China’s CNPC Seen Tapping Exxon-Rosneft Assets: Real M&A ; Understanding Mr Darcy

Votes for this Posting Voted 4 times. Message China’s CNPC Seen Tapping Exxon-Rosneft Assets: Real M&A By Aibing Guo & Zijing Wu - Aug 6, 2013 7:27 AM GMT China National Petroleum Corp. already spent more money this year on energy assets than any other global producer. Oil and gas fields controlled by Exxon Mobil Corp. (XOM) and Russia’s OAO Rosneft may be next on the list. China’s largest oil producer, known as CNPC, has made more than $9 billion of purchases this year -- and has considered another $4 billion, according to people familiar with the matter -- as part of a plan to double overseas output by 2015. Spending will likely accelerate under Zhou Jiping, who was named chairman in April and has more than a decade of experience in international operations, CLSA Asia-Pacific Markets said. CNPC is ramping up deals to make up for lost ground after Sinopec Group and Cnooc Ltd. (883), two other Chinese state-owned energy companies, outspent the producer by about $50 billion on overseas transactions in the five years through 2012, according to data compiled by Bloomberg. CNPC’s success with mature fields makes an Exxon asset in Iraq a target, Sanford C. Bernstein & Co. said, while a supply agreement with Rosneft may lead to deals with the state-controlled Russian producer, according to UOB-Kay Hian Ltd. “CNPC’s skill set makes it a good fit for many developed onshore oilfields in central Asia, the Middle East and South America,” Neil Beveridge, a Hong Kong-based oil and gas analyst at Bernstein, said by phone. “CNPC’s state-owned background is more of a bonus rather than a burden when it seeks acquisitions in those regions.” Oilfield Experience At its Daqing field, discovered in the Heilongjiang province of northeastern China in 1959, CNPC has gained “world class” experience at extending the life of oilfields, Beveridge said. The company also drills for oil in Syria, Sudan, Iraq and several central Asian countries. CNPC plans to increase overseas production to 200 million tons by 2015, about twice what it produced abroad last year. Output from fields outside China may account for 60 percent of production by the end of the decade, former Chairman Jiang Jiemin said in January. The proportion was 37 percent in 2012.

Jiang this year became head of China’s State-owned Assets Supervision and Administration Commission. His replacement, 61-year-old Zhou, previously led CNPC’s overseas division. “Zhou’s expertise in international business will help CNPC’s international expansion,” Simon Powell, an analyst at CLSA in Hong Kong, said in a phone interview.

Liu Weijiang, CNPC’s Beijing-based spokesman, said the company doesn’t comment on speculation. Supply Needs To supply the world’s largest consumer of energy, Chinese companies announced at least $108 billion of overseas purchases in the five years through 2012, about one fifth of the total spent by energy companies worldwide on cross-border acquisitions, data compiled by Bloomberg show. While CNPC spent more than $16 billion, Sinopec Group -- officially known as China Petrochemical Corp. -- and Cnooc, China’s second- and third-biggest oil and gas producers, spent $41 billion and $26 billion respectively, the data show. The Cnooc total includes purchases by parent China National Offshore Oil Corp. This year, CNPC has struck at least $9 billion of deals, including a $4.2 billion purchase of a stake in Mozambique’s Rovuma fields, the data show. The 2013 total also includes a stake in Kazakhstan’s biggest oil field worth about $5 billion. The Chinese producer is considering buying Petroleo Brasileiro SA assets in Colombia and Peru with a value of about $2 billion, people with knowledge of the matter said last month. CNPC also held talks to buy Brazilian oil startup Barra Energia Petroleo e Gas for about $2 billion, people said in May. Crude Prices Crude oil prices may help, said Wu Fei, a Hong Kong-based analyst at Bocom International. Brent dropped to an average of about $107 a barrel this year, from $111.7 in 2012. “CNPC may want to get some deals done quickly while Brent stays relatively stable,” Wu said by phone. “China needs to import the fuel no matter what crude prices may change to.” CNPC’s experience in Iraq makes the company a candidate to buy Exxon’s 60 percent stake in the West Qurna-1 field in southeastern Iraq, said Laban Yu, a Hong Kong-based analyst at Jefferies Group LLC. CNPC produces about 1.65 million barrels of oil a day from Iraqi projects, the company said last October. The Exxon asset is near the Rumaila field run by CNPC and BP Plc (BP/), and may produce as much as 600,000 barrels of oil per day by the end of 2013, Exxon has estimated. Iraq’s government has asked Exxon to abandon projects in the semi-autonomous Kurdish region in the north, or exit projects in the south. Other Bidders? “CNPC could take over the operation by moving its personnel and equipment from the nearby Rumaila site and start commercial production right away,” Bernstein’s Beveridge said. Exxon’s stake would cost at least $3 billion, he said. David Eglinton, an Exxon spokesman, declined in an e-mail to comment when asked whether the Irving, Texas-based company has held talks with CNPC over its West Qurna-1 stake or is trying to sell it. There may be other bidders. PT Pertamina, Indonesia’s state-owned oil company, was in talks with Exxon to buy as much as 20 percent of the West Qurna-1 field, the Indonesian government said in March. Natural gas projects owned by Moscow-based Rosneft, close to a pipeline connecting Siberia and the Pacific, may yield targets after CNPC and Rosneft signed a $270 billion oil-supply agreement in June, according to Shi Yan, an analyst at UOB-Kay Hian in Shanghai. The 25-year deal will supply about 360 million metric tons of crude to China, Russian President Vladimir Putin said on June 21. Rare Opportunity Officials at Rosneft didn’t immediately respond to requests for comment about a potential deal with CNPC. Any deal with Rosneft would be “in the range of billions of dollars” given the size of the projects, Shi said. “A majority ownership in the resources would allow CNPC to control some of the best upstream natural gas assets,” Shi said. “The opportunity to buy a quality asset at a reasonable price is rare, after most in easy-to-reach areas have long been controlled by established oil companies in the West.” ==================== Wed 21:25 Latest shareholdings update scaramouche 33 I note that the list of largest shareholders has been updated on the GKP website, showing figures as at 18 July 2013 http://www.gulfkeystone.com/securities.aspx Details are as follows with apologies if the formatting does not come out perfectly! Number of shares in issue as at 18 July 2013: 887,686,957. Of the shares in issue 33,564,740 (3.78%) were considered not to be in public hands. Insofar as is known to the Company, the identities and percentage holdings of Gulf Keystone’s significant shareholders (3% or more) are shown in the table below: Rank Shareholder 18 Jul 2013 % 1 TD Waterhouse 59,636,473 6.72% 2 Barclays Wealth 53,759,397 6.06% 3 Capital Research Global Investors 49,596,975 5.59% 4 M&G Investment Mgt 47,973,877 5.40% 5 Halifax Share Dealing 40,239,901 4.53% 6 Hargreaves Lansdown Asset Management 39,062,422 4.40% Previously, the Annual Report (which came out on 20 June 2013) http://www.investegate.co.uk/gulf-keystone-petrol--gkp-/rns/2012-results-announcement/201306200700114413H/ showed ‘Significant shareholdings’ at 31 May 2013 as follows… TD Direct Investing 59,123,475 6.66% Barclays Wealth 54,036,195 6.09% Capital Research Global Investors 49,596,975 5.59% M&G Investment Mgt 45,350,000 5.11% Hargreaves Lansdown Asset Management 37,838,687 4.26% Halifax Share Dealing 31,964,809 3.60% Selftrade Investments 30,631,160 3.45% From this, we can see... ‘Halifax share dealing’ has increased by about 8.25 million shares, while ‘Selftrade’ has unexpectedly fallen below the 3% reportable threshold, which would represent a decrease of at least 4 million shares. TDW, Barclays, Halifax and Hargreaves Lansdowne now total 21.7% so, IMHO when other brokers like Selftrade that are also commonly used by PIs are added in, it is likely that the overall PI holding is around 25-30%. This figure has remained pretty similar for some time so there seems to be little evidence of PIs beiing gradually eased out or the oft-repeated theory that there will be very few Pis left at the end! Most seem to be 'hanging' on come what may IMHO. M&G Investment Management's holding showed an increase of about 2.62 million shares in the 7-week period leading up to the AGM, while Capital's figures were unchanged. GLA, scaramouche =============================== STOCKS NEWS Reuters Results diary Europe Real-time Equity News UK Stocks on the move UK smallcaps UK smallcaps news 13:07GMT 26May2010-Afren rises; RenCap initiates with "buy" ----------------------------------------------------------- Shares in Nigeria-focused oil explorer Afren rise 12 percent as the oil price climbs 3 percent and Renaissance Capital initiates coverage with a "buy" rating. "Exceptional production growth from current developments will put the company in a different weight class, likely becoming one of the top-20 independent oil producers in Africa," says Renaissance Capital analyst Dragan Trajkov. An analyst at Evolution Securities says the recovery in the oil price combined with the note pushes up Afren's shares, rather than any company-specific news. For more, click on Reuters messaging rm://sarah.young.thomson reuters.com@reuters.net 11:14GMT 26May2010-BP down, uncertainty surrounds plug attempt -------------------------------------------------------------- Shares in oil major BP fall 0.3 percent, lagging a 2 percent rise in both Britain's FTSE 100 index of blue chip companies and the European index of oil and gas companies. BP is trying to stop oil gushing into the Gulf of Mexico as the leak from a ruptured well there threatens to become the largest oil spill in U.S. history. "Until we get some sort of positive news out of BP, the market's going to be pretty down on them," says Arbuthnot Securities analyst Dougie Youngson. The British company faces a pivotal day on Wednesday as its latest attempt to control the leak by plugging the well with heavy fluids, the so-called "top kill" option, gets underway. "There's a bit of doubt coming through from BP about whether this top kill is going to work," says Panmure Gordon analyst Peter Hitchens. For more please click on Reuters messaging rm://sarah.young.thomsonreuters.com@reuters.net 10:58GMT 26May2010-UK small caps up 0.7 pct at midday ================ West house securities Two points: first, brokers exist to have opinions and to attempt influence behaviour ...they are no different to advertising agencies and must have an angle ... theirs/his is Afren. Lets grab some attention by initiating "coverage" by being the ONLY broker out of 50 listed to put a sell rating on GKP ...oh and let's use it as a means of advertising Afren as our preferred choice. The guy at Westhouse who covers Afren is just another salesman, Dragan Trajkov http://westhousesecurities.com/profile.asp?user=92 whose previous experience was covering African oil plays ...so probably has a cosy relationship with Afren from his days in Renaissance Capital http://www.iii.co.uk/investment/detail/?isplay=news&code=cotn:AFR.L&action=article&articleid=7912710 ... So lets dis one of the biggest, high profile and volatile Kurd plays to promote one we have a relationship with from the past and so generate some attention and hopefully some business for Westhouse .... He's a player like everyone else in the city... Secondly ... who thefeck are Westhouse Securities! Another city game ....but a rather silly looking one to me .... ============== Oil, Sustainable Development, and the Transformation of Iraq Posted on 07 August 2013. Tags: Ahmed Mousa Jiyad By Ahmed Mousa Jiyad. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News. Oil, Sustainable Development and the Management of the Transformation in Iraq This contribution is based on PowerPoint presentation delivered before the Symposium “Iraq – 10 Years On” held at Tahrir Campus of the American University in Cairo (AUC) on 3rd and 4th June, 2013. I - Introduction As this conference is about Iraq it is therefore expected that other contributors would address sustainable development from different aspects and disciplines using probably different methodologies, terminologies and statistical data. This presentation focuses on energy and more precisely on petroleum. And from this perspective sustainable development is taken within the context of the depleting finite natural resources in the country. The presentation begins by outlining briefly the conceptual and analytical framework of sustainable development, in a rich deplete-able natural resources developing country, as a process of transformation through horizontal and vertical structural diversification. Then it uses “budget analysis approach” to draw few conclusions on whether “horizontal diversification” in the economy had occurred during the last ten years commensurate with the availability of the necessary development financing. A more detailed analysis of the efforts in the petroleum sector was provided to assess the “vertical diversification” in this important sector. The presentation argues that the lack of and imbalances in both horizontal and vertical diversification during the last ten years had undermined the sustainable development prospect, entrenched the dependency on upstream petroleum subsector and pushes the economy further in the web of rentierism. However, the recent launching of the first ever energy strategy might bring some sense to development planning in the country. Hence the presentation suggests and highlights the urgency for adopting different and diversified strategies to manage the production of petroleum and the associated influx of export revenues. Moreover, it introduces and outlines the importance of full transparency of all resources and payments flows within the “Value Cycle” during the duration of the related projects. Finally, the presentation ends with few concluding remarks. The full paper can be downloaded here. Mr Jiyad is an independent development consultant, scholar and Associate with Centre for Global Energy Studies (CGES), London. He was formerly a senior economist with the Iraq National Oil Company and Iraq’s Ministry of Oil, Chief Expert for the Council of Ministers, Director at the Ministry of Trade, and International Specialist with UN organizations in Uganda, Sudan and Jordan. He is now based in Norway (Email: mou-jiya@online.no). ============ Author Dalesmann View Profile Add to favourites Ignore Date posted Thursday 10:52 Subject Understanding Mr Darcy Votes for this Posting Voted 81 times. Message I'm afraid this is rather long! GRH has been banging on about this for some time ! The last Competent Persons Report was back in 2010. Why so long between updates I hear you cry. This was the Ryder Scott report, which was technical in nature and hard to understand – well it was for me! It does however contain some colourful language like ‘’world class” But world class what? Here is an extract from page 11 The Completion Test and the Extended Well Test run after the well was cased over the Sargalu, ……..it did suggest extremely high reservoir permeabilities possibly at the high end of reservoirs found in the world. Well I liked the last bit – it sounds very encouraging. I understand DST – Drill Stem Test and I understand the difference between porosity and permeability so far so good. On page 10 we learn a bit more about the tests – its depth – the loss of drilling fluid, the flow rates and the pressure tests. Ryder Scott then moves on to comment on the Extended well test We learn that for the Sargalu analysis of the test data indicates a permeability of 9.8 Darcies and a skin factor of +56. What is all that about? Well a little bit of googling gives us the definition of darcies. Slumberger say it should be spelt Darcys but we will let that pass. Whats a Darcy? From Wiki A darcy (or darcy unit) and millidarcy (mD) are units of permeability, named afterHenry Darcy. They are not SI units, but they are widely used in petroleum engineering and geology. Rock permeability is usually expressed in millidarcys (mD) because rocks hosting hydrocarbon or water accumulations typically exhibit permeability ranging from 5 to 500 mD. The odd combination of units comes from Darcy's original studies of water flow through columns of sand. Water has a viscosity of 1.0019 cP at about room temperature. So Ryder Scott is saying that the analysis of the test data from the Sargalu indicates a permeability of 9.8 Darcies (9800 milli darcies) and a skin factor of +56. That is HUGE! – Wiki says that rocks hosting hydrocarbon or water accumulations typically exhibit permeability ranging from 5 to 500 mD. So the Sargalu exhibits 18 times the permeability found in typical rocks. Again from Wiki. Permeability Permeability is a property of rocks and is an indication of the ability for gases or fluids to flow through rocks. High permeability will allow fluids and gases to move rapidly through rocks Permeability is affected by the pressure in a rock. The unit of measure is called the darcy, named after Henry Darcy (1856) Sandstones may vary in permeability from less than one to over 50,000 millidarcies (md). Permeabilities are more commonly in the range of tens to hundreds of millidarcys If we move on to the Kurre Chine A we find that the permeability as measured by Darcys has declined to 5 but this is still 10 times that of a typical reservoir rock. The viscosity has increased to 39 API as opposed to 18 API in the Sargalu. Lighter oil was found in the Kurre Chine B. Here we learn that the permeability is down to 322 milli Darcies. But the oil is light - 59 API – almost a condensate and the well flowed extremely well. There was a much greater GOR, Gas to oil ratio . Well how does this compare with other mega fields? GRH pointed to Ghawar in Saudi. 5 major sub sections are attributed to Ghawar The have reasonably light oil of around 34 API and a permeability measured in MD – around 600- 650 MD on average. The reservoirs have been producing since the 1940s! So what if anything can we conclude from this short foray? Well the Shaikan reservoirs appear to be very highly fractured carbonates (Limestones and Dolomites). W knew that. The permeability appears to be world class. What we don’t know is the extent of these fractures. Consider a map of Britain. Add in the motorways Fill in the trunk roads, the A roads. Now add in the plethora of B roads And finally the tiny C roads. The vast majority of the UK would be covered by a complex inter connected road network which in turn is connected to many arterial route ways. This network is dense. If the fracturing at Shaikan is like this then I would expect the recovery factor to rise as oil flows down the well defined route ways into the well bore. There will of course be certain regions say the NW Highlands of Scotland that will not have the density of roads compared to those around our major cities but there will still be some trunk roads and some highways and byways to allow the vast areas of the Highlands to be accessed. If we move to Texas there will still be the network of arterial routes but the density of the road network as you move away from the cities reduces. If this is the model for Shaikan then the permeability will be less and the RF is less likely to rise. A simple analogy but its one I find useful. Ryder Scott comment on the lack of water being produced at the surface. They don’t talk about a regional aquifer but should one exist then the ability to maintain pressure in the various reservoirs must mean that the RF will increase. Returning to Ryder Scott Ryder Scott is saying that the analysis of the test data from the Sargalu indicates a permeability of 9.8 Darcies and a skin factor of +56. We now know something about Darcies but what is this term skin factor? http://www.ogj.com/articles/print/vol-110/issue-8/drilling-production/new-method-evaluates-efficiency.html Introduction to skin factor - nothing to do with Amber Solaire! As a consequence of drilling and completion operations, most wells have reduced permeability near the borehole (skin zone). At oil-water production the radius of the skin zone increases over time. It is known that reservoir waters associated with oil-bearing formations contain a variety of dissolved solids (scales). At simultaneous production of oil and water, precipitation of scales occurs In the vicinity of the well the pressure logarithmically increases with the radius. As a result deposition of scales mainly occurs near the wellbore. Due to partial blocking of pores a skin is created whose size increases with production time. Deposition of scales in the pores greatly reduces the permeability of formations around the wellbore. This results in pressure loss through the skin and a corresponding reduction in well productivity. Well stimulation through acidizing or hydraulic fracturing can improve well productivity even above production levels in undamaged conditions. Quantitatively, the skin is defined as a parameter (skin factor), which depends on the thickness and the effective permeability of the skin zone2 (Equation 1). Now that’s interesting as scaling appears to be increased by water being present. But at Shaikan no water has yet been reported and it is thought that the reservoirs may be full to spill. However RS says that the Sargalu had a skin factor of +56. Whats that mean http://www.ogj.com/articles/print/vol-110/issue-8/drilling-production/new-method-evaluates-efficiency.html http://en.termwiki.com/ENkin_factor skin factor A numerical value used to analytically model the difference from the pressure drop predicted by Darcy law due to skin. Typical values for the skin factor range from -6 for an infinite-conductivity massive hydraulic fracture to more than 100 for a poorly executed gravel pack. http://www.pe.tamu.edu/blasingame/data/z_zCourse_Archive/P620_02C/P620_02C_Exam_2/SPE_xxxxx_VE_Skin_Effect_WBS.pdf The pressure drop in a well per unit rate of flow is controlled by the resistance of the formation. The viscosity of the fluid , and the additional resistance concentrated around the well bore resulting from the drilling and completion techniques employed and perhaps from the production practices used. The pressure drop caused by this additional resistance is defined as the skin effect . This skin effect considerably detracts from a wells capacity to produce. ------------------------------------------------------------------------------------------------------- At Shaikan we have seen little in the way of formation water and yet we have a high skin factor. it is possible that this high skin factor was caused by drilling mud and associated liquids being pumped into the fractures effectively blocking them. Was it SH4 that had an acid treatment to counteract this and we all know what effect that had. SH4 is huge. All of which only scratches the surface of the Ryder Scott Report. There are many members of this board who have far more knowledge than I. So the following conclusions are from a drilling novice and I’m happy to be corrected. 1. The permeability at Shaikan is VERY high when compared to Ghawar. 2. The skin factor noted by Ryder Scott could be due to blocking of the fractures by drilling mud 3. The wells can be cleaned up and better flow rates accomplished. 4. There is the possibility that the RF will rise over time as the fracture system and associated matrix is better understood 5. The Shaikan Reservoirs are remarkable – absolutely world class. Kind regards Dalesman ============================ Interesting stuff Dalesman but we should not compare Shaikan to Ghawar and if some on here have been doing they're giving out serious misinformation. The Ghawar field produces from the Arab D formations which are Jurassic limestones (as is the Sargelu of course) but they are VERY different formations. The main difference is that the primary porosity in the Arab D formation is within the rock itself. It is composed of mainly very fossiliferous limestones with not a lot of good matrix holding these together so in effect it's like a sponge made up of all manner of small and large fossils with lots of gaps between them. The Sargelu is much more fine grained and does not have anything like the same high level of primary porosity. Instead it has secondary porosity (and permeability) which comes from the fractures. If the fracture network is really extensive it can make for excellent production, but, unlike the Ghawar reservoirs, fractures can be localised and it's possible to have wells where the fracture network doesn't intersect the well path and then you have very low production (or none). The extremely high permeabilities (as in darcies not millidarcies) is misleading in a way as this reflects the fractures. High permeability in Ghawar reflects the whole reservoir; this can be quantified much more accurately than a reservoir relying on fractures alone. The Kurra Chine is a dominantly Dolomite reservoir and this differs from the limestones of the Sargelu. Dolomites are often found to be crystalline and have excellent primary porosity between the individual crystals. Imagine a lump of coarse brown sugar (Kurra Chine) compared to a broken paving slab (Sargelu). With the high API (as you say, pretty much condensate) and a good thickness of this, and with high primary porosity and permeability, this only bodes very well indeed! (hence why the current well is so important) ====================