Page 8 - LatAmOil Week 19 2020

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Meanwhile, Bulgaria’s parliament has backed increased tax controls over the country’s top fuel supplier, owned by Russia’s Lukoil, in the hope of boosting budget revenues. The company has threatened to shut down its depots if the meas- ures are introduced.
If you’d like to read more about the key events shaping Europe’s oil and gas sector then please click here for NewsBase’s EurOil Monitor.
FSU production pressures
In the former Soviet Union, eyes are on Russia and its OPEC+ partners Azerbaijan and Kazakh- stan to see how agreed cuts to production will be implemented.
Russian oil and condensate production surged 5% m/m in April to 11.35mn bpd, according to initial energy ministry data. But under the new OPEC+ deal, oil output needs to fall to 8.5mn bpd this month. The cuts do not apply to condensate and the energy ministry does not provide a break- down on liquids. NewsBase understands that Rus- sia is close to reaching its oil target, however, with flows averaging just 8.75mn bpd in the first five days of May.
Russian oil firms boast considerably low pro- duction costs, albeit not quite as low as those in Saudi Arabia. Even so, like their international peers, they too are seeing their free cash flow plummet as a result of the oil price collapse. Goldman Sachs expects them to cut their divi- dends by 25% this year. Russian oil firms typi- cally set their dividends as a percentage of IFRS profit. Therefore the decline will be the result of diminished earnings rather than changes in div- idend policy.
Russia’s Gazprom marked the 75th anniversary of World War 2 with news of a new 200 bcm gas discovery in the Arctic Kara Sea. But the find is of little commercial benefit until prices recover. The company is also contending with a serious
outbreak of COVID-19 at an Eastern Siberian field that pumps gas to China via the Power of Siberia pipeline. It insists that flows continue as planned, but seeing as its main contractor has halted work, delays in the field’s ramp-up to full capacity look likely.
In Azerbaijan, state-owned SOCAR has reported drilling a new well at the Umid field in the Caspian Sea – a project it once described as the biggest find since the giant BP-operated Shah Deniz field. SOCAR is raising the field’s output level steadily, but an international partner is likely needed to realise its full potential.
If you’d like to read more about the key events shaping the former Soviet Union’s oil and gas sector then please click here for NewsBase’s FSU Monitor.
LNG FID delays
US LNG developer NextDecade has warned that it may delay a final investment decision (FID) on a new liquefaction terminal as a result of the collapse in energy demand globally because of COVID-19. The company said in a US regula- tory filing that the FID on Rio Grande LNG in South Texas was scheduled for this year, but that prospects for financing and developing the ter- minal depended on market conditions that were likely to worsen as a result of the pandemic.
NextDecade’s warning follows Sempra Energy delaying an FID on Port Arthur LNG and Cheniere Energy saying that it may similarly push back a planned FID on the next phase of its Corpus Christi LNG project since late April.
These moves come as news emerges of more cancellations of cargoes that were due to be loaded at US liquefaction terminals in June. By late April up to 25 US LNG cargoes for June load- ing were reported to have been cancelled, but the latest estimates suggest that it could ultimately be around 33. Buyers typically have to give 45-60 days’ notice to cancel a contracted US cargo.
While LNG producers do not tend to comment publicly on decisions taken by their customers, suppliers are increasingly expected to come under pressure to curtail some of their output
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Week 19 14•May•2020