MARCH 2 2016 (The Conway Bulletin) – Output at BP’s Azeri-Chirag-Gunehsli (ACG) dropped in 2015 to 31.3m tonnes of oil, down from 31.5m tonnes of oil in 2014. The ACG field is Azerbaijan’s largest field and the bedrock of its oil output. Azerbaijan has been pressuring BP to maintain ACG output.
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(News report from Issue No. 270, published on March 4 2016)
ALMATY, MARCH 2 2016, (The Conway Bulletin) — Guernsey-based Tethys Petroleum said it had now sealed a life-saving financing agreement with Kazakhstan-based Olisol for around $32m, after months of doubt regarding the company’s ability to pay debts and continue its Kazakh and Tajik operations.
The two companies initially reached the deal on Feb. 22 and signed it on March 2, giving Tethys shares on the Toronto Stock Exchange a boost.
Under the deal, Tethys will receive $1m of finance and convert the remaining $5.25m debt facility into ordinary shares. If the Toronto Stock Exchange approves Tethys’ issue of 500m new shares, Olisol will then buy around 181m of these, and own a 42% stake in Tethys.
John Bell, Tethys chairman, said: “Tethys now has a strong in-country strategic partner which has committed to becoming a minority share- holder and who will help the company in its objective to supply the growing energy demand in China.”
Mr Bell and three other board members will step down upon completion of the deal.
“We leave the board having steered Tethys into a company focused on capital efficiency and cost discipline, well placed to become a strong platform for future growth,” he said.
Tethys had been in talks with Nostrum Oil & Gas for a takeover last summer. It later rejected the offer and turned to Kazakhstan’s Olisol.
In January, however, Olisol missed a payment scheduled in an earlier agreement putting the deal in jeopardy. The latest deal confirms that Olisol will in fact go ahead with the purchase and become a minority stakeholder in Tethys.
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(News report from Issue No. 270, published on March 4 2016)
FEB. 26 2016 (The Conway Bulletin) – Iran and Azerbaijan will resume oil swaps after a five year break, Iran’s official Fars news agency reported quoting Iranian deputy oil minister Rokneddin Javadi. Azerbaijan will deliver oil to Iran’s Caspian Sea port of Neka to supply refineries in the north of the country. In return Iran will give Azerbaijan the equivalent amount of oil at its Persian Gulf ports.
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(News report from Issue No. 270, published on March 4 2016)
FEB 26 2016 (The Conway Bulletin) – Azeri energy minister Natig Aliyev said construction works will start later this month on the Trans-Adriatic Pipeline (TAP), the final section of the so-called Southern Gas Corridor that will pump gas from Azerbaijan to Europe.
According to Mr Aliyev, TAP is also expecting to secure financing by the end of April.
“The issues of TAP financing will be completely solved on April 28,” he said.
TAP, a 10b cubic metres pipeline which runs across Greece, Albania and the Adriatic Sea to Italy will link up with the 16b cubic metres Trans- Anatolian Pipeline at the border with Turkey.
BP, Azerbaijan’s state-owned SOCAR, Snam, Fluxys, Enagas and Axpo are all shareholders in TAP.
European customers see the Southern Gas Corridor an alternative to Russian gas supplies and the European Commission has lobbied intensely to ensure that the project is completed by the 2019 deadline.
This week a delegation of the European Commission participated in the second meeting of the Southern Gas Corridor Advisory Council.
Federica Mogherini, vice president of the European Commission, emphasised just how much weight the EU put on the project.
“The Southern Gas Corridor is an essential element in the EU’s Energy Security Strategy,” she said.
“We strongly support the Southern Gas Corridor, and we are determined – and me personally – to do our part to ensure that it is completed on time.”
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(News report from Issue No. 270, published on March 4 2016)
FEB. 29 2016 (The Conway Bulletin) – On a trip to Baku, Federica Mogherini, a European Commission vice-president in charge of external affairs, said the European Union and Azerbaijan need to work hard to improve relations which have soured over the past few years.
Ms Mogherini made the comments during a two-day trip to Baku and to Armenia’s capital Yerevan.
“It is time for a new chapter in the relations between the EU and Azerbaijan. We need an all-round strategic partnership between us,” she said during a speech to the Southern Gas Corridor Advisory Council.
“We have not always seen eye to eye in all matters, and we know that differences will remain between us in some areas. This is normal in international relations and often in European and even national politics.”
Europe has been vocal over what it has said is a systematic crackdown by the Azerbaijani authorities against civil society and the media. The Azerbaijani government has responded by accusing Europe and the United States of meddling in affairs which aren’t theirs and of trying to stir a revolution.
The result has been a drift by Azerbaijan towards Russia.
Still, Europe and Azerbaijan have been working together on a pipeline network running from the Caspian Sea to central Europe.
Europe wants to reduce its reliance on Russia for gas and its sees Azerbaijan as the solution. The pipeline network is dubbed the Southern Gas Corridor.
Ms Mogherini was careful to avoid direct mention of human rights and media freedom in her speech but the underlying message would have been clear and her speech was an important step towards, tentatively, mending Azerbaijan-EU relations.
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(News report from Issue No. 270, published on March 4 2016)
FEB. 22 2016 (The Conway Bulletin) — Tethys shares have surged back from their historical low of 1.63p after the company announced a change in the agreement with Olisol, which will allow Tethys to raise cash via a loan in Kazakhstan.
John Bell, Tethys’ executive chairman said that “in entering into this agreement, Tethys has gained a strong in-country strategic partner which has committed to remaining a minority shareholder.”
Olisol has thus finally and concretely become Tethys’ partner. After months of sustained low oil prices and fickle exploration and production data, Tethys was looking for a cash injection to finance its operation and restore investors’ trust.
Now Olisol and, likely, Bank RBK will complete a loan transaction for $10m and the deal with Olisol will go ahead as agreed last November. The entire deal should be completed within the next two months, according to Tethys.
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(News report from Issue No. 269, published on Feb. 26 2016)
FEB. 23 2016 (The Conway Bulletin) – Azerbaijani president Ilham Aliyev flew to Tehran for talks with his Iranian counterparts. Media reported that the two sides signed a memorandum of understanding on oil and gas projects.
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(News report from Issue No. 269, published on Feb. 26 2016)
FEB. 25 2016 (The Conway Bulletin) – Azerbaijan and Russia agreed to resume shipments of oil through the Baku-Novorossiysk pipeline on March 1. The agreement ends weeks of negotiations over the restart of oil supplies. Oil flows along the the pipeline give a decent insight into the state of Azerbaijani- Russian relations. Over the past few years, oil flows have been a stop start affair but now appear to have steadied, much like bilateral relations, at around 1.4m tonnes per year.
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(News report from Issue No. 269, published on Feb. 26 2016)
ALMATY, FEB. 23 2016 (The Conway Bulletin) — Kazakhstan’s government said it will not try to buy a 29.25% stake in the Karachaganak gas field that Shell inherited from BG Group after it completed a takeover earlier this month.
Previously, Kazakh officials had said the government might use its preemptive rights to buy out BG Group’s share in the field, one of the most prolific in independent Kazakhstan’s history.
Kazakhstan has now said it does not have any preemptive rights to buy the stake because the Shell-BG deal was not directly linked to the Karachaganak contract. Shell, which completed its $53b takeover of BG on Feb. 15, has not commented.
A direct change in the structure of the contract would have given the Kazakh government the right to move first and buy stakes on sale at market prices. The government used this mechanism when ConocoPhillips wanted out of the contract for Kashagan, a giant oil field in the Caspian Sea, in 2013. At the time, Kazakhstan matched a $5.4b offer by India’s ONGC Videsh and later sold the stake to China’s CNPC for the same price.
Now, the government has decided it has no right to do so.
Of course, Kazakhstan’s economic position has changed considerably since 2013. Then it was awash with spare cash. Now it is counting its coppers and flogging off chunks of previously sacrosanct state companies to pull through a deepening economic crisis.
And, for Kazakhstan, shying away from the Shell/BG stake in Karachaganak makes it look good and pro- Western business, especially important in this tight economic climate.
Karachaganak’s shareholders are Shell with a 29.25% stake, ENI with 29.25%, Chevron with 8%, Lukoil with 13.5% and Kazmunaigas with 10%.
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(News report from Issue No. 269, published on Feb. 26 2016)
FEB. 23 2016 (The Conway Bulletin) — Iran and Azerbaijan have started negotiations on how to develop the disputed Araz-Alov-Sharg oil project in the Caspian Sea that has lain undeveloped for 18 years.
The talks, part of a visit by Azerbaijani president Ilham Aliyev to Tehran to boost relations, also high- light Iran’s potential to be an important partner in the region now that most international sanctions have been lifted.
The oil and gas website Natural Gas Europe (NGE), quoted two sources close to Azerbaijan-Iran negotiations on talks over the Araz-Alov- Sharg project, which Iran calls Alborz.
It quoted a source close to negotiations as saying that they had “already reached a primary agreement to develop the block jointly, but they had not finalised the details”.
For Western companies any deal between Azerbaijan and Iran to develop the site would create problems.
The SOCAR website still shows off a production sharing agreement for the field signed in 1998 by several Western oil and gas companies including BP, Statoil and Exxon.
That PSA may turn out to be worthless and, if Azerbaijan and Iran can agree on the field’s ownership, may be torn up in favour of a bilateral Azerbaijani-Iranian deal.
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Copyright ©The Conway Bulletin — all rights reserved
(News report from Issue No. 269, published on Feb. 26 2016)