Energy Explorers Bemoan Cost Of Labor Disputes In Argentina

BUENOS AIRES, May 19 (Reuters) – Labor disputes are on the rise in Argentina and costing foreign energy companies millions of dollars as they explore the country’s vast but barely-tapped Vaca Muerta shale oil and gas field, company officials said.

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Trade Unions are a powerful force in Argentina, Latin America’s No. 3 economy, where the frequency of industrial disputes are a deterrent to explorers already unsettled by President Cristina Fernandez’s heavy-handed trade and currency controls.

Argentina’s state-run energy company YPF estimates $200 billion is required over the next decade to exploit Vaca Muerta, which covers an area the size of Belgium, but so far foreign firms have made little more than foothold investments.

“In the last few years labor disputes have cost us in the region of $10 million, enough to drill a well,” Maximiliano Hardie, venture lead and operations manager at Shell Argentina, said at an industry conference in Buenos Aires.

“Between 2013 and 2014 the number of strike days, and therefore the amount of unproductive time, increased,” he said.

Years of under-investment in Argentina’s energy sector have left the South American country a net energy importer. Mired in a decade-long debt battle, the cash-strapped country needs the deep-pockets of energy companies like Chevron Corp, Royal Dutch Shell and Exxon Mobil.

Investor confidence is unlikely to improve before October’s presidential election. Fernandez is constitutionally barred from a third straight term and the three front-running aspirants all tout more investor-friendly policies.

Javier Iguacel, vice president of business development at Pluspetrol, told the conference an explorer’s survival depended on maximizing drilling time.

“And for this, changes are needed. We have to be working 365 days a year, 24 hours a day,” Iguacel said.

The next disruption, however, is likely to come in the next few weeks.

An official at Argentina’s main oil workers union, the Private Oil and Gas Union of Rio Negro, Neuquen and La Pampa, on Tuesday told Reuters that members would take part in a national strike that is expected to take place in early June.

The government is currently locked in lengthy negotiations with big business and unions over the size of salary increases in the face of one of the world’s highest inflation rates.

Oklahoma Set to Overturn Local Drilling Controls as Backlash Brews

OKLAHOMA CITY/WASHINGTON, May 20 (Reuters) – Facing a backlash over the side effects of its oil and gas boom, Oklahoma is poised to overturn an 80-year-old statute that allows cities and towns to ban drilling operations within their borders.

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The legislation, now being finalised, would help insulate energy companies from local movements that have grown in response to the rapid expansion of oil and gas drilling and a dramatic spike in earthquakes across the central state.

Oklahoma now sees 600 times more tremors than it did before 2008, a surge seismologists say is linked to vast amounts of wastewater injected into the ground as a result of drilling for oil and from hydraulic fracturing – a process to extract natural gas that is also known as fracking.

The bill was championed by energy companies, which contend that local interference in drilling practices would endanger the production bonanza that has boosted their profits and brought the United States within sight of energy independence.

Opponents say the bill severely restricts the right of local communities to protect themselves from the earthquakes and drilling operations that encroach on residential areas.

The move by Oklahoma’s Republican-majority legislature follows a similar law signed on Monday by Texas Governor Greg Abbott in response to a fracking ban passed by one municipality.

In April, the state-run Oklahoma Geological Survey said the rise in tremors is “very likely” linked to injection of wastewater into disposal wells.

SapuraKencana Clinches $269M Deals as Firm Ventures into Mexico

SapuraKencana Petroleum Berhad, a Malaysia-based oil and gas services and solutions provider with upstream oil and gas assets offshore Southeast Asia, reported that the company has clinched several engineering and construction contracts amounting to $269 million, including the commencement of its operations in Mexico, the firm announced in a filing with local stock exchange Bursa Malaysia Monday.

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Subsidiaries of SapuraKencana Petroleum’s Engineering and Construction – International Division bagged contracts in Mexico and Asia, where the Malaysian firm landed contracts in India, Indonesia and Vietnam.

Under the Mexican contract, worth between $41.2 million and $98.1 million, SapuraKencana Mexicana S.A.P.I. de C.V. will install structures and superstructures of fixed marine platforms. In addition, the firm will provide pipelaying and lifting of major power generation equipment, utilizing the dynamic positioning 3 (DP3) heavy-lift and pipelay vessel SapuraKencana 3500, in the Marine Regions, Bay of Campeche, Gulf of Mexico for Pemex Exploracion y Produccion (Pemex).

Over in Indonesia, SapuraKencana TL Offshore Sdn Bhd (SKTLO), previously known as TL Offshore Sdn Bhd), in consortium with PT Encona Inti Industri of Indonesia, has bagged the $97.5 million contract for work on offshore and onshore pipeline installation for the construction of Kalija 1 Natural Gas Transmission Pipeline of Kepodang – Tambak Lorok Segment by PT PGAS Solution.

The Indonesian contract, which involved the transportation and installation of a 124-mile (200 kilometers) long 14-inch gas pipeline from Kepodang field offshore to the Onshore Receiving Facility. The work will be performed in the Muriah Production Sharing Contract (PSC), Central Java, Indonesia.

Further north in Southeast Asia, SKTLO has been awarded a contract to install nearshore and offshore pipeline for Phase 1 of the Thai Binh – Ham Rong Gas Distribution & Gathering System Project in Block 102-106, located offshore Thai Binh Province in northern Vietnam for PTSC Offshore Services Joint Stock Company (PTSC Offshore Services).

SKTLO also clinched an installation contract for H5-WHP Topside and Pipelines for Te Giac Trang Field Development Project, which is located in Block 16-1, offshore Vietnam from PTSC Offshore Services Joint Stock Company. The final contract in Vietnam covered the installation of offshore facilities for Thai Binh Development Project in Blocks 102 & 106 by PTSC Offshore Services.

Oil Down Over 3% On Dollar Rally, Ample Supply Worry

NEW YORK, May 19 (Reuters) – Oil prices fell more than 3 percent on Tuesday, with U.S. crude extending losses for a fifth straight day, as the dollar rallied amid evidence that the United States and top oil exporter Saudi Arabia were pumping more than the world needed.

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North Sea Brent and U.S. crude settled down more than $2 a barrel each as the dollar hit two-week highs against a basket of currencies, making crude and other dollar-denominated commodities less affordable for holders of currencies such as the euro.

The sell-off in oil came ahead of Tuesday’s end-of-business expiry in U.S. crude’s front-month contract, which often results in unusually heavier market activity. Volume in U.S. crude’s July contract, the new front-month from Wednesday, was markedly higher than the expiring June contract, Reuters data showed.

The market also tumbled despite an industry report scheduled later in the day that was expected to cite a third straight weekly decline in U.S. crude stockpiles.

The American Petroleum Institute (API) report is due at 4:30 p.m. EDT (2030 GMT), ahead of official inventory numbers on Wednesday from the U.S. government’s Energy Information Administration.

“There is certainly a degree of profit-taking going on today before the expiry of the June contract, but it’s primarily driven by the dollar’s strength,” said Sal Umek of the Energy Management Institute in New York.

“Regardless what the API and EIA say, we are nearly 90 million barrels higher in U.S. crude, and about 14 million higher in gasoline, from a year ago, putting us well above the five-year average,” Umek said.

Azerbaijan Lines 20,000 PSI Drill Bit to Test Caspian New Frontiers

Caspian Drilling Co. (CDC), the drilling unit of the State Oil Company of the Azerbaijan Republic (SOCAR), looks set to stand among the world’s first drilling contractors to perform 20,000 (20K) pound per square inch (psi) blow-out-preventer (BOP) drilling operations, with its new generation KFELS DSS38M semisubmersible rig upon delivery in late 2016.

Keppel FELS Ltd. and its subsidiaries, Caspian Rigbuilders and Caspian Shipyard Co. Ltd. (CSC), were commissioned in 2013 by SOCAR’s subsidiary CDC to build the DSS38M semisub, which was priced at $800 million including owner furnished equipment.

With about 70 percent of the blocks assembled and the lower hull erected by the end of March, construction of the semisub now taking place at various locations before its final integration at CSC is progressing well towards the scheduled delivery in December 2016.

The DSS38M semisub design developed by Keppel Deepwater Technology Group and Gusto-Marine Structure Consultants allows for the installation of a future 20K psi BOP system to be installed with “minimal works” required, according to a CDC spokesperson.

“Having one of the first semisub that has the capability to be equipped with a 20K psi BOP allows us to be in a position to support the future drilling operations planned for the Caspian Sea,” the spokesperson said.

CDC has not officially commented on the intended destination field for 20K psi drilling in the Caspian Sea.

Slow Oil Price Recovery Heightens Upstream Default Risk

The default rate among the exploration and production (E&P) sector’s weaker companies is expected to more than double during the next 12 months, according to a new report from Moody’s.

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Energy prices slow recovery is putting those companies at greater risk, David Keisman, Moody’s senior vice president said in a statement. The credit agency estimates the one-year portfolio average default rate will increase from 2.7 percent to 7.4 percent.

“The companies on the lower end of spec-grade ratings are the ones that should be most worried,” he said.

At the beginning of May, 15 percent of all oil and gas companies had a credit rating of B3 or lower. That’s the largest share of any U.S. sectors in the ratings. Moody’s focused on the 48 struggling E&P companies with a rating of B2 or lower that could face default.

“Given the relatively small size of the portfolio, there is a risk the forecast could worsen,” the report said.

Driven by the collapse in oil prices, Moody’s has forecasted that fundamental business conditions for the E&P and oilfield services sectors would be negative through the first half of 2016. After next year, Moody’s expects a gradual recovery in oil prices to stabilize in the $70 to $75 per barrel range.

But there is an upside. Moody’s said the negative credit migration has been concentrated in lower-grade group; higher spec-grade ratings companies have managed to navigate the troubled market, generally by cutting capital expenditures, running only the highest quality rigs and selling lesser assets.

South Sudan Rebels Say Capture Oil Refinery, Tell Firms to Leave

JUBA, May 19 (Reuters) – South Sudanese rebels said on Tuesday they had captured a refinery near a major oilfield in Upper Nile State, where fighting has flared up in recent days, and told firms there to shut down operations and evacuate their staff.

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No government official was immediately available to comment.

SPLA-in-Opposition spokesman, James Gatdet Dak, said that the rebels were still fighting government troops in the area that is home to South Sudan’s biggest oilfield – Paloch.

“This is a matter of urgency! This is due to the ongoing clashes between our forces and pro-Salva Kiir troops near the oilfields,” he said, referring to the country’s president.

Oil firms in South Sudan include China National Petroleum Corp, India’s ONGC Videsh and Malaysia’s Petronas.

Forces loyal to Kiir and rebels allied with his former deputy, Riek Machar, have been fighting for nearly 18 months in the world’s newest state, which seceded from Sudan in 2011.

Several ceasefires have been reached and broken and each side accuses the other of violating one announced in February.

“In response to the government’s full-scale offensive on our positions in the three states of greater Upper Nile region, we have decided to take control of the oilfields and deny Salva Kiir from using the oil revenues to perpetuate the war,” Gatdet Dak said in a statement.

He said the rebels had asked the companies to close the oilfields safely to avoid any damage to the facilities and the environment. The refinery site is some 10 km (6 miles) from the main Paloch oilfields.

Thousands have fled their homes in recent days because of the fighting and some 650,000 civilians are without access to aid in Upper Nile State and neighbouring Unity State, according the U.N. Humanitarian Coordinator for South Sudan.

Gatdet Dak said that in fighting on Tuesday, the rebels had seized artillery from government troops.

(Writing by George Obulutsa; Editing by Louise Ireland)

BP Settles Oil Spill-Related Claims With Halliburton, Transocean

May 20 (Reuters) – BP Plc has settled with oilfield services provider Halliburton Co and contract driller Transocean Ltd cross claims related to the 2010 Gulf of Mexico oil spill, the worst offshore disaster in U.S. history.

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BP still faces a potential fine of up to $13.7 billion under the U.S. Clean Water Act.

Transocean, which owned the Deepwater Horizon rig, had settled its Clean Water Act liability for $1 billion. The U.S. government never sued Halliburton under the Act, one person familiar with the case said.

“We have now settled all matters relating to the accident with both our partners in the well and our contractors,” BP spokesman Geoff Morrell said in an email.

Transocean said BP would pay the company $125 million in compensation for legal fees it incurred, adding the companies will mutually release all claims against each other.

The company added BP will also discontinue its attempts to recover as an “additional insured” under Transocean’s liability policies that will accelerate the company’s recovery of about $538 million in insurance claims.

Transocean also said it would pay about $212 million to a fund set up to pay out claims to people and businesses harmed by the spill, subject to the approval by U.S. District Court for the Eastern District of Louisiana.

“We applaud Transocean for adding to the settlement funds established in the Halliburton settlement to help compensate people and businesses for their losses,” said co-lead plaintiffs’ attorneys, Stephen Herman and James Roy.

Transocean said it intends to make the payments using cash on hand.

In September, a U.S. judge ruled that BP was mostly at fault and that Transocean and Halliburton were not as much to blame.

Halliburton, which did the cementing work for BP’s well, had earlier blamed BP’s decision to use only six centralizers for the blowout that spilled millions of barrels of oil for 87 days.

Halliburton said in September that it reached a $1.1 billion settlement for a majority of claims related to its role in the oil spill.

London-based BP has already taken $43.8 billion in pretax charges for clean-up and other costs.

(Reporting by Anannya Pramanick and Tanvi Mehta in Bengaluru and Terry Wade in Houston; Editing by Don Sebastian and Lisa Shumaker)

Oil Rises On US Crude Drawdown But Oversupply Still Weighs

NEW YORK, May 20 (Reuters) – Oil prices rebounded on Wednesday, with U.S. crude snapping a five-day decline, after another weekly inventory draw but gains were still limited by a huge supply overhang and concerns about a stronger dollar.

U.S. crude stocks fell nearly 2.7 million barrels last week, down for a third consecutive week, as refineries hiked output, the government-run Energy Information Administration (EIA) said. Gasoline and distillate inventories also declined.

While the crude draw was nearly triple that estimated by analysts in a Reuters survey, it was only about half of the 5.2 million-barrel drop reported by industry group American Petroleum Institute, disappointing some market bulls.

“It’s a fairly neutral report at the best as the weekly change is mildly bullish within a bearish overall stock situation,” said James L. Williams, energy economist at WTRG Economics in London, Arkansas.

He noted that stockpiles were in “excellent shape” with crude inventories about 90 million barrels above year-ago levels, while refinery utilization rates were only a little higher at above 92 percent.

The dollar rose to a two-week high, before the release of the Federal Reserve’s April meeting minutes that showed Fed officials thinking it would be premature to raise interest rates by June. A stronger dollar makes commodities priced in the greenback, including oil, less affordable for holders of other currencies.

U.S. crude settled up 99 cents, or 1.7 percent, at $58.98 a barrel.

Russell: Shell-BG Deal May Be End Point Rather Than Harbinger

KUALA LUMPUR, May 19 (Reuters) – There is a widespread assumption that weak commodity prices are likely to spark a wave of merger and acquisition activity as stronger companies seek to buy assets on the cheap.

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The $70 billion buyout of BG Plc by larger rival Royal Dutch Shell is generally viewed by investors and analysts as the first big deal in a likely series of major mergers and acquisitions in the resource sector.

After all, the last time commodity prices fell sharply, around 15 years ago, there was a rash of mega-mergers, such as Exxon with Mobil and Conoco with Phillips in the energy space, and BHP with Billiton and Rio Tinto’s purchase of Alcan.

Notwithstanding the Shell-BG deal, it appears executives may be more cautious this time around, eschewing mega-mergers in favour of smaller acquisitions and in-house projects to add shareholder value.

Ryan Lance, the chief executive of ConocoPhillips, was adamant that he didn’t expect a “big M&A wave any time soon”.

Speaking at the Asia Oil & Gas Conference in Kuala Lumpur on Monday, Lance said the rationale that drove the previous round of major deals doesn’t quite apply any more.

Why would a giant international energy or resource company want to go down the M&A route currently?