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Repsol Signs Exploration Deal with Guyana Gov’t

Spanish oil company Repsol has signed an exploration and production agreement with the Government of Guyana.

The four-year agreement, signed yesterday, will allow Repsol to search for hydrocarbons in the Kanuku block, approximately 161 km offshore Guyana, the only South American nation in which English is the official language.

According to GINA, Guyana’s Government Information Agency, Repsol will first conduct 2D and 3D marine seismic surveys, which will be followed by an exploration well in the second phase of the licence.

The company was last year involved in drilling the Jaguar-1, a high pressure, high temperature (HPHT) well, offshore Guyana. The well encountered some hydrocarbons but the partners in the prospect decided to plug the well on safety criteria after reaching a point in the well where the pressure design limits for safe operations prevented further drilling to the main objective.

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Repsol Strikes Gas in Peru

 

Repsol has made a new gas discovery in block 57 in Peru. The well, known as Sagari, was successful in two different formations, known as Nia Superior and Nia Inferior.

Preliminary estimations indicate the field may hold between 1 and 2 trillion cubic feet of gas resources. Repsol is the operator of the block with a 53.84% stake. Petrobras holds the remaining 46.16%.

The Sagari find reinforces the potential of this area in Peru, home to the Repsol’s Kinteroni find, one of the five biggest discoveries made worldwide in 2008 and currently under accelerated development with first gas planned for the end of 2012.

Production tests carried out at depths of between 2,691 and 2,813 metres produced gas flows of 26 million cubic feet of gas with 1,200 barrels of condensate per day in one formation, and 24 million cubic feet of gas with 800 barrels of condensate per day in the other. The sum of both tests indicates about 11,000 boepd.

Repsol plans to carry out further exploration in the block once the production tests are complete.

Repsol in May presented its 2012-2016 strategic plan with ambitious growth targets based on the strengths of its exploration and production units, the company’s growth engine. The plan envisages investment of over 19 billion euros in the next five years and annual production growth of 7% to reach 500,000 barrels of oil equivalent a day in 2016. This is higher than the industry average. Repsol also plans to add six barrels of oil equivalent to reserves for every five barrels pumped during the period.

Repsol has made more than 30 oil and gas discoveries in the last five years, including five which are amongst the largest made worldwide, significantly bolstering future reserve and production growth prospects.

Repsol Strikes Gas in Peru LNG World News.

 

Repsol, Partners Abandon Jaguar-1 Well (Guyana)| Offshore Energy Today

Repsol, Partners Abandon Jaguar-1 Well (Guyana)| Offshore Energy Today

CGX Energy Inc. last week announced, along with its partners on the Jaguar-1 well located on the Company’s 25% owned Georgetown Petroleum Prospecting License (“PPL”), that drilling operations at the Jaguar-1 well on the Georgetown PPL, Guyana ended and the well would be plugged at a depth of 4,876 metres without reaching the primary objective in the Late Cretaceous geologic zone.

The decision to stop drilling at this point was unanimously agreed by all partners based on safety criteria and was taken after reaching a point in the well where the pressure design limits for safe operations prevented further drilling to the main objective.

Jaguar-1 was a high pressure, high temperature (HPHT) well which was spudded in February 2012 using the Atwood Beacon jack-up rig. Whilst the primary Late Cretaceous objective was not reached, samples of light oil were successfully recovered from two Late Cretaceous turbidite sands. The partners to the Georgetown PPL are Repsol Exploración S.A (15%), as operator, along with YPF Guyana Limited (30%), Tullow Oil plc (30%) and CGX Resources Inc. (25%).

Kerry Sully, President and CEO stated, “Based on hydrocarbons recovered during the drilling of Jaguar-1, CGX is confident that a new well targeting the same prospect would hold significant promise and is therefore committed to seek a re-drill utilizing a new well design.”

Commenting on the Company’s plans in the Guyana Suriname basin, Suresh Narine, Chairman, reiterated CGX’s near-term goals stating, “In addition to our commitment well on the Corentyne Block, we are planning a 3D seismic program later this fall with our ultimate goal being to commit to a rig for a three to five well program. Added to this would be the re-drill of the Late Cretaceous target addressed by the Jaguar-1 well.”

Repsol, Partners Abandon Jaguar-1 Well (Guyana)| Offshore Energy Today.

Petronas, PDVSA Searching for Oil Offshore Cuba

Cuba’s state oil company, Cubapetróleo (Cupet) sent a statement to the country’s media saying that a company from Malaysia, a subsidiary of Petronas, had started drilling operations at the Catoche 1X well offshore Cuba.

The Malaysian company is using the Scarabeo 9, a 6th generation semi submersible drilling rig, for the operation. The Catoche 1X well was spudded on May 24. The rig had been under a contract with the Spanish oil major Repsol, who, following the disappointing results of its recent well, decided to scrap plans for further drilling off the Caribean country’s coast.

Cupet has said that Repsol’s failure to find oil doesn’t mean that the oil isn’t there and has added that the area has “a high potential for discovery of new hydrocarbon reserves, according to geological studies performed.”

Cuba estimates that its offshore fields hold approximately 20 billion barrels of oil, which could, once unlocked provide a major boost to the communist country’s economy.

Furthermore, the Cupet’s announcement says that once the drilling of Catoche 1X is completed the Scarabeo 9 will move to the Cabo de San Antonio 1x well, operated by Venezuela’s PDVSA.

Scarabeo 9, capable of operating in water depths of up to 3,600 meters, was built by Singapore’s Keppel specifically for drilling operations in Cuban waters.

Due to the United States trading embargo against Cuba, Repsol had to come up with a rig with almost no U.S. made parts in it, and according to Reuters, the only U.S. manufactured part on the Scarabeo 9 rig is a blowout preventer, a part that malfunctioned and caused the Deepwater Horizon disaster in the U.S. Gulf of Mexico in 2010.

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Repsol Drills Duster Offshore Cuba

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Spanish oil titan Repsol on Friday announced it would plug and abandon an exploration well offshore Cuba.

Repsol’s well in Cuba’s exclusive economic zone (EEZ) was drilled by the Scarabeo 9, a 6th generation semi submersible drilling rig.

The Saipem-owned rig failed to find hydrocarbons, and Repsol’s spokesman told BusinesWeek that the result is disappointing but not unusual saying that every four of five offshore wells turn out to be a dry hole.

He said that the Spanish company was analyzing the data collected before making any further decisions.

Scarabeo 9, capable of operating in water depths of up to 3,600 meters, was built by Singapore’s Keppel specifically for this campaign.

Due to the United States trading embargo against Cuba, Repsol had to come up with a rig with almost no U.S. made parts in it, and according to Reuters, the only U.S. manufactured part on the Scarabeo 9 rig is a blowout preventer, a part that malfunctioned and caused the Deepwater Horizon disaster in the U.S. Gulf of Mexico in 2010.

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Desperate Argentina Now Seen Begging for Oil Investment

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Thursday, May 10, 2012 – by Staff Report

Argentine Vice President Amado Boudou on Tuesday urged US companies to invest in YPF, the nationalized oil company that Argentina recently expropriated from Spain’s Repsol … “We are very optimistic in terms of what is coming for the Argentine economy in general and the hydrocarbons sector specifically” Boudou said at a Conference on the Americas at the US State Department in Washington. Far from scaring off foreign investment because of the expropriation, the government of President Cristina Fernandez has set the framework for “excellent opportunities for those who want to invest in joint ventures and possibilities of joint work in the energy sector,” he said. The Cristina Fernandez administration is gambling that the discovery in May 2011 of a giant oilfield in Argentina’s Patagonia would be too tempting for foreign oil giants to ignore. YPF needs the know-how and the capital to fully exploit the oil fields in the south-western Nequen province, known as Vaca Muerta (Dead Cow), which according to official estimates holds 150 million barrels of oil. YPF is “open to capital and the possibility of working together with public or private companies in Argentina or abroad,” Boudou said. – Merco Press

Dominant Social Theme: Don’t cry for Argentina. It’s all under control …

Free-Market Analysis: Are Argentina’s top officials having second thoughts about their expropriation of Spain’s Argentine oil-producer? It would seem that way from the above news report via Merco Press.

If the move was as wildly destructive as people think it may have been, then this posture would tend to confirm the idea that one of the world’s more powerful and influential states is simply spinning out of control.

The results may be truly catastrophic, not just for Latin America but for the larger, struggling world.

This boom may well be ending – or certainly growing long-in-the-tooth after a decade or more.

Although the Argentine expropriation of Repsol made major shock waves, the Argentine government under President Cristina Fernandez has portrayed it as a judicious and necessary gambit.

Many other observers regardless of political affiliation have branded the move as a shallow populist one that will bring disaster to Argentina and environs.

As the predictions of damage mount, there is more speculation that Fernandez’s action may bring down not only her own government but other regional governments as well.

These predictions involve inevitably a peso devaluation that will set off a dollar-withdrawal frenzy in big regional banks. Real estate prices – radically inflated after a decade of monetary expansion – may well plunge. The results could affect large swaths of South America.

Countries that could be affected include Uruguay, Brazil, Chile and Peru among others – all countries that have pursued moderate market-based policies and have benefitted from the South American industrial and monetary boom.

Meanwhile, Repsol doesn’t seem apt to surrender. Here’s more from the article.

YPF is “open to capital and the possibility of working together with public or private companies in Argentina or abroad,” Boudou said.

Last week the Argentine president signed a bill expropriating 51% of YPF stock from Repsol, its majority shareholder, sealing a measure that has roiled the country’s trade ties with Europe.

Cristina Fernandez has argued that the move was justified because Argentina faces sharp rises in its bill for imported oil, and Repsol has failed to make agreed investments needed to expand domestic production.

In Madrid, a Repsol spokesman Tuesday said the company has warned its competitors that they will face legal action if they invest in YPF.

“The idea is to protect the assets that were confiscated in Argentina until the situation is resolved in a satisfactory way for the parties that are involved,” the spokesman said.

Conclusion: A cascading crisis in South America may still seem likely …

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Argentina: Vaca Muerta – Argentina’s oil and gas seizure poses new dilemma

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By Vladimir Hernandez BBC Mundo

It is a grim name, though it has nevertheless brought hope of a better future for many in Argentina: Vaca Muerta – translated from the Spanish – means “Dead Cow”.

Vaca Muerta’s barren landscape covers some 30,000 remote sq km of the Patagonian province of Neuquen, in the west of Argentina.

And it was here where energy giant Repsol-YPF struck gold last year. Black gold.

Buried in 250-million-year-old rocks, almost 3km beneath the surface here, are some of the world’s largest reserves of shale oil and gas.

According to the Spanish energy giant Repsol, there are prospective resources equal to more than 21 billion barrels of oil underneath the ground in Vaca Muerta.

Much of it could be shale oil, rather than gas, according to an independent Ryder Scott audit commissioned by Repsol, though this has yet to be proven.

But the presence of shale gas is proven, and it is clear that the reserves found here will make up a big proportion of the country’s estimated 22 trillion cubic-metre total.

That makes Argentina the world’s number three in terms of shale gas reserves – hot on the heels of the US, which has reserves of some 24 trillion cubic metres, and China, which has reserves of some 36 trillion cubic metres, according to the American Energy Information Administration.

Failure to invest

Getting the reserves out would obviously require massive investment.

Argentina’s government believes Repsol – which has been active here ever since it took over YPF when it was privatized during the 1990s – should have done this.

But instead, it says, Repsol has been dragging its feet, invested too little and thus failed to get the resources out of the ground as quickly as it should have done.

The government has even accused Repsol of pulling YPF’s profits out of the country to finance its businesses abroad.

President Cristina Fernandez said:

“If such a situation continued, we would have had big energy problems in the country because of the drop in production and the increasing reliance on fuel imports.”

Renationalized resource

So the government has stepped in to take control of what it sees as a vital, national asset.

Rodrigo Alvarez Argentine economist:

This is the real reason behind the renationalization of YPF”

Renationalizing YPF has in effect helped the government regain control of the Vaca Muerta energy reserves, since the rights to exploit more than a third of the area were held by Repsol-YPF.

The move, and the manner in which it was made, has obviously created a great deal of controversy.

Repsol and others believe the government was motivated by a desire to secure the country’s energy requirements for decades to come, and thus reduce its gas import bill which shot up to $10bn in 2011 and is expected to surge to $14bn this year.

“This could help cope with between 30% and 40% of the gas demand within Argentina, which has been covered with costly imports in the last two years,” says Eduardo Barreiro, an energy consultant and a director at the Society of Petroleum Engineers in Argentina.

Argentine economist Rodrigo Alvarez Litre agrees:

“This is the real reason behind the renationalization of YPF,” he wrote in a column in the Argentine newspaper, Perfil.

“With such shale gas reserves, Argentina could position itself as a nation with cheap and abundant energy, and profit from the high prices in the international market.”

Investment required

Argentina’s government might describe its move as a step towards self-reliance, which it believes is clearly in the nation’s interest.

“Vaca Muerta could be a very important area in the future,” Mr Barreiro says.

“But it needs investment.”

Some $3bn would be required over the next three years to get the shale gas extraction started.

And then, he added: “You’ll need to be excavating constantly to keep the production levels high enough to justify the investment and to make a profit.”

According to Repsol, more could be achieved with more investment. The firm insists that some $25bn per year would be needed to exploit Vaca Muerta’s shale oil and gas potential. This, the company believes, could double the Argentine production in 10 years.

But this would require some 3,000 shale oil and gas wells in an area where there are only 28 at the moment.

Costly subsidies

Without Repsol, the government might well look to other foreign investors for help to make it happen.

But Daniel Kokogian, a geologist who works as an advisor for several foreign energy companies in Argentina, said some companies would be concerned about how they might be treated in the future, following the renationalization of YPF.

“What private investor would put money into a business where national interest will come first, then profits?” he asks.

Others are far more optimistic about Argentina’s chances to attract foreign investors.

The government says it has already had talks with energy giants such as Total of France and Petrobras of Brazil – and local energy analyst Victor Bronstein expects deals to be struck.

“Oil companies are constantly operating in turbulent environments, in problematic countries,” he says.

“If they think there’s a business opportunity, that there’s a possibility of resources, they’ll dive in.”

Besides, cash-rich states may well be keen to get involved, according to Mark Routt, a senior consultant with KBC Advanced Technologies in Houston, Texas.

“Argentina is going to have to look for government-government relationships, particularly with China,” he says.

Polluting process

But Mr Kokogian says he believes the main concern of most investors will be whether or not Vaca Muerta is going to deliver decent margins.

“The main issue here is to determine if these estimated resources can actually be called reserves,” he said.

“A resource becomes a reserve when it is proven that the investment can be recovered with an acceptable profit. In Vaca Muerta, I don’t think that has happened yet.

“If this area was truly the main reason behind the nationalization of YPF, then Argentina may have shot itself in the foot over an unproven source of energy,” he adds.

And if that turns out to be the case, the Argentine efforts to control “Dead Cow” could be a bit like flogging a dead horse.

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Britain reassures banks over Argentina’s Falklands threats

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The British Government has told the Falklands and companies working there that it will defend the protectorate against Argentine aggression. Photo: Reuters

The Foreign Office has sought to reassure British and American banks threatened by the Argentine government over their involvement in the Falkland Islands oil industry.

By James Quinn
9:30PM BST 21 Apr 2012

The Government, in a move designed to ease concern among the investment community about the Argentine legal threats, has written to some 15 banks and oil exploration companies operating in the region.

The move comes as Argentina faces international condemnation for its seizure of Repsol’s majority stake in YPF, Argentina’s largest oil company, last week.

In the new letter, the Foreign Office says it is “deeply sceptical” that Argentina would be able to enforce “any penalties” in courts outside its own borders. It adds that the government of the Falklands “is entitled to develop” oil and fishing industries in its own waters “without interference from Argentina.”

“The British Government has no doubt about our sovereignty over the Falkland Islands and surrounding maritime areas,” it adds.

News of the letter follows The Sunday Telegraph’s revelation that the Argentine government had written to banks involved in the Falkland oil industry threatening them with legal action. In writing to the banks concerned, including broker Oriel Securities and Royal Bank of Scotland, the Government has sought to not jeopardies the fledgling Falkland oil industry.

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Edison Investment Research, which has published research on the value of oil around the islands , slammed the attempts to silence it.

“Edison Investment Research firmly believes in the right for all financial institutions, publishers and in particular financial research houses such as ours to be able to exercise their right to provide independent analysis of all quoted companies wherever they are listed and wherever their operations may be carried out,” said Edison’s Fraser Thorne.

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