Page 5 - LatAmOil Week 07 2020

LatAmOil COMMENTARY LatAmOil
 e account was established for a $200mn loan facility extended by the Bank of China (BoC) and Deutsche Bank.
In a statement, it indicated that it intended to use these funds to keep the Tango oating LNG (FLNG) vessel operating. It also reported that Tango FLNG had dispatched its second cargo of LNG on behalf of Argentina’s national oil company (NOC) YPF in December 2019 and was processing the gas that would constitute the facility’s third cargo.
Exmar made its announcement on January 23, about three weeks a er the Chinese central government informed the World Health Organ- isation (WHO) of the outbreak. (Coincidentally, January 23 was also the day that Beijing imposed a quarantine that halted travel to and from the city of Wuhan).
Postponement of release
e Belgian company’s next comment on the matter came on February 13. On that date, Exmar published a statement revealing that BoC had not released the $40mn from the DSRA in line with Sinosure’s authorisation. It explained that the bank had not been able to meet all of the necessary conditions for this release because of delays stemming from the coronavirus outbreak.
e statement did not go into details about these delays, but it did describe them as relatively simple in nature. “ ese conditions precedent are merely administrative points that cannot be solved until the o ces from the Chinese author- ities o cially re-open,” it said.
Exmar also stated that it was monitoring the situation carefully and would release more information on Tango FLNG when appropriate. In the meantime, it said it had secured the “fur- ther extension of its bridge loans until [the] end of February and of certain other capital expend- iture until mid-March.”
Knock-on effects
At face value, the Belgian company’s announce- ments do not represent anything dramatic. ey merely recount a nancial decision and a delay in the implementation of that decision.
But there is more to the story. Exmar’s expe- rience demonstrates that the virus outbreak has the potential to spread disruption to every cor- ner of the oil and gas industry.
In other words, the slowdown in the oil and gas sector may not just a ect the obvious things – that is, core business operations such as com- modities trading, upstream production or the operation of midstream transportation facilities such as terminals and tankers. It could also hit service providers and contractors, which play a crucial role in keeping oil and gas ows mov- ing all the way from the wellhead to the retail market. Additionally, it could hit the nancial institutions that help Exmar and countless other companies across the sector secure the money they need to keep going in the short term.
As such, the longer the outbreak continues, the more companies depending on Chinese funding are likely to follow in Exmar’s footsteps – and the more they may need to seek credit elsewhere. ™
“ the oil and gas
MEXICO
Head of Pemex outlines new rules for awarding service contracts
The slowdown in
sector could hit service providers and contractors, which play a crucial role
in keeping hydrocarbons moving to market
MEXICO’Snationaloilcompany(NOC)Pemex appears to have introduced a new procedure for awarding oilfield service contracts related to high-priority upstream projects.
Pemex CEO Octavio Romero Oropeza said on the sidelines of an industry event last week that the company was selecting service contrac- tors via a closed bidding process. Within this framework, he explained, the NOC invites spe- ci c rms to bid for service contracts to support upstream exploration and development work.
Romero described this process as a good solution for Pemex because it allowed the com- pany to minimise its costs.
“We invite the companies, [which] form consortia to carry out these comprehensive projects, from construction of the facilities [to] the drilling of wells, [and to] laying both marine and onshore pipelines ... and the consortium
thato ersthebestpricewins,”hewasquotedas saying by Reuters.
He also indicated that this approach allowed Pemex to remain on schedule. e company is due to nish assigning all relevant contracts by the end of this year, he said.
In the past, Pemex has mostly worked with major international service providers such as Halliburton to secure support for its upstream projects. Last year, though, the administration of President Andres Manuel Lopez Obrador changed the rules for awarding contracts to favour domestic vendors.
This policy shift was supposed to lend momentum to Mexico’s economy and speed up the pace of work on upstream projects. It has drawn praise from the president, who harbours a certain amount of suspicion about investment by foreign oil and gas companies.

Week 07 20•February•2020 w w w. N E W S B A S E . c o m
P5