Transition from a trickle to a flood: The ripple of rumours is developing into a big barrel of a wave.

Iraq blacklists Chevron for Kurdish oil deals Tue, Jul 24 12:18 PM EDT By Ahmed Rasheed BAGHDAD (Reuters) - Iraq hit out at Chevron Corp over its just-signed oil contract with Kurdistan, barring it from any oil agreements with the central government in a move meant to deter other companies from dealing directly with the semi-autonomous northern region. Baghdad has long held that contracts signed by the Kurdistan Regional Government (KRG) are illegal, and last year Exxon Mobil Corp aroused its anger by striking a deal with the region while also running a project at a supergiant oilfield in the south. Baghdad retaliated by banning Exxon from an exploration tender in May. Chevron followed larger rival Exxon into Kurdistan last week and Baghdad's action on Tuesday will be closely watched by other oil majors, such as France's Total, which is widely expected to be the next to make a Kurdish oil play. "In line with Oil Ministry policy based on the constitution, the Oil Ministry announces the disqualification of Chevron company and bars it from signing any deals with the federal oil Ministry and its companies," an oil ministry statement said. Chevron could not immediately be reached for comment. Last week, the company confirmed its purchase of 80 percent of two blocks in Iraq's Kurdistan, an area where oil rights are a subject of fierce dispute. Whatever the impact on good will, for now Chevron has no material stake in the south to lose. The second largest U.S. oil company after Exxon was qualified to take part in Iraq's four oil and gas licensing rounds, but chose not to. The company found the commercial terms of Iraq's service contract unworkable, but -- like other investors -- found the production sharing contracts on offer in Kurdistan more attractive, industry sources said. Chevron said it would continue to monitor opportunities in both the north and south of Iraq. Iraqi oil officials said the company had shown interest in developing the giant southern Nasiriyah oilfield, which was not offered in any of the tenders. "The reputation and credibility of Chevron and other companies are being tested today and we are fully confident the result of its test is a total failure and it should feel ashamed of its action," the oil ministry statement said. THINK TWICE? Kurdistan said in June that it expected more oil majors to follow Exxon in the next few months and Total, which also has a stake in a project in the south, is widely believed to be close to doing a deal. "Total is waiting for the best time to proceed," said an Iraqi oil executive. "After today's announcement, they may think twice." And with Kurdistan and Baghdad regularly clashing over oil and land rights, securing interests in both is not clear cut. Just last month, Iraq asked U.S. President Barack Obama to stop Exxon from exploring in Kurdistan, saying that it could have dire consequences for the country's stability. Iraq's Prime Minister Nuri al-Maliki said Obama sent a "positive" written response. [ID:nL2E8IJKLQ] Seemingly undeterred, Exxon is close to awarding a contract for drilling rigs at its six exploration blocks in Kurdistan, said Iraqi oil sources. As part of its deal announced last week, Chevron is purchasing the Sarta and Rovi blocks from India's Reliance Industries Ltd, where it will be the new partner of Austria's OMV AG, holder of the other 20 percent interest. Baghdad has a long-running dispute with the Kurdistan regional government over oil, land and sharing revenues and insists that it has the sole authority to manage oil fields and sign deals in the north. As well as France's Total, Norway's Statoil is also looking closely at KRG exploration blocks, industry sources have said. A move into the north by Total could mean the tipping point has been reached. "Chevron has no contracts in the south, so that's likely to minimize the fallout," said an oil industry executive. "If Total joins the procession, that will signal the transition from a trickle to a flood." (Additional reporting and writing by Peg Mackey; editing by Alex Lawler and Anthony Barker) ============ July 24, 2012, 4:23 p.m. EDT Chevron hit by Iraqi ban, energy stocks clobbered Peabody Energy falls more than 11% on lowered profit estimateStories You Might Like •Sponsored: MarketWatch.com Penn State got off easy •Sponsored: this site Apple earnings jump, but miss estimates •Sponsored: this site VMware earnings down; Nicira acquired for $1.26B [?] 0 Comments Share Digg Yahoo! Buzz MySpace del.icio.us Reddit LinkedIn Fark StumbleUpon Newsvine newPortfolio Relevance LEARN MORE Want to see how this story relates to your portfolio? Just add items to create a portfolio now: XAddPeabody Energy Corp. (BTU)XAddS&P 500 Index (SPX)XAddChevron Corp. (CVX)Add Create Portfolio or Cancel Already have a portfolio? Log In By Steve Gelsi, MarketWatch NEW YORK (MarketWatch) — Chevron Corp. and Peabody Energy Corp. weighed on energy stocks on Tuesday, as the sector fell into the red with the broad equities market. /quotes/zigman/282895/quotes/nls/btu BTU 20.55, -2.61, -11.27% /quotes/zigman/3870025 SPX 1,338.31, -12.21, -0.90% 25%0%-25%-50%-75%ASON12FMAMJJ Chevron Corp. /quotes/zigman/289939/quotes/nls/cvx CVX -1.53% lost 1.5% as one of the worst -performing components of the Dow Jones Industrial Average /quotes/zigman/627449 DJIA -0.82% , which fell 104 points at the closing bell. Earlier, the Iraqi oil ministry said Chevron would be excluded from further participation in the nation’s oil industry because the San Ramon, Calif., petroleum producer inked a deal to buy stakes in two exploration blocks from Reliance Industries Ltd. IN:500325 +0.81% in the Kurdish region in the northern part of the country. The decision by the Iraqi central government marks the latest sign of friction over petroleum exploration and production with the semi-autonomous Kurds. Also in the spotlight, BP PLC /quotes/zigman/247026/quotes/nls/bp BP -1.46% dropped 1.5%. The oil major’s 50% stake in the TNK-BP Russian joint venture is drawing interest from state-run oil major OAO Rosneft of Moscow. OAO Rosneft said it’s taking part in talks with BP PLC on acquiring BP’s share of Russia’s No.3 oil producer TNK-BP. AAR, the Russian holding company that owns 50% of BP-TNK, has said it’s interested in buying part BP’s stake for around $10 billion. In the broad energy sector, the Energy Select Sector SPDR Fund /quotes/zigman/246199/quotes/nls/xle XLE -1.60% fell 1.6%. S&P 500 Index component Alpha Natural Resources /quotes/zigman/362718/quotes/nls/anr ANR -10.12% lost 10% and Tesoro Corp. /quotes/zigman/243084/quotes/nls/tso TSO -3.83% dropped 3.8%. In the broad energy sector, the NYSE Arca Oil Index /quotes/zigman/6015539 XX:XOI -1.36% declined by 1.4% and the Philadelphia Oil Service Index /quotes/zigman/1470028 OSX -1.62% moved down by 1.6%. The NYSE Arca Natural Gas Index /quotes/zigman/6015474 XX:XNG -1.35% dropped 1.4%. Reuters BP tanker refuels a transport plane in Wales. Peabody Energy Corp. /quotes/zigman/282895/quotes/nls/btu BTU -11.27% lost more than 11% after the coal producer said its expects adjusted third-quarter profit of 20 cents to 45 cents a share, below the Wall Street estimate of 65 cents a share in a survey of analysts by FactSet. The company cited Australian conditions that include performances at contractor-operated mines, lower average realized pricing and other factors. “While we see some bright spots within the global coal markets, there remain macroeconomic and industry challenges that Peabody is well positioned to weather given our global position and financial strength,” the company said. The losses in energy stocks came despite modest gains in commodity prices, with crude for September delivery /quotes/zigman/2203153 CLU2 -0.57% up 36 cents to settle at $88.50 a barrel. See Futures Movers for more on crude oil prices. /quotes/zigman/289939/quotes/nls/cvx Add to portfolio CVX Chevron Corp. US : U.S.: NYSE $ 106.30 -1.65 -1.53% Volume: 6.66MJuly 24, 2012 4:00pP/E Ratio7.75Dividend Yield3.39%Market Cap$212.95 billionRev. per Employee$3.92M /quotes/zigman/627449 Add to portfolio DJIA Dow Jones Industrial Average US : DJ-Index 12,617.32 -104.14 -0.82% Volume: 131.53MJuly 24, 2012 4:30p Add to portfolio IN:500325 Reliance Industries Ltd. IN : India: Bombay रु 724.55 +5.80 +0.81% Volume: 225,233July 24, 2012 12:00aP/E RatioN/ADividend Yield1.17%Market Capरु2353.58 billionRev. per Employeeरु154.40M /quotes/zigman/247026/quotes/nls/bp Add to portfolio BP BP PLC ADS US : U.S.: NYSE $ 39.81 -0.59 -1.46% Volume: 5.01MJuly 24, 2012 4:00pP/E Ratio4.97Dividend Yield4.82%Market Cap$127.12 billionRev. per Employee$4.73M /quotes/zigman/246199/quotes/nls/xle Add to portfolio XLE Select Sector SPDR-Energy US : U.S.: NYSE Arca $ 67.04 -1.09 -1.60% Volume: 12.66MJuly 24, 2012 4:00p /quotes/zigman/362718/quotes/nls/anr Add to portfolio ANR Alpha Natural Resources Inc. US : U.S.: NYSE $ 6.22 -0.70 -10.12% Volume: 16.03MJuly 24, 2012 4:00pP/E RatioN/ADividend YieldN/AMarket Cap$1.52 billionRev. per Employee$552,531 /quotes/zigman/243084/quotes/nls/tso Add to portfolio TSO Tesoro Corp. US : U.S.: NYSE $ 26.33 -1.05 -3.83% Volume: 5.37MJuly 24, 2012 4:01pP/E Ratio7.54Dividend YieldN/AMarket Cap$3.84 billionRev. per Employee$5.85M /quotes/zigman/6015539 Add to portfolio XX:XOI NYSE Arca Oil Index XX : NYSE Glb Ind 1,161.04 -16.06 -1.36% Volume: 0.00July 24, 2012 8:09p /quotes/zigman/1470028 Add to portfolio OSX PHLX Oil Service Index US : PHLX Ind Cur 211.23 -3.47 -1.62% Volume: 0.00July 24, 2012 5:17p /quotes/zigman/6015474 Add to portfolio XX:XNG NYSE Arca Natural Gas Index XX : NYSE Glb Ind 622.37 -8.52 -1.35% Volume: 0.00July 24, 2012 8:09p /quotes/zigman/282895/quotes/nls/btu Add to portfolio BTU Peabody Energy Corp. US : U.S.: NYSE $ 20.55 -2.61 -11.27% Volume: 21.64MJuly 24, 2012 4:01pP/E Ratio5.46Dividend Yield1.65%Market Cap$6.31 billionRev. per Employee$996,157 /quotes/zigman/2203153 Add to portfolio CLU2 Crude Oil - Electronic (NYMEX) Sep 2012 US : U.S.: Nymex $ 88.00 -0.50 -0.57% Volume: 2,353July 24, 2012 8:34p Steve Gelsi is a reporter for MarketWatch in New York. ============ Author bonobo77 View Profile Add to favourites Ignore Date posted today 06:59 Subject What's stopping them? Votes for this Posting Voted 49 times. Message The entry of Exxon was rumoured in June 2011. Exxon’s entry was announced in October 2011. Chevron and Total were rumoured to be weighing up deals in November 2011. They have both been confirmed this week. The ‘wave of consolidation’ that started with a ripple of rumours, has now become a swell and the ‘frontier’ operators like GKP are surely about to get towed-in. Surfing metaphors aside, GKP has been subject to more than its fair share of rumour. We’ve heard talk of £8 from Exxon. Chevron has run their slide rule over us. Total supposedly have the right expertise to deal with Shaikan’s heavier oil. And then there are the visits to China that Todd doesn’t like to talk about (unlike Todd to be coy, isn’t it). The ‘Exit Awards’ are, no doubt, there for a reason. So what is now standing in the way of Big Oil acquiring our company or Kurdistan’s ‘jewel’ at Shaikan (you know, the one that just keeps ‘getting bigger and bigger’; the asset from which Kurdistan expects to produce 50% of its entire oil)? We have been told that the Shaikan appraisal is finished, commerciality can be declared and an FDP has to be submitted by December at the latest. Does a major/NOC need this FDP to be written before they can make a bid? I doubt it. There were originally supposed to be two FDPs, one for GKP to move Shaikan to production and another written with a major in mind. We now know that only the latter will be written. And one assumes that any new operator at Shaikan would want to have input on any plan being drawn up for it. The earlier they can do this, the better. Is GKPs reported cancellation of a pipeline contract an indication that another party (or parties) are redrawing the plan? So the lack of FDP right now should not inhibit any bid. Perhaps the KRG is the block on a bid. Or rather, they do not wish a bid for Shaikan to be announced just yet. This would assume that a bid has been made, or a deal in principle signed, that is simply awaiting the green light from a KRG who want to play their Aces in an orderly fashion. It’s possible, but with an asset of the size and importance of Shaikan, it would be hard to keep such a deal quiet … especially as every man and his dog will have wanted a slice. So in this scenario, one of the biggest and most hotly contested auctions for the biggest oil find in 40 years, would have needed to take place under total lockdown. Is this likely? And has this provided the fuel for the GKP rumour mill? For me, the one obvious ‘hurdle’ that might prevent a bid forthcoming, or prevent an existing ‘deal in principle’ from being announced, is the court case. We know from Todd’s evasive answers at the AGM, that the company has likely been approached with offers, or at least ‘sounded out’ (‘have we announced any bids?’ was his deft, but transparent, rhetoric). If this is the case, one would assume that Todd and Co. would be talking up the value of Shaikan and the company to entice the ‘offer we cant’ refuse’. Todd has spoken of 20bn barrels at Shaikan, and JG said Shaikan is worth 560p on our previously announced OIP. But they’ve recently gone coy on our valuation. The Edison report this week – commissioned by GKP – was ultra conservative on valuation. Mirabaud – our house broker – issued a note in advance of the AGM that certainly played down our worth. It does force us to consider that the company is seeking to keep a lid on our valuation just now. And I can only think that they are doing this because of the impending court case. There are two scenarios related to the October court case where it might be in Todd’s interests to keep our valuation low. The first: the company expects Excalibur to win the case and be awarded a slice. The lower our valuation, the smaller their award. Do you think Todd expects to lose? At the AGM he said they hadn’t lost any argument or decision yet, and they don’t intend to. And all the court reports to date have suggested that it would be a mammoth task for Excalibur to succeed, never mind secure everything they are demanding. The other scenario that might necessitate a suppressed valuation would involve an out of court settlement. And I believe this may be the reason why – since PW came on board – GKPs trumpets have been packed away, and they are now being subdued and even vague in their estimations for Shaikan. Todd’s divorce is behind us. Shaikan’s appraisal has been announced as complete. The clock is now ticking. Meanwhile, the KRG play three aces: Chevron, Total, Gazprom. The ripple of rumours is developing into a big barrel of a wave. We are perhaps awaiting only one event – an out of court settlement – before we pop-up and ride it. I’m guessing that could happen any time in the coming weeks. Or maybe everything will be allowed to coalesce on the August 31st 'ultimatum' that Maliki now faces? Worthy of debate, at least. =================== Insight: Oil's big players raise the stakes in Iraqi Kurdistan Sun, Aug 05 04:03 AM EDT By Peg Mackey and Andrew Callus LONDON (Reuters) - Iraqi Kurdistan's crude oil is plentiful and easy to get at, rare among undeveloped energy resources. The man managing it, a former North Sea engineer and consultant turned politician, knows how to attract investment. But the companies working there under contracts with the semi-autonomous Kurdistan Regional Government (KRG) are not getting much out, and they are not getting paid, all because of a dispute over control with the national government in Baghdad. Despite the row, rooted deep in the tinderbox politics of Iraq, ever bigger oil companies are moving into the northern region, angering Baghdad with their seal of corporate approval for a government that is seeking more autonomy in one of the most volatile parts of the world. Something has to give. "The northward migration continues," said a senior oil executive involved in Iraq. "And this could well be the tipping point." Output in this mountainous region bordering Turkey, Syria and Iran is an on-off trickle for now in global terms but, given the right investment and an export route, it could reach 1 million barrels per day by 2014, and 2 million five years later, according to Ashti Hawrami, the KRG natural resources minister. That would be more than Libya, the North African producer whose civil war outage led to a sharp jump in prices last year. Hawrami worked in Scotland for the British National Oil Company in the 1970s and early 1980s. He later ran an oil services firm, then moved into consulting before becoming a KRG minister in 2006. Oil men admire his commercial savvy. They say he understands that companies have a simple need for returns that justify investments, in stark contrast to suspicious governments they deal with elsewhere in the Middle East. "The difference is that they want us here while in the south of Iraq, it feels like they don't," said one oil executive. The sticking point for KRG development is that Baghdad has jurisdiction over all exports, and contests the validity of contracts signed with the Kurdish government in Arbil. It tries to keep the region on a tight leash, limiting supplies of fuel and restricting its flow of cash under an entitlement based on 17 percent of the country's oil export income. There is much friction, claim and counter-claim over the arrangements, and in its most recent act of protest, the KRG halted oil exports in April, saying Baghdad owed $1.5 billion. In 2002 Turkish company Genel Enerji blazed an exploration trail to the region. Norwegian company DNO and others followed after the U.S.-led invasion of Iraq in 2003. Now more than 40 foreign companies are drilling in oil territory so rich that in some places the crude seeps out of the hillside and collects in the valley below. Proven reserves in Iraqi Kurdistan of 45 billion barrels amount to more than a third of the national total of 143 billion recorded in BP's annual statistical review, where Iraq accounts for 8.7 percent of all the world's known oil. EXXON GAME-CHANGER In 2007 Hawrami came within a whisker of making Royal Dutch Shell his first really big signing, but the board of the world industry number two ruled it too risky, an industry source said. Shell later became, and remains, the biggest oil investor in southern Iraq. Because of the politics and the payback issue, ventures into KRG territory remained the preserve of smaller explorers with an appetite for political risk and nothing to lose in Baghdad. In November last year, four years after Shell walked away, came the game changer. Exxon Mobil, the world's biggest private oil company, signed a deal for six exploration blocks. Last month, the U.S. number-two player Chevron moved in too, buying 80 percent of two blocks, Sarta and Rovi, from India's Reliance. And last week, Total of France piled in, buying 35 percent of the Harir and Safen blocks from Marathon Oil, along with Gazprom of Russia, which farmed in to the Garmian block operated by Canadian company Western Zagros. Suddenly, four of the world's top 10 international oil companies by market value have set up shop in Arbil. Baghdad is furious, and has made it clear that both Exxon and Total are risking their involvement in multi-billion dollar projects in the south of the country. So what are the big international oil companies thinking? There is still no obvious way to monetize these investments. Letters last week to the KRG from DNO, Genel and others with activities in Iraqi Kurdistan expressed their continued frustration at not getting paid. Executives say the move north by the big companies sends a message to Baghdad that its commercial terms on southern oilfield projects are unattractive, and that institutional chaos and the slow pace of postwar redevelopment are problems. "We understand the political risk of going into the north and the commercial terms are attractive enough to take that risk," said an oil industry source. "The economics of Iraq's service contract just can't compete with the terms on offer in Kurdistan." More new entrants may be beating a path to Hawrami's door for quality acreage and a safer operating environment as well as a better potential rate of return than the south. KRG production sharing contracts (PSCs) promise as much as 25-35 percent versus the 15 to 18 percent in the south for fixed-fee output-boosting and start-up deals on untested fields, oil experts say. Total's CEO Christophe de Margerie has been openly critical of Baghdad's service contract terms. The latest national tender for exploration blocks drew no interest from the oil majors. Norway's Statoil and Italy's Eni are both looking at KRG acreage, say industry sources. Statoil pulled out of its stake in the giant West Qurna-2 oilfield in southern Iraq earlier this year, while Eni is still leading a project to develop the huge Zubair oilfield in southern Iraq. Other big companies that still have all their Iraq eggs in the southern basket include Britain's BP, which recently produced its 1 billionth barrel in the southern Rumaila field, Russia's Lukoil, as well as the Chinese and Malaysian state firms CNPC and Petronas. Shell has stayed loyal to Baghdad too. According to industry sources it decided last year for a second time against a KRG tie-up, turning its back on a partnership with Exxon to focus on a $17 billion gas project and other commitments in the south. BP said it had plenty to keep it occupied in the south and no plans to look north. Although Shell would not comment, company officials privately have a similar view to that of BP. But those already on the ground in Kurdistan are likely to build up their positions. Exxon, risking operatorship of West-Qurna-1 with its dalliance in the north, is looking at unawarded blocks along the border with Turkey, and Chevron and Total are expected to snap up more acreage, industry sources said. BAGHDAD'S BLACKLIST "It's quite worrying for the Iraqi government to have the big companies walking away," said a senior oil executive who believes Baghdad will take action to deter further defections. "If the federal government does not act, other companies will think they can move north without further consequences. And they have to do what they say - so far, it's just been a lot of noise. "And we will, of course, use the situation as an argument to look for more reasonable terms (in southern Iraq)." Baghdad has protested at the highest political level about Exxon's floodgate-opening move, with Iraqi Prime Minister Nuri al-Maliki writing to U.S. President Barack Obama predicting dire consequences for the country's stability. It has also threatened to throw out Exxon and Total and blacklist Chevron from future involvement. All to no avail - so far. "I don't think Exxon can hang onto and work both pieces and they will be forced to choose very soon," said a senior western executive, adding that he expected chief executive Rex Tillerson, if pushed, to opt for Kurdistan. In the latest twist, Arbil has responded to Baghdad's saber rattling with an apparent softening of its position, agreeing to resume exports until August 31 provided it gets the money it says it is owed. The oil concessions dispute between Maliki and KRG president Masoud Barzani forms part of a deeper political rift in Iraq, whose wobbly coalition of Sunni, Shi'ite and Kurdish leaders are embroiled in their second serious squabble since the last U.S. troops left in December. TURKISH QUESTION With their potential to produce immense wealth for whoever controls them, reserves in Kurdistan also play into the broader balance of power and ethnic tensions in the region. When it comes to exports, a fully independent Iraqi Kurdistan could in theory avoid Iraq territory altogether by sending its crude through Turkey. In May, the KRG announced plans to build a pipeline from the Taq Taq oilfield to hook up with an existing one that runs from Kirkuk in Iraq to Ceyhan on Turkey's Mediterranean coast, targeting August 2013 as the completion date and initial capacity of 1 million barrels a day. But there's a snag here too for the KRG and its investors, and one that could strengthen Maliki's hand. Turkey's prime minister Tayyip Erdogan performs one of the world's trickiest political balancing acts. Having turned his back last September on his one-time friend, President Bashar al-Assad of Syria, and embraced the rebels fighting him, Erdogan has made an enemy along his longest border. Iran, which backs Assad, is another potentially unfriendly neighbor. Meanwhile Turkey, like Syria, has a restless Kurdish population of its own. So Erdogan may be reluctant to upset Baghdad, and a Kurdish state flush with oil money on his frontier might not be the perfect outcome for him either. "The one thing in Baghdad's favor right now is that the Kurds don't have an independent export line," said Raad Alkadiri of Washington consultancy PFC Energy. "So a lot of this will come down to the Baghdad-Arbil-Ankara triangle, and given developments in the region, including Syria, how this relationship plays out could surprise the Kurds and investors there." (Additional reporting by Tom Bergin; Editing by Anthony Barker and Richard Mably) ===================== A Good Month for Iraqi Oil Shares Posted on 09 August 2012 Like good comedy, the secret of good investment is often said to be timing. Someone buying shares at the end of June in Heritage Oil, which has interests in Iraqi Kurdistan, may have had reason to be concerned if they planned to sell shortly afterwards, as the shares were suspended in early July pending the publication of a prospectus. However, their patience was amply rewarded when trading resumed on Tuesday and the shares gained 21% on the day. Those who held on were up another 19%, compounded, on Wednesday, giving them a total gain of 44%. But while Iraq-focused oil shares have had a bumpy ride over the years, the past five weeks have been particularly fruitful. Just look at these returns from a selection of the players: • Genel Energy, up 11.3% •DNO, up 22.7% •Afren, up 22.9% •Gulf Keystone, up 36.7% •Heritage Oil, up 43.9% •WesternZagros, up 48.4% And despite these significant gains, all of these except WesternZagros are still well below their peaks. Momentum traders may have on opinion on whether the upward trend will continue; fundamental investors will ignore these factors and consider such metrics as asset valuations and cash flows. However the shares will ultimately be valued, Iraq is floating on a lake of oil, and the whole country should reap the benefits of its development. ============