Page 4 - FSUOGM Week 41 2019

FSUOGM COMMENTARY FSUOGM
Chevron, Exxon push on with
search for buyer at Azerbaijan’s
flagship oil project
The US majors are looking to divest from Azerbaijan after more than 25 years of operations, so that they can re-invest capital in domestic shale production
AZERBAIJAN
WHAT:
Chevron is reportedly in talks to sell its ACG stake to MOL, while Exxon’s search for a buyer continues.
WHY:
While past its prime, ACG is still a valuable low- cost asset, and the stakes could fetch billions.
WHAT NEXT:
Exxon and Chevron have also divested from other areas such as the North Sea, as they refocus their attention on the Permian basin and other high- margin projects.
SPECULATION continues to swirl over whether Chevron and ExxonMobil will exit the giant Azeri-Chirag-Gunashli (ACG) oil project in Azerbaijan under plans to focus more on domestic operations.
The pair of US majors entered Azerbaijan more than 25 years ago, helping to establish the country’s modern oil industry following the collapse of the Soviet Union. But both are now looking for the door, enticed by higher-margin opportunities in the US and elsewhere.
Hungary’s MOL is the latest company reported to have expressed interest in their stakes at ACG, which produced more than 542,000 barrels per day of oil in the first half – equal to more than 70% of Azerbaijan’s national output. Citing sources, Reuters reported on October 9 that MOL had initially been eyeing both com- panies’ shares in the Caspian Sea project, but is now in talks to buy only Chevron’s 9.6% position. MOL currently does not operate in Azerbaijan, although it does manage some upstream projects in neighbouring Kazakhstan and Russia.
Exxon meanwhile is continuing its search for
a buyer for its 6.8% stake, with Bank of America Merrill Lynch handling the sales process, Reu- ters reported.
Earlier BP and Azerbaijan’s state-owned SOCAR – both major shareholders in ACG – were also suspected to be eyeing the US majors’ interests. While Chevron confirmed back last December it had launched a sales process for its stakes in ACG and the Baku-Tbilisi-Ceyhan (BTC) pipeline used to pump its output to mar- kets, Exxon is yet to confirm its plans.
Past its prime, but still valuable
BP operates ACG with a 30.4% stake. Besides Chevron, Exxon and SOCAR, other sharehold- ers include Japan’s Inpex and Itochu, Norway’s Equinor, Turkish Petroleum and India’s ONGC Videsh (OVL).
While still a prominent oil project in the Cas- pian region, ACG is now past its prime. Produc- tion first began in 1997 and ramped up to a peak of 835,000 bpd in 2010 before entering decline. Its fields are now mature and recovery has grown increasingly costly.
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w w w . N E W S B A S E . c o m Week 41 16•October•2019