LatAmNRG Prospector: Week 12 2019

LATAMNRG PROSPECTOR VOL 12 2019 Germany’s Wintershall Highlights Activities In Brazil And Argentina

Mexico To Invite Four Firms To Bid On New Pemex Oil Refinery

Chile To Launch First Thermosolar Plant In Latin America

Argentina’s Mendoza Province To Launch Oil Tender In May

Petrobras Announces Conclusion Of $3 Billion Offering In Global Notes

Petrobras Starts Production Of P-77 In The Santos Basin Pre-salt

Petropar Takes Part in #BasuraChallenge In Villa Elisa

ENERGY ANALYTICS INSTITUTE | LATAMNRG PROSPECTOR | HOUSTON • CARACAS

Energy Analytics Institute’s weekly LatAmNRG prospector and select highlights from the week. Read the full stories online 24/7 at www.energy-analytics-institute.org

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ARGENTINA Germany’s Wintershall Highlights Activities In Brazil And Argentina (Wintershall, 21.Mar.2019) — Wintershall continued its growth course in Latin America in 2018, the company’s CEO Mario Mehren said during an nnual press conference in Kassel. During the meeting, the executive highlighted two countries in the region where the company is active: Brazil and Argentina.

Brazil

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A total of seven exploration licenses have been acquired in Brazil. Wintershall is the operator for four of these licenses. The licenses are located off the north and southeast coasts of Brazil.

Since December 2018, initial 3D seismic measurements have been conducted in three blocks in the Potiguar basin off the northeast coast of the country where Wintershall is the operator. Once the survey is completed the data will then be processed and evaluated. The first results are expected by mid-2020.

“The coast of Brazil is considered one of the most highly promising oil regions in the world. It is part of our growth course that we are also active in new regions, and Brazil offers great potential,” said Mehren. “We want to build a broad and diversified portfolio in Brazil.”

Argentina Wintershall has been active in Latin America for several decades. The company has a long tradition in Argentina where it proudly celebrated a major anniversary in 2018: Wintershall has been exploring and producing hydrocarbons here with great success for 40 years and is the country’s fourth largest gas producer. Today, Wintershall is involved in a total of 15 onshore and offshore fields. The company is the operator in three of these fields.

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Wintershall intends to further expand its technology base in Argentina and is involved in unconventional oil and gas production in the promising Vaca Muerta shale formation.

In 2018, two horizontal wells were drilled in Wintershall’s operated Aguada Federal block to further explore the shale rock in the formation.

“We’ve been contributing to the oil and gas industry in Argentina for decades. We have the technology and expertise to drill wells under demanding geological conditions, and with the highest environmental and safety standards,” Mehren explained.

Wintershall took over a further operatorship in 2018 with the CN-V block in Mendoza Province. Two exploratory wells have been drilled here, one of which has discovered hydrocarbons. The results of the drilling are now being evaluated.

Argentina’s Mendoza Province To Launch Oil Tender In May (Energy Analytics Institute, Aaron Simonsky, 19.Mar.2019) — Argentina’s Mendoza province plans to launch a tender in May for at least five oil areas with aim to attract investments of $70 million to boost falling production, which last year registered the worst decline in the past decade.

The province, which attracted investments of around $110 million in 2018, plans to announce winning bid details in September, reported online media Econojournal on March 19.

ARGENTINA U.S.’ Rick Perry To Travel To Argentina With Mission Of Oil Fields Services Cos. (Energy Analytics Institute, Aaron Simonsky, 19.Mar.2019) — U.S. Energy Secretariat Rick Perry will soon travel to Argentina with a delegation of oil field service companies seeking business opportunities in the Vaca Muerta shale play, announced Argentina’s Energy Secretariat on March 19 in an official statement.

Argentina To Start Exporting Light Oil By Year-End 2019 (Energy Analytics Institute, Aaron Simonsky, 19.Mar.2019) — Argentina’s Energy Secretariat Gustavo Lopetegui said the country would commence exports of light petroleum by year-end 2019, the executive said in an official statement.

The fields to be offered include Sierra Azul Sur, Cerro Chaparro, Boleadero, Atuel Norte and Loma el Divisadero, Econojournal said, citing details from provincial hydrocarbons director Santiago Fernandez, who didn’t rule out the possibility of adding other areas to the auction.

An estimated 85% of Mendoza’s oil production is attributed to state oil company YPF. This year’s tender aims to attract more players and reverse the province’s declining production trend over the short and medium terms, Fernandez said. The province is also considering reducing royalties to boost investments.

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“We have no problems reducing oil royalties as long as that brings more investments and more work in the sector,” Fernandez said.

Argentine Presidential Election Preview (IHS Markit, Carla Selman, 19.Mar.2019) — In a statement on 18 March, the International Monetary Fund (IMF) allowed Argentina to allocate additional funds to social programs in the framework of the USD57 billion stand-by arrangement (SBA), with the next tranche (USD10.87 billion) to be disbursed over the coming weeks.

BRAZIL Petrobras Hedges Oil Prices

IEEFA Report: Vaca Muerta Patagonia (IEEFA, 21.Mar.2019) — The Vaca Muerta oil and gas project, which promises to double oil and gas production over the next six years in Argentina, is facing such strong headwinds from current fiscal, market, political and environmental forces that “the plan is likely to fail,” according to a report released today by the Institute for Energy Economics and Financial Analysis (IEEFA), a global financial research group.

“The Vaca Muerta extraction plan promises subsidies that are unaffordable, relies on a financially weak Argentine business team and hopes to attract global oil and gas companies when there are much better opportunities elsewhere,” said IEEFA finance director Tom Sanzillo who co-authored the report. “Over the last six years, foreign investors have signed agreements with the biggest names in the oil and gas business, but progress is slow, commitments are thin and future plans unrealistic.”

(Petrobras, 22.Mar.2019) — Petrobras has implemented a hedge strategy to protect part of its oil production expected for the year of 2019. Put options have been acquired with exercise price referenced to the average of Brent oil prices, from April to the end of 2019 at US$60/barrel. The total price is US$320 million and the options will expire on 12/31/2019.

The strategy aims to hedge the export operations planned for the period, partially protecting the company's operating cash flow for 2019, ensuring a minimum level of realization price for the volume. Thus, there is protection against the scenarios of low prices, but the fruition of higher prices in Brent’s upside scenarios remains.

This operation is in line with the company’s Resiliency Plan.

Petrobras Starts Production Of P-77 In The Santos Basin Presalt (Petrobras, 19.Mar.2019) — Petrobras reports that it has started today the production of oil and natural gas of P77, the fourth platform to be put into production in the Búzios field.

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Búzios field, in the pre-salt of the Santos Basin, was discovered in 2010 and is the main field under the Transfer of Rights Agreement. The field started production in April 2018 and currently has 4 platforms in production.

PetroReconcavo In Talks For Petrobras Onshore Fields: Sources

In line with Petrobras’ Strategic Plan, P-77 is the third platform to be put into production in 2019, out of four platforms planned for production this year.

(Reuters, Gram Slattery, 19.Mar.2019) — Brazilian independent oil company PetroReconcavo has entered direct negotiations with state-run Petroleo Brasileiro SA to purchase a cluster of 34 oilfields in the nation’s northeast, two oil industry sources told Reuters.

With a daily capacity to process up to 150,000 barrels of oil and compress up to 6 million cubic meters of natural gas, P-77 will contribute to the growth of Petrobras' production in 2019.

The FPSO (floating unit for production, storage and offloading of oil and gas) is located approximately 200 km off the Rio de Janeiro’s state coast, at a water depth of 1,980 meters. The project provides for its interconnection to nine production wells and eight injection wells.

Drainage of oil production shall be made through lifting vessels, while the production of gas shall be drained by the routes of the pre-salt gas pipelines.

Petrobras, as the state-owned company is known, entered talks with the unlisted Salvador, Brazil-based company after upstart 3R Petroleum failed to receive financing for its $453 million purchase of the fields, which was announced in late November, said the sources, who requested anonymity because they were not authorized to discuss internal matters.

Petrobras Announces Conclusion Of $3 Billion Offering In Global Notes (Petrobras, 19.Mar.2019) — Petrobras announces that today it concluded the offering of securities in the international capital market (Global Notes) in the amount of US$ 3 billion, with US$ 750 million from the reopening of the 2029 notes and US$ 2,25 billion from the issuance of the 2049 new notes, by means of its wholly-owned subsidiary Petrobras Global Finance B.V. (“PGF”). Pricing of the notes occurred on March 12, 2019, as disclosed to the market.

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The terms are as follows: The issuance was three times oversubscribed, with 467 orders from 305 investors from the United States, Europe and Latin America, which allowed the 30-year security to be priced at the lowest yield for this tenor since 2013.

Petrobras Updates On CARF Decision Related To Tax Collection On Remittances (Petrobras, 20.Mar.2019) — Petrobras informs that the Administrative Board of Tax Appeals (CARF) pronounced, on this date, by a casting vote, an unfavorable decision regarding fiscal administrative proceeding that addresses the collection of CIDE (base-year 2009) on remittances abroad for the payment of vessel charters, in the approximate amount of R$ 2.2 billion.

Petrobras awaits the notification of the decision in the administrative sphere and will appeal to the Judiciary. The company understands that the judgment does not change the classification of expectation of possible loss.

The information regarding this process is presented in the financial statements (ITR) of 2018, in explanatory note 31.3 - Contigent liabilities.

Petrobras Updates On Mothballing Of Fertilizer Plant In Bahia (Petrobras, 21.Mar.2019) — Petrobras, following up on the Press Release of 02/01/2019, informs that it obtained a favorable decision, reversing the injunction that suspended the mothballing of the fertilizer plant in Bahia (Fafen-BA). In this way, the company will follow the procedures for mothballing the unit.

The bidding process for the leasing of this plant, as well as the unit in Sergipe (Fafen-SE) is in progress.

Petrobras BOD Elects Chief Refining and Natural Gas Executive Officer (Petrobras, 20.Mar.2019) — Petrobras informs that its Board of Directors, at a meeting held today, elected Mrs. Anelise Quintão Lara for the position of Chief Refining and Natural Gas Executive Officer and approved the reappointment of the CEO Roberto Castello Branco and the other Executive Officers of the company for a term of two years, with the exception of the Chief Financial and Investor Relations Officer, who shall remain in his current position until his successor takes office.

Anelise Lara holds a degree in chemical engineering from the Federal University of Minas Gerais, with a master’s degree in petroleum engineering from the Federal University of Ouro Preto and a PhD. in Sciences de la Terre by the Université Pierre et Marie Curie, in France. She holds an MBA in executive management from IBMEC and in advanced business management by COPPEAD. She has been with Petrobras for more than 30 years and has held several management positions in the areas of research, reservoir engineering and pre-salt project development. Since May 2016 she has held the position of Executive Manager of Acquisitions & Divestments. She chaired the Brazil Section of the Society of Petroleum Engineers (SPE), was a member of the Board of SPE International until 2017, and is currently a member of the IBP Diversity Committee, having participated in its creation in 2018.

Petrobras Announces Expiration and Expiration Date Results Of Offer (Petrobras, 19.Mar.2019) — Petrobras announced the expiration and expiration date results of the previously announced offer to purchase (the “Offer”) by its whollyowned subsidiary Petrobras Global Finance B.V. (“PGF”), of any and all of its outstanding notes set forth in the table below (the “Notes”).

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country, but that in the case of the pre-salt, the definition of the new gas regulatory framework is crucial.

CHILE The Offer was made pursuant to the terms and conditions set forth in the offer to purchase dated March 12, 2019 (the “Offer to Purchase” and, together with the accompanying notice of guaranteed delivery and related letter of transmittal, the “Offer Documents”).

The Offer expired at 5:00 p.m., New York City time, on March 18, 2019 (the “Expiration Date”). The settlement date with respect to the Offer will occur promptly following the Expiration Date and is expected to occur on March 21, 2019 (the “Settlement Date”).

Brazil To Present Plan To Overhaul Natural Gas Sector By June: Minister (Reuters, Jake Spring, 21.Mar.2019) — Brazil Mines and Energy Minister Bento Albuquerque said on Thursday that the government will present a program for overhauling the natural gas sector by June, a move aimed at lowering energy costs in the country.

Equinor Brasil President Wants An Open Gas Market According To Quest Offshore (World Oil, 20.Mar.2019) — Margaret Øvrum recalls that investment depends on viability, “With a monopoly, you do not get the right price.”

Chile To Launch First Thermosolar Plant In Latin America (Energy Analytics Institute, Aaron Simonsky, 17.Mar.2019) — Chile plans to launch the first thermosolar plant in Latin America. The project will be the first of its kind on the continent and provide energy to some 250,000 homes, reported online media Emol.

With this project, Chile aims to avoid the emission of 643,000 tons of CO2 per year and aims to have 100% clean energy generation by 2040.

COLOMBIA Ecopetrol Reports Attack Along OTA Pipeline In Nariño (Energy Analytics Institute, Piero Stewart, 23.Mar.2019) — Colombia’s state oil company Ecopetrol announced that the Trasandino Pipeline, or OTA by its Spanish acronym, was attacked on March 22 along a portion of the installation located in Ricaurte, Nariño, the company said in an official statement.

As a result of the attack, oil was spilled into the Río Güiza.

The company has dispatched personnel to the area to conduct contingency operations, but has yet to report the magnitude of the attack.

Norwegian Equinor (formerly Statoil), the second largest oil and natural gas producer in the country, behind only Petrobras, is waiting for a new regulation of the gas market to expand its investments in Brazil. The president of the company, Margareth Øvrum, said that Equinor wants to participate in the upcoming oil auctions in the

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“Cuba’s demand for oil is about 130,000 barrels per day, and Cuba produces about 50,000 barrels per day, which means a deficit of about 80,000 barrels per day,” said Jorge Piñón, director of the Latin American Energy Program at the University of Texas at Austin.

MEXICO Pemex Seeks Average Output Of 2.480 MMb/d In 2024

Colombia Shelves Conoco, Canacol Requests For Fracking Licenses – Reuters (Seeking Alpha, Carl Surran, 20.Mar.2019) — Colombia’s government has nixed two environmental licensing requests made by ConocoPhillips and Canacol Energy for fracking projects in northern Cesar province, Reuters reports. The companies reportedly failed to meet minimum conditions for the Piranga project, while the Plata project raised possible water protection concerns.

(Energy Analytics Institute, Jared Yamin, 18.Mar.2019) — Pemex Director Octavio Romero Oropeza announced that the company will target average crude oil production of 2.480 million barrels per day (MMb/d) in 2024, the executive said in an official statement. Additionally, Romero said the company will target an exit production rate of 2.650 MMb/d for 2024.

Mexico To Invite Four Firms To Bid On New Pemex Oil Refinery

CUBA

(Reuters, 18.Mar.2019) — The Mexican government will invite four companies to bid in a restricted tender to build the new Dos Bocas refinery for state oil company Pemex, Energy Minister Rocio Nahle said at a news conference on Monday. Dos Bocas would be Pemex’s seventh domestic refinery and is intended to help wean Mexico off growing fuel imports, a major campaign promise of President Andres Manuel Lopez Obrador, who took office in December.

Cuba Would Need To Spend $2 Bln /Year For Oil If Venezuela Stops Deliveries

Mexico’s AMLO Takes Nationalist Tone On Energy During First 100 Days

(Miami Herald, Nora Gamez Torres, 22.Mar.2019) — Cuba would have to spend nearly $2 billion a year to meet its domestic oil needs if Venezuela’s National Assembly and interim president Juan Guaidó manage to stop deliveries to the Caribbean island.

(Houston Chronicle, Sergio Chapa, 21.Mar.2019) — Canceled energy auctions, halted pipeline projects, a ban on hydraulic fracturing, a showdown with fuel thieves, political pressure on regulators to resign and plans to build an $8 billion refinery.

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PARAGUAY

Petroperu said it plans to import fuel in that period to ensure demand is met in the Andean country of about 30 million people. It did not specify what kind of fuel it would import.

Paraguay’s Petropar Takes Part in #BasuraChallenge In Villa Elisa

VENEZUELA

(Petropar, 22.Mar.2019) — Paraguay’s state oil company Petropar announced its participation in the #BasuraChallenge or #TrashChallenge in Arroyo Fortín (Villa Elisa).

Venezuelan Exports Through The Eyes Of OPEC And Russia, Everything Is Fine (IHS Markit, Liquid Bulk Principal Analyst, Maritime & Trade, Fotios Katsoulas, 20.Mar.2019) — With most experts anticipating Venezuela’s output to further decline over the next couple of weeks, PDVSA, the country's state-run oil produce, just announced the addition of a new subsidiary office in Moscow by next month. The country’s oil minister Manuel Quevedo, who participated in the OPEC+ meeting in Baku, noted that the country managed to increase its output to 1.432 million bpd in February.

Reliance Sends Fuel From India, Europe To Venezuela To Sidestep U.S. Sanctions

PERU Peru To Shutter Talara Oil Refinery For A Year In November: Petroperu

(Reuters, Nidhi Verma and Marianna Parraga, 21.Mar.2019) — India’s Reliance Industries is selling fuels to Venezuela from India and Europe to sidestep sanctions that bar U.S.-based companies from dealing with staterun PDVSA, according to trading sources and Refinitiv Eikon data.

Reliance had been supplying alkylate, diluent naphtha and other fuel to Venezuela through its U.S.-based subsidiary before Washington in late January imposed sanctions aimed at curbing the OPEC member's oil exports and ousting Socialist President Nicolas Maduro.

(Reuters, 19.Mar.2019) — Peru’s state-owned energy company Petroperu will halt operations at its flagship oil refinery Talara for about a year starting in November to complete a $5 billion expansion project, the company said on Tuesday.

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