Page 7 - NorthAmOil Week 41

NorthAmOil COMMENTARY NorthAmOil
However, ACG’s prospects improved in 2017 after its operating consortium agreed with the government to extend their production-shar- ing agreement (PSA) from 2024 until the end of 2049, unlocking billions more dollars in invest- ment. This milestone paved the way for the part- ners to take a $6bn final investment decision (FID) earlier this year on a new 100,000 bpd plat- form, Azeri Central East (ACE), due online in 2023. The launch of this platform will help slow the pace of production decline, maintaining out- put at above 400,000 bpd even in the late 2020s. A plan has also been discussed to explore and develop ACG’s deeper non-associated gas layers – resources that could help alleviate Azerbaijan’s domestic gas supply squeeze.
Chevron and ExxonMobil’s positions at ACG, as well as Chevron’s stake in the BTC pipe- line, are still valuable, according to Wood Mac- kenzie analyst Ashley Sherman, who estimated their worth at $3bn.
“This value has been solidified and de-risked by the landmark contract extension in 2017 and the 2019 FID for the new Azeri Central East plat- form,” he told NewsBase.
“The M&A rumour mill is in full swing and matches our expectation for strong and diverse interest in the stakes – from Western IOCs and Asian NOCs, as well as the other existing ACG partners,” he continued. “Like some recent deals in the Middle East, ACG offers long-life and comparatively low-cost oil production. This remains a highly prized proposition to fill near-term and long-term corporate growth ambitions.”
Shifting focus
Chevron and ExxonMobil’s planned exit from ACG is in line with their ongoing divestment and portfolio rationalisation programmes, Sher- man said
“Whereas ExxonMobil and Chevron’s posi- tions in Kazakhstan are the core of the core, Azerbaijan is fairly peripheral in the global port- folios of these two majors,” he said.
In a similar vein, Chevron withdrew from the North Sea earlier this year after decades of oper- ating there, in a $2bn deal with Israeli-owned Ithaca Energy. ExxonMobil also agreed to sell its assets off Norway to Eni-owned Var Energi for $4.5bn last month and is considering a simi- lar retreat from the UK offshore. It is looking to prune its Asia-Pacific portfolio of smaller mature projects as well as part of its plan to divest $15bn of assets by 2021.
These sales come as ExxonMobil shift its focal point to the US, where it is ramping up oil pro- duction in the Permian basin, as well as in Guy- ana, where it wants to develop large untapped oilfields. Chevron too is focusing more on domestic shale extraction in the Permian, where it is currently hunting for acquisition targets. (See previous story)
Both super-majors are increasingly bucking against the trend in the Permian by ramping up drilling and production while independ- ents in the basin scale back. ExxonMobil is by far the most active driller in the Permian, and announced in March that it had updated its growth plans for the basin to produce over 1mn barrels of oil equivalent per day (boepd) by as early as 2024. This would be an increase of nearly 80% on the volumes it was producing at the time.
Chevron, for its part, expects its Permian unconventional production to reach 600,000 boepd by the end of 2020, and 900,000 boepd by the end of 2023.
The two super-majors are not the only large players focusing more on their domestic pro- duction while shedding certain overseas assets. US-based ConocoPhillips, the world’s largest independent producer, recently completed the $2.7bn sale of its UK exploration and pro- duction business. This week, the company announced that it had also struck a deal to sell its Australia-West assets and operations to Santos for $1.39bn. ConocoPhillips is also focusing on domestic shale operations, as well as an expan- sion of conventional production in Alaska.™
In a similar
vein, Chevron
withdrew from
the North Sea
earlier this year
after decades of
operating there.
ExxonMobil is by far the most active driller in the Permian Basin.
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