LatAm NRG Brief - May 2017 (Wk 20)

LATAM NRG BRIEF

16 May 2017

Week 20

VENEZUELA TRINIDAD OIL REACHES VENEZUELAN BEACHES PDVSA has intensified contingency measures to counter the ill effects of an oil spill that occurred last week in neighboring Trinidad and Tobago.

Oil from the spill has reached the Venezuelan eastern coast including the Bay of Morro de Puerto Santo and Cipara beach in the Arismendi municipal in Sucre state as well as other coastal areas such as La Caracola in Valdez beach, Punta Ballena and El Ángel, all located in Nueva Esparta state, announced PDVSA in an official statement.

PDVSA’s Zone 5 Contingency Plan was activated on 25.Apr.2017 to counter the leakage of fuel oil from Petrotrin’s Pointe-à-Pierre Refinery located in Trinidad.

PDVSA personnel continue to conduct maritime and aerial inspections along the areas affected by the spill and primarily of the Paria Peninsula in Sucre state and the southern area of Nueva Esparta state.

PDVSA did not provide estimates as to how much oil may have reached Venezuelan coastal regions nor did it provide details of the potential

environmental impact of the leakage.

[Piero Stewart, Energy Analytics Institute, 13.May.2017]

VZLA OIL OUTPUT (MMb/d)

PDVSA, CAMIMPEG-SPS INK MARACAIBO DEAL

DC

2ndS

2.194 2.235 2.248

1.956 1.982 1.998

2.244 2.265 2.326

1.996 2.057 2.103

2.373 2.654

2.159 2.375

Monthly Apr.17 Mar.17 Feb.17 Quarterly Photo source: PDVSA PDVSA in alliance with Camimpeg (Compañía Anónima Militar de Industrias Mineras, Petrolíferas y Gas) and Southern Procurement Services (SPS) plan to boost production in Lake Maracaibo by more than 30,000 b/d with an investment of $400 mln, reported PDVSA in an official statement.

“There are more than 500 MMbbls to be developed at Urdaneta Field and we’re going to take it to its maximum production,” said PDVSA President Eulogio Del Pino during a signing ceremony at the Alí Primera Dock, located in La Cañada de Urdaneta municipality in Zulia state.

1Q:17 4Q:16 3Q:16 Yearly 2016 2015

Source: OPEC Secretariat Note: DC = Direct Communications 2ndS = Secondary Sources

VZLA OIL PRICE Weekly 5-12.May 1-5.May

$40.72 $41.27

Monthly May.2017 Apr.2017 Mar.2017 Feb.2017 Jan.2017

$41.00 $44.08 $42.95 $46.37 $45.12

Quarterly 1Q:17

$44.76

4Q:16 3Q:16 2Q:16 1Q:16

$41.98 $37.84 $36.06 $24.71

Del Pino said an unconventional financial model was being applied, for the first time in lake operations, through which “we pay upon services rendered, in this case, upon incremental barrel produced.” The model has been implemented in other areas, and will be replicated in other Lake Maracaibo fields, he said.

The companies seek to increase production through the drainage of recoverable hydrocarbon reserves in the reservoirs, according to PDVSA. The alliance between CamimpegSPS and PDVSA calls for development of the Urdaneta Field located in Lake Maracaibo, as well as work at the Alí Primera Dock.

Work activities include repairing boat facilities and installations, field optimization, safety reinforcement, drilling wells and recovery activities.

[Piero Stewart, Energy Analytics Institute, 7.May.2017]

Yearly 2017 2016 2015

$44.27 $35.15 $44.65

INDOVENEZOLANA OPENS INJECTION PLANT

Source: Venezuela Oil Ministry Note: All figures preliminary.

OIL PRICE SENSITIVITY With each $1 dollar drop/rise in the price of oil, Venezuela loses/gains estimated revenues of $700 mln a year, PDVSA estimates.

The project aims to recover production levels and increase it over the short term to 23,000 b/d from 18,500 b/d, PDVSA said. The medium-term goal is to achieve average production of 22,000 b/d which partners PDVSA and Indian company Oil and Natural Gas Corporation Videsh (ONGC) aim to maintain over a 10-yr period.

Implementation of this secondary recovery method is expected to boost the current recovery factor to 15% from 9%; thus, recovering an additional 80 MMbbls, according to PDVSA. [Piero Stewart, Energy Analytics Institute, 7.May.2017]

SIDOR WARNS OF THEFT OF COPPER, MINERALS The president of Siderúrgica del Orinoco (Sidor), Justo Noguera Pietri, announced the mineral sector in Guayana was under threat from persons stealing the materials, principally copper, to later sell them in the black market, reported the daily newspaper El Universal.

[Piero Stewart, Energy Analytics Institute, 15.May.2017]

VENEZUELA NOT SELLING GASOLINE IN PESOS Photo source: PDVSA Petrolera Indovenezolana opened a Saltwater Injection Plant in Zuata North field, Anzoátegui state to boost production and prevent reservoir declination.

The field, located in Hugo Chávez Orinoco Oil Belt’s Junín Division, utilized Venezuelan technology during the early phase of the project, reported PDVSA in an official statement.

Venezuela expected to receive between $120,000 and $150,000 per day from the sale of its gasoline along the Colombian border, reported the daily El Nacional citing Economist Aldo Contreras.

However, since initiating the process on 2.Jan.2017 to commercialize its gasoline along the border in Colombian pesos, the Venezuelan government has yet to register a sale in pesos.

The sale of Venezuelan gasoline along the Colombo-Venezuelan border was envisioned by the government of President Nicolas Maduro to cut down on contraband and boost foreign export revenues.

[Piero Stewart, Energy Analytics Institute, 15.May.2017]

February of 2014, the employees have accumulated 2,965,710 labor hours, announced PDVSA. [Piero Stewart, Energy Analytics Institute, 8.May.2017]

PDVSA’S BARINAS PLANT READY IN JUNE 2017

PDVSA participated in the Offshore Technology Conference held in Houston, Texas from 1-4.May.2017.

PDVSA Gas Vice President César Triana headed a sizable contingent, and presented the company’s Business Plan 2016-2026 to conference participants.

[Energy Analytics Institute, 5.May.2017]

PDVSA announced construction of a 100-MW electric generation plant located in Barinas state had reached the 98% mark in terms of completion. Work on the plant is estimate for completion this June 2017, PDVSA announced in an official statement.

New infrastructure at the plant located in the Santa Ines Agroindustral Complex (Cominsi by its Spanish acronym) will allow the company to satisfy the energy needs of the petroleum sector and population in Barinas.

“The energy will supply PDVSA’s operating system with just 15-MW while the remaining 85% will be destined for the Barinas electric network,” reported PDVSA citing the company’s Planning and Engineering Vice President Marianny Gómez.

Construction of the dual fuel plant commenced 34 months ago.

Financing to the tune of $300 mln was procured through the ChinaVenezuela Fund, announced PDVSA. The pre-commissioned and commissioned testing by PDVSA and its principal contractor, China’s Sinohydro, has advanced without problems, reported PDVSA. The project, during the construction phase, generated a maximum of 893 direct employees and approximately 2,679 indirect employees. Since construction commenced in

PDVSA PARTICIPATES IN OTC 2017 IN HOUSTON

VENEZUELA EYES 2018 PRESIDENTIAL ELECTIONS

RECENT PUBLICATIONS 1Q:17 NRG Prospector

4Q:16 NRG Prospector

Photo source: PDVSA Venezuelan President Nicolas Maduro said during a speech televised on national TV that “rain, thunder or lightning, in Venezuela there would be presidential elections in 2018 because the revolution governed and not Temer.”

[Piero Stewart, Energy Analytics Institute, 13.May.2017]

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VZLA OIL RESERVES (Bln Bbls) - 2015 World Ranking 1 2 3 4 5 6 7 8 9 10

Venezuela Saudi Arabia Canada Iran Iraq Russia Kuwait UAE USA Libya

300.9 266.6 172.2 157.8 143.1 102.4 101.5 97.8 55.0 48.4

Note: PDVSA reported YE:15 oil reserves of 300.878 bln bbls in its 2015 annual report.

Source: BP Statistical Review of Energy, June 2016. Data at YE:15.

VZLA GAS RESERVES (Tcf) - 2015 World Ranking 1 2 3 4 5 6 7 8 9 10

Iran 1,201.4 Russia 1,139.6 Qatar 866.2 Turkmenistan 617.3 USA 368.7 Saudi Arabia 294.0 UAE 215.1 Venezuela 198.4 Nigeria 180.5 Algeria 159.1

Source: BP Statistical Review of Energy, June 2016. Data at YE:15.

Note: PDVSA reported YE:15 gas reserves of 201.349 Tcf in its 2015 annual report.

LATAM BRIEFS EXXON, PETROBRAS TALK PARTNERSHIPS Exxon Mobil Corp. and Petrobras have held talks on a strategic partnership that could involve multiple assets in Brazil and overseas in different segments of the industry, like the $2.2 bln deal signed with Total SA in Dec.2016, said people familiar with the conversations. [Bloomberg]

BRAZIL JUDGE ENDS BR DISTRIBUIDORA CASE Petroleo Brasileiro SA said a federal court had thrown out a lawsuit seeking to block its divestment of distribution arm BR Distribuidora.

[Reuters]

SHARP DROP IN CUBAN REFINED OIL EXPORTS Cuban exports of refined oil products fell about 97% between 2013 and 2016, according to a United Nations trade report, reflecting falling supplies from its political ally Venezuela. [Reuters]

IDB TO FINANCE WASTE PROJECTS IN JAMAICA The Inter-American Development Bank said it would consider financing projects for waste to energy in Jamaica, but cautioned the cost of doing so would have to be around US$0.12/kwh for it to make sense to consumers. [Jamaica Gleaner]

TURBINE OIL SEEPS INTO MEXICAN LAND Wind turbines were planted along a strip of Mexico’s southern coast to make the country’s power industry cleaner. Now they’re spilling oil.

[Bloomberg]

MEXICAN FUEL IMPORTERS WEIGH RISK Foreign companies looking to supply gasoline to Mexico are taking a hard look at planned investments after a series of fuel thefts escalated into a bloodbath recently in the state of Puebla. [Bloomberg]

PETROTRIN SAYS OIL OUTPUT MUST INCREASE Despite fluctuating oil prices, an aging infrastructure and a debt burden associated with ongoing upgrades at its refinery, Petrotrin president Fitzroy Harewood has identified increased local crude production as the key to the co.’s success. [Trinidad and Tobago Newsday]

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PETROTRIN BOOSTS PRODUCTION

GUYANA? YOU OFF YOUR ROCKER!

Petrotrin started increasing its crude production from 41,000 b/d in Feb.2017 to 46,438 b/d at the end of Apr.2017, president Fitzroy Harewood revealed during a luncheon hosted by the Energy Chamber of T&T, held at Cara Suites Hotel in Claxton Bay. [Trinidad Guardian]

Anyone suggesting as recently as five years ago that Guyana, the headquarters territory of the Caribbean Community and Common Market (Caricom), would become an oil and gas producer and exporter, would be considered to have gone off their rocker. [Trinidad Express]

PETROTRIN UPGRADE TO COST $16 BLN

VENEZUELA — DRIFTING TOWARDS CIVIL WAR

Petrotrin President Fitzroy Harewood admits that the stateowned co. is too reactive when it comes to safety saying it would cost approximately $16 bln over the next 4 yrs to repair Petrotrin’s aging infrastructure. [Trinidad Express]

“I am no Mussolini,” insisted Venezuela's beleaguered President Nicolas Maduro on television early this month, but if things go on this way he could end up like Mussolini.

That would be very unfortunate for him, and also for Venezuela.

[Trinidad Express]

PETROTRIN HAS FIVE YEAR PLAN

PARAGUANA COMPLEX AT 43 PCT OF CAPACITY

There’s light at the end of the tunnel for Petrotrin, says president of the state-owned oil and gas company, Fitzroy Harewood.

[Trinidad Express]

The Paraguana Refining Center, which includes Venezuela's two largest refineries, is working at 43% of its installed capacity of 955,000 b/d, according to internal reports from its operator, state-run PDVSA. [Reuters]

TRINIDAD: NO FUEL PRICE HIKE There will be no increase of fuel prices, says Finance Minister Colm Imbert. Imbert was speaking at the 2017 mid-year budget review in Parliament in Port of Spain. Imbert also said that there will be no “drastic and sudden” depreciation of the currency. [Trinidad Express]

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