Page 19 - FSUOGM Week 30

FSUOGM NEWS IN BRIEF FSUOGM

Russia could hedge oil and
RUSSIA compliance with regulation.
Lukoil buys extraction gas revenues NORD STREAM (SWITZERLAND)

project in Senegal Russian President Vladimir Putin has ordered Bulgarian pipeline ruptures
the government to study mechanisms of
Independent oil major Lukoil agreed to buy hedging national oil and gas revenues against Bulgaria's gas grid operator Bulgartransgaz
a 40% stake in the Rofisque, Sangomar and price volatility, the Kremlin's press secretary, reported that a pipeline in southwest Bulgaria
Sangomar Deep (RSSD) project in Senegal for Dimitry Peskov, told the press on July 23. that carries Russian gas to Greece halted flows
$300mn from Cairn Energy, Russia's second- Previously unnamed sources told Interfax after a rupture on July 27.
largest crude producer announced on July 27. that Russia could use the Mexican model of The rupture occurred at 07:56 near the
The new offshore Senegalese deal is buying put options to hedge against sharp village of Kulata.
expected to close in 4Q20, is subject to the fluctuations in oil prices. "The section has been cut off and all
Senegalese government approval, and also The scheme could reportedly be financed actions required for the urgent repair
includes a bonus of up to $100mn for Cairn from the National Welfare Fund (NWF), works and restoration of the natural gas
Energy after production launches. which could gain financial revenues on transport to Greece have been made. No
Lukoil estimates the total recoverable the hedging, all the while stabilising public people suffered any injuries," Bulgartransgaz
hydrocarbons in place for the project at finances. explained. "Gas network users will be
500mn barrels of oil equivalent (boe). "Indeed, the respective government informed in due time of the restoration of
Australia's Woodside has a 35% stake in the entities are discussing various hedging gas supply.
project, Australia's FAR 15% and Senegal's mechanisms used by various countries,"
state-owned Petrosen another 10%, with an Peskov said as cited by Reuters, noting that
option to increase its stake to 18%. the request was coming from the president.
"RSSD is an early stage greenfield project," As reported by bne IntelliNews, in the CENTRAL ASIA & SOUTH
Sberbank CIB wrote on July 28, seeing the beginning and spring of 2020 the prices for
price Lukoil paid as "probably below Cairn's Russian oil were briefly below the federal CAUCASUS
historical exploration costs". The analysts budget break-even point, before recovering
believe that "Lukoil is entering into an on the effects of the extension of the OPEC+ Saudi firm eyes TAPI
interesting project at a fairly low initial cost." deal.
Previous estimates put the initial capex for investment
Sangomar's development at $4.2bn, which
translates into $1.7bn for Lukoil's share, Gas transmission via Nord Riyadh-based Somo Al Mamlakah is eyeing the
Sberbank notes. possibility of investing in the Turkmenistan-
The development of Sangomar, requiring Stream pipeline resumed Afghanistan-Pakistan-India (TAPI) gas
a substantial capex outlay from Lukoil of pipeline, Turkmen opposition-run news
$1.7bn over 2020-2023, should have an after completion of annual website Chronicle of Turkmenistan reported,
impact on dividends, which are paid from citing the NEBIT-GAZ agency.
free cash flow (FCF) under the dividend maintenance works The company’s interest was reportedly
policy, Sberbank CIB warns. voiced during a meeting between
BCS Global Markets on July 28 reminds Nord Stream has successfully completed all representatives of Somo Al Mamlakah and
that unlike Lukoil’s past attempts to produce planned maintenance works on its twin gas state-run Turkmengaz. Earlier this year,
oil in the region, this project is already past pipelines within the scheduled period. After Turkmengaz was unable to complete the
the exploration phase, having found a field the temporary shutdown of the pipeline financial closure of TAPI, originally planned
with significant reserves. system, gas transmission resumed on July for December 2016 and postponed until
"Previous attempts offshore were in Sierra 26 2020 and the full capacity of both lines early 2020. Turkmengaz has been ordered
Leone and Cote d’Ivoire, and generally is available again to fulfil all transport by the government to look for foreign
did not result in success," BCS GM writes, nominations. investors in order to complete the search for
reminding that Lukoil booked $2bn of losses “For the eighth consecutive year, Nord funding by 2021.
on these explorations. Stream planned the annual shutdown The 1.735-km-long TAPI pipeline
Therefore given the company’s thoroughly to ensure the efficient inspection project is intended to provide up to 33bn
unsuccessful run as an offshore explorer, and maintenance of the pipeline system, cubic metres per year of gas from fields in
BCS GM takes it as a positive that Lukoil which is a key element of our long-term eastern Turkmenistan. Gas flows would
is entering the Senegalese project in the Pipeline Integrity Management Strategy,” said go to Afghanistan, Pakistan and India.
development of this field, and believes that Taeke Keja, Maintenance Director of Nord The Turkmen pipeline section is expected
investors should be more positively inclined Stream AG, adding: “Our operations and to cost $1bn, while the whole project is
towards this news. maintenance teams and our contractors have projected to cost $10bn. Some estimates
Should the investment pay out, "then carried out these planned activities safely and show the costs ballooning to up to $22.5bn.
perhaps Lukoil will have found another on time, with all necessary precautions and Though Turkmenistan formally broke
option for using its substantial FCF to protection measures against COVID-19, and ground on the pipeline in December 2015,
deliver value-added growth to investors," contributed to a reliable, safe, and efficient only limited ground work appears to have
BCS GM believes, while reiterating the Buy gas supply to the European market.” taken place, despite claims to the contrary
recommendation on the name. The schedule for the maintenance from Turkmen officials.
activities has been closely coordinated with
Nord Stream’s upstream and downstream
partners and appropriately disclosed in

Week 30 29•July•2020 www. NEWSBASE .com P19