Page 5 - FSUOGM Week 41 2019

FSUOGM COMMENTARY FSUOGM
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 Exxon’s positions at ACG, as well as Chevron’s stake in the BTC pipeline, are still valuable, according to Wood Mackenzie 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 Exxon’s planned exit from ACG is in line with their ongoing divestment and port- folio rationalisation programmes, Sherman 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. Exxon also shed its assets off Norway to Eni-owned Var Energi for $4.5bn last month and is considering a similar 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 Exxon shifts its focal point to the US, where it is ramping up oil production in the Permian basin, as well as in Guyana, where it wants to develop large untapped oilfields. Chevron too is focusing more on domestic shale extraction in the Per- mian, where it is currently hunting for acqui- sition targets. ™
A pair of rigs stationed at the ACG fields.
Week 41 16•October•2019 w w w . N E W S B A S E . c o m P5