406 billion in October from September, again reversing from a contraction in September over the previous month.

Total consumer loans were up 0.1 per cent to $266 billion in October, compared to the 0.2 per cent growth in the previous month.

From a year ago, total lending rose 3.4 per cent, weaker than the 4.5 per cent gain posted in September.

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A blockchain-based oil trading platform dubbed Vakt and developed by a consortium involving BP and Shell began operating this week, Reuters reports, citing the consortium. The aim is to utilize the potential of the distributed ledger technology for lower-cost, no-intermediary but still secure transactions.

News of the platform first emerged last year as blockchain continued to gain popularity. The consortium behind Vakt also includes trading houses Gunvor and Mercuria, as well as Koch Supply & Trading. The platform was financially backed by Dutch ABN Amro, ING, and French Societe Generale.

In January 2017, Mercuria, in partnership with ING and Societe Generale, announced it was preparing the first oil trade using blockchain technology. The trade involved an African crude shipment to Mercuria shareholder ChemChina. When he announced the test at the Davos World Economic Forum, Mercuria’s CEO, Marco Dunnand, said, “The energy industry will have to digitalize more and more in oil production, refining, shipping. So traders will also have to participate.”

Now, the companies involved in the launch of Vakt will be the first ones to use it, but next year, the consortium said, the platform will be opened to other participants next January. Initially, the platform will only process contracts for the five crude oil grades sourced from the North Sea that form the Brent international benchmark. At a later stage, it will include U.S. oil pipelines and cargoes of gasoline and other oil products for Northern Europe.

“Vakt is the logistical arm…Once a deal is executed through our book of records, it gets pushed through Vakt. The next leg is the financing and the link-up with komgo gives access to several banks,” Reuters quoted Gunvor’s Chief Operations and IT Officer, Eren Zekioglu, as saying.

There are also other blockchain-based trading platforms in the oil industry that are being developed at the moment. One of them, komgo, is also due to launch before this year’s end. The platform is financed by most of the participants in the Vakt consortium and 10 international banks.

By Irina Slav for Oilprice.com

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