GLOBAL ENERGY SECTOR FISCAL MEASURES
|The Bilateral Chamber will continue to provide our members and stakeholders with relevant, timely information to help you navigate through these unprecedented times. The proliferation of the COVID-19 pandemic and government-mandated “stay at home” directives have resulted in a massive economic contraction on a global scale. |
Consequently, the significant reduction of global energy demand, energy prices, and revenues have led energy companies to take immediate, proactive measures that would have been unthinkable last year. Those measures include cutting budgets, selling assets, suspending major projects, shutting in production, closing plants, furloughing employees, securing additional credit facilities, and more. This week’s newsletter will focus on those fiscally-necessary efforts.
While the scope of the austerity measures highlighted below may seem overwhelming and the scale difficult to comprehend, we believe that they represent hope for a sustainable future for the global energy industry. Across the world, energy industry stakeholders are making difficult decisions to survive until better days when a robust, recovering economy can be met with a thriving, reliable supply of energy. We believe that, although painful in the near-term, such measures will result in a stronger global energy sector in the long-term. If you have any questions or would like to share helpful resources, please feel free to contact us at firstname.lastname@example.org.
Coronavirus COVID-19 Global Cases by Johns Hopkins CSSE
|Taken as of April 1st, 2020 @9:00 AM CST.|
To view the live update of the COVID-19 Global Cases, Click here.
| MEMBERS AND STAKEHOLDERS IN THE NEWS|
|Forbes: Staring at $20 Oil, Exploration and Oilfield Services Firms Prepare to ‘Write Off’ 2020|
Oil majors such as ExxonMobil, Chevron, Shell, and BP are all evaluating their capital (capex) and operating expenditures (opex), with multi-billion dollar projects likely to be in limbo. Beleaguered mid-tier independents are facing pressures of their own with Occidental Petroleum announcing dividend cuts of over 85%. The cost-cutters' ranks are being swelled by independents like Apache Corporation, Devon Energy and Murphy Oil, all of whom announced dramatic capital budget cuts of 30% or more, even before Big Oil got there. On the OFS side, blue-chip Halliburton has said it would furlough about 3,500 employees in Houston, oil and gas capital of the U.S., for 60 days.
Reuters: Coronavirus, Gas Slump Put Brakes on Exxon's Giant Mozambique LNG Plan
Exxon Mobil Corp. is likely to delay the greenlighting of its $30 billion liquefied natural gas (LNG) project in Mozambique as the coronavirus disrupts early works and a depressed gas market makes investors wary, six sources told Reuters.
Reuters: Exxon Notifies Contractors, Vendors of Spending Cuts Over Coronavirus
Exxon Mobil Corp. is notifying contractors and vendors of planned near-term cuts in capital and operating expenses over a coronavirus pandemic, and will announce the plans once they are final, company spokesman Jeremy Eikenberry said.
NGI: Deluge of North American E&Ps, OFS Operators Slash Spending as Demand Crushed from Coronavirus
Chevron Corp. led the way by oil and natural gas producers in announcing huge cuts to capital spending this year, with Marcellus Shale operator Antero Resources Inc. and Permian Basin-focused Laredo Petroleum Inc. also pulling back as the North American energy industry attempts to regroup amid a pandemic and an oil price war.
Reuters: Chevron Leads Another Wave of Massive Oil-industry Spending Cuts
Chevron Corp. cut its capital spending budget by $4 billion, leading a wave of cost-cutting announcements across the reeling oil-and-gas industry as the coronavirus pandemic has slashed demand and triggered a dramatic slide in oil prices.
Zawya: Aramco to Cut Capital Spending Over Coronavirus; 2019 Profits Plunge
Saudi Aramco said it plans to cut capital spending in the wake of the coronavirus outbreak, and also posted a plunge in profit for last year, missing forecasts in its first earnings announcement as a listed company. The company said it expects capital spending for 2020 to be between $25 billion and $30 billion in light of current market conditions and recent commodity price volatility, compared to $32.8 billion in 2019.
World Oil: Saudi Aramco Considers $10B Pipeline Stake Sale to Raise Cash
Saudi Aramco, the world’s largest oil producer, is weighing the sale of a stake in its pipeline unit to raise money amid a slump in crude prices, according to people familiar with the matter. Aramco may need to raise cash this year as it confronts a historic rout in oil prices and a burgeoning list of spending obligations. The company has reaffirmed its commitment to pay out $75 billion in dividends this year and also needs to make the first installment for its $70 billion acquisition of a stake in chemicals producer Saudi Basic Industries Corp.
Reuters: UAE's ADNOC Tells Contractors it Plans Cost Cuts After Oil Price Crash
Abu Dhabi National Oil Company (ADNOC) has notified contractors and suppliers that it will review existing deals to find ways to cut costs due to the steep slide in oil prices, according to three industry sources and a letter seen by Reuters.
Egypt Oil & Gas: Libya NOC Oil Production Falls Below 80,000 bbl/d
Libya’s National Oil Company (NOC) has posted a decrease in oil production down from 95,000 barrels per day (bbl/d) on March 23 to 79,655 bbl/d as of March 30, according to a press release.
The Motley Fool: Occidental Petroleum Cuts Spending Even Deeper Due to Oil Price Pressures
Oil giant Occidental Petroleum Corp. announced a further reduction in its 2020 capital spending program following the continued slide in crude oil prices. The company now expects to invest between $2.7 billion and $2.9 billion, which is about $600 million lower than its recently revised budget range. Meanwhile, it's 47% below its initial spending plan.
Pipeline Oil & Gas News: ConocoPhillips to Slow Operational Activity in Lower 48
ConocoPhillips is taking several actions in response to the recent oil market downturn that will see it lower its operating expenditures by slowing development plans. 2020 operating plan capital expenditures will be reduced by $0.7 billion, representing about a 10 percent decrease from the previously announced guidance. The reduction will be sourced by slowing operated development activity in the Lower 48, expected decreases in non-operated activity in the Lower 48, and deferred drilling in Alaska.
Reuters: Halliburton to 'Significantly' Cut 2020 Capex Below $1.2 Billion Budget
Oilfield services firm Halliburton is accelerating its cost-cutting and will significantly reduce spending this year below its original $1.2 billion budget, its finance chief said.
Reuters: Schlumberger Cuts Executive Salaries, Reduces Workforce Amid Oil Price Crash
Oilfield services provider Schlumberger said it will implement widespread salary and job cuts as it grapples with a sharp decline in revenue from the oil price collapse. Schlumberger said its executives will take a voluntary 20% base salary reduction, starting April 1, and worldwide support personnel will adopt unspecified “modified schedules” that reduce salaries, the company said in a statement.
|Houston Chronicle: Energy Companies Slash Billions From Budgets Amid Oil Price Drop|
Eleven energy companies over the past several days said they would cut a combined $18.6 billion dollars from their budgets as oil prices remain near 20-year lows, setting the stage for tens of thousands additional layoffs.
S&P Global: Permian Producers Trimming 2020 Capex
Other US shale producers also announced new budget reductions as North American producers have slashed their 2020 capital spending plans by an average of at least 30% just this month.
Reuters: Texas Oil Producers Ask State to Limit Output as Prices Collapse
U.S. shale firms this month slashed as much as 50% of planned spending as falling demand due to the coronavirus and a price war between Saudi Arabia and Russia threw the oil market into a free fall. With oil prices down 60% this year, Parsley Energy and Pioneer Natural Resources want regulators to consider setting limits on how much oil large firms can send to market.
NGI: Lower 48 Permitting ‘Clearly’ in Retreat as E&Ps Face Escalating Credit Shocks on Prices, Pandemic
As Lower 48 natural gas and oil producers signal cutbacks to spending and activity, the latest data on permitting indicates operators already are “clearly retreating” in the wake of a devastating decline in oil prices and the effects of the Covid-19 pandemic. Most of the decline related to fewer wells permitted in Texas, with Eagle Ford Shale reporting a 43% decline week/week to 32, and in the Permian Basin, off 19% to 139.
S & P Global: US' Tellurian Said to Have Cut Almost Two-fifths of Workforce to Keep Driftwood LNG Alive
Tellurian LNG shed 38% of its workforce as part of a cost-cutting move designed to give the developer a lifeline as it struggles to secure the remaining partnership agreements it needs to finance construction of its Driftwood LNG export project in Louisiana, a person familiar with the decision said.
The Times-Picayune: Tellurian LNG Defers $75M Loan until 2021 Amid
Houston-based Tellurian LNG negotiated new terms for its $75 million loan which was slated to be due in May but now has been extended until November 2021.
Houston Business Journal: Phillips 66 Cuts Budget, Suspends Share Repurchases Amid Low Oil Prices
Houston-based Phillips 66 is the latest major energy company to slash spending plans for 2020. The cuts include a $700 million reduction in 2020 capital spending, bringing Phillips 66's budget to $3.1 billion, according to a March 24 press release. Operating and administrative costs for 2020 will be reduced by $500 million.
Reuters: Shell Drops Out of Major U.S. LNG Project, Energy Transfer Delays Decision
Shell pulled out of a major liquefied natural gas (LNG) export plant under development in Louisiana following the recent crash in oil and natural gas prices, in a move that resulted in its partner, Energy Transfer LP, delaying their final decision on going ahead with the project to next year. Lake Charles is one of several LNG export projects based around the world that have been delayed in recent months by the collapse in global energy prices.
ET Energyworld: Devon Energy Further Cuts 2020 Capital Spending by $300 mln
Oil and gas producer Devon Energy said it was further reducing its capital expenditures by $300 million to $1 billion for 2020, citing weak oil prices. The company added it was prepared to further reduce spending if oil prices continue to remain weak.
|MENA/EASTERN MEDITERRANEAN REGION |
|CSIS: How COVID-19 Will Reshape Global Gas; Someone Has to Cut Production|
In the short term, gas prices are facing headwinds. Qatar has always been operationally flexible, adjusting maintenance schedules or keeping a few ships as floating storage. But yearly output has always been near its nameplate capacity, and Qatar has recently booked long-term capacity in various European terminals, evidence that it wants to be able to place cargos no matter what. Qatar faces an insurmountable contradiction in its long-term export strategy between wanting to massively increase output while defending prices. “If Qatar were to lose faith in oil prices, it could eventually want to free LNG from its tie to oil.”, the author noted.
Reuters: UAE's SNOC Says Mahani 1 Gas Project Startup to be Delayed Slightly
UAE’s Sharjah National Oil Company (SNOC) said that the impact of the coronavirus outbreak will delay the startup of production at its Mahani gas exploration project by up to two months.
The Arab Weekly: Algeria Says to Slash Public Spending, Sonatrach to Roll
Algerian President Abdelmadjid Tebboune ordered the government to cut public spending by 30% and delay state projects to cope with financial pressures, the presidency said in a statement. Algeria's state oil giant Sonatrach would be required to halve operating and capital expenditure in order to preserve the nation's foreign currency reserves, the statement said.
Zawya: GCC IPOs Could be Delayed as Coronavirus Outbreak Hurts
Many companies in the GCC region might delay their initial public offering (IPO) plans this year as gloom weighs on investor sentiment over the outbreak of the coronavirus, analysts have said.
Egypt Oil & Gas: Qarun to Save $12.6 MM by Reduction of Production Costs
Qarun Petroleum aims to save $12.6 million by reduction of production costs in its concession areas in Egypt, during the H2 2019/20, according to Al Mal. It is noteworthy that Qarun has succeeded in reducing production expenses by $1.4 million in H1 2019/20.
Egypt Oil & Gas: Oman’s PDO to Reduce Number of Workers Following Quarantine
Petroleum Development Oman (PDO), the largest oil and gas producer in Oman, plans to reduce the number of working staff due to coronavirus quarantine, S&P Global reports.
Egypt Oil & Gas: KPC to Cut Capital Spending Following Oil Price Collapse
State-run Kuwait Petroleum Corporation (KPC) has instructed all subsidiaries to decrease spending plans for the upcoming year amidst record low oil prices, according to Reuters.
|UNITED KINGDOM/EUROPEAN UNION|
|ZAWYA: Italian Energy Group Eni to Review All Middle East Projects|
Italy's Eni is reviewing its energy projects in the Middle East, including those in partnership with the Abu Dhabi National Oil Co, because of the coronavirus outbreak and current oil market conditions, a senior company official said.
Egypt Oil & Gas: Eni Announces Drastic Cuts in Capex, Opex
Claudio Descalzi, CEO of Italy’s Eni, has announced huge cut backs in capital expenditure (Capex) and operational expenditure (Opex) in order to maintain a robust balance sheet, following a press release. These measures have been taken in light of the sharp decline in oil prices and the foreseeable turbulence in the oil market.
World Oil: Total, Shell Announce Multi-billion-dollar Budget Cuts as Oil
Total and Shell each introduced significant cost-reduction measures, as the oil price war and the global spread of Covid-19 combined to disrupt operations. Following the lead of other supermajors like BP and ExxonMobil, Total and Shell are implementing plans to reduce capital expenditures, operational costs, and cancel planned share buybacks.
The Guardian: Shell Plans to Slash $9bn from Spending in Wake of Coronavirus
Shell plans to slash $9bn (£7.2bn) from its spending plans to weather the collapse in oil market prices in the wake of the coronavirus outbreak. The oil giant set out plans to reduce its operating costs by between $3bn and $4bn this year while cutting its planned capital expenditure by $5bn to $20bn for the year.
Offshore Mag: Equinor Cuts E&P Budgets for 2020
Equinor has drawn up a $3-billion action plan to strengthen its financial resilience in the current strained market conditions. The company claimed it can be organic cash flow neutral before capital distribution in 2020 with an average oil price of around $25/bbl over the remainder of the year.
ET Energyworld: Neptune Energy to Cancel Dividend, Cut Spending Plans by Around $300 mln
Private equity-backed gas producer, UK-based Neptune Energy plans to cut its budget for development projects by around $300 million this year and will not pay a cash dividend to its owners Carlyle and CVC Capital Partners.
Pipeline Oil & Gas: Siccar Point and Shell Delay FID on Cambo Project
Operator Siccar Point Energy and its joint venture partner, Shell, have announced the deferral of the planned sanction date for the Cambo project to 2021 in light of the unprecedented worldwide macroeconomic dislocation resulting from Covid-19. The Cambo field, located 125km northwest of the Shetland Islands and in a water depth of 1100m, was discovered in 2002, and subsequently had 4 appraisal wells drilled up to 2012 and a final successful appraisal well was drilled and flow tested by Siccar Point during the summer of 2018.
|Reuters: Oil Crash Compounds Coronavirus Hit for Cash-Strapped OPEC States|
OPEC producers such as Nigeria, Angola, Algeria and Venezuela cannot compete with the lower costs of erstwhile allies Saudi Arabia and Russia, who are flooding the market. Nigeria, which cut nearly $5 billion from its budget, said it needs 120 billion naira ($333.33 million) to fight the coronavirus outbreak. Algeria, whose public debt rose to 45% of gross domestic product at the end of last year from 26% in 2017, plans 30% public spending cuts and has directed state energy firm Sonatrach to halve planned investment to $7 billion.
Offshore Mag: Major New Offshore Africa Projects Could Stall at Current Prices
Many of Africa’s largest planned offshore projects look set to be delayed with oil prices falling below their breakeven costs, according to Rystad Energy. In most cases, the operators were expecting sanctioning under a price assumption of $55-$60/bbl. If they do not go ahead as planned, this will likely cause the continent’s liquids production to decline for much of the 2020s, with a major impact on some energy-reliant state budgets.
Reuters: Nigeria Imposes Offshore Oil Worker Restrictions in Coronavirus Battle
Nigeria’s petroleum regulator has ordered oil and gas companies to reduce their offshore workforce and move to 28-day staff rotations as part of measures to curb the spread of the coronavirus, according to a circular seen by Reuters.
ET Energyworld: South Africa's Sasol Warns Possible Coronavirus Disruptions Could Hit Full-year Results
South African petrochemicals producer Sasol Ltd, the world's top producer of motor fuel from coal, said its full year results could be hit by potential disruptions to production, supply chains and construction as the coronavirus continues to spread across the world.
ET Energyworld: Oil & Gas Major Cairn Energy Reduces Senegal, UK Spending Plans
Cairn Energy and its partners, including Woodside and FAR , were assessing "substantial initiatives to reduce and re-phase" investment in the $4.2 billion Sangomar oil development project in Senegal, Cairn said in a statement.
|INDIA/SOUTH ASIA REGION|
|Reuters: Australia's Santos Cuts Spending, Defers Barossa Decision as Oil Crashes|
Oil and gas producer Santos Ltd said on Monday it will slash capital spending in 2020 and defer an investment decision on Barossa as oil prices plunge and the coronavirus outbreak dents business sentiment.
Boiling Cold: Woodside Slashes Offshore Maintenance Workforce
Woodside is cutting its offshore maintenance workforce as it responds to a cratered oil and LNG market and COVID-19 risk leaving safety questions unanswered and possibly about 360 casual workers with no income for six months.
Reuters: PetroVietnam Says Considers Stockpiling Oil Amid Low Prices
Vietnam Oil and Gas Group, known as PetroVietnam, said on Wednesday it was considering stockpiling crude oil amid low prices while exploring measures to cope with the impact of the coronavirus outbreak.
Reuters: Thai Oil Refiners Cut Output as Fuel Demand Falls
Oil refineries in Thailand are reducing their run rates by 10 per cent to 20 per cent after measures taken by the government to curb the spread of the coronavirus caused domestic fuel demand to fall sharply, two sources familiar with the matter said.
ET Energyworld: Sinopec Expects Lowers 2020 Refining Runs as Coronavirus Hits Demand
Asia's top refiner China Petroleum Chemical Corp, or Sinopec, expects that its full-year 2020 refining runs will be lower than in 2019 because of a contraction in Chinese fuel demand caused by the coronavirus outbreak. The company, which will trim 2020 capital expenditure by 2.5 per cent, was making a detailed plan to reduce capex and would report this in April during first-quarter earnings, said Zhang Yuqing, chairman of Sinopec.
The Jakarta Post: Medco Cuts Capex and Production Over Oil Price Crash
Publicly listed oil and gas company PT Medco Energi Internasional has slashed its capital expenditure and production targets this year because of weakened global demand and the recent oil price crash. Indonesia’s eighth most productive oil producer plans to reduce its 2020 capital expenditure by 30 percent to US$240 million “with potential for further 2021 reductions”.
Reuters: Indonesia to Cut Gas Prices for Power Plants from April 1
The Indonesian government will lower gas prices for power plants from April 1 to $6 per million British thermal units (mmBtu), the Energy and Mineral Resources Ministry said in a statement. Power plants managed by state utility company PT Perusahaan Listrik Negara have paid an average of $8.4/mmBtu for gas this year.
PetroVietnam: Petrovietnam Quickly Implement Urgent Tasks and Solutions to Cope with Double Impact of Covid-19 Epidemic and Decline in Oil Prices
Facing the complicated situation of the Covid-19 epidemic and the oil market, in order to improve the management and administration of production and business activities, proactively build and promptly deploy the urgent solution packages to cope with the double impact of the epidemic and low oil price, Petrovietnam has issued a Directive requiring the entire Group and its subsidiaries to actively capture and update market information on supply and demand, price fluctuation of crude oil and petroleum products, then build specific plans and scenarios for coping.
|LATIN/SOUTH AMERICA REGION|
|Reuters: Brazil Fuel Distributors to Cut Ethanol Buying Amid Lockdown|
Brazil’s number 1 fuel distributor, BR Distribuidora, said it will reduce the amount of ethanol it buys from Brazilian mills to levels that are below the minimum defined in contracts, due to an “atypical situation” created by the COVID-19 pandemic. Raizen Combustiveis SA, which is owned by Brazil’s Cosan SA and Royal Dutch Shell, declared force majeure. It said it would not comply with volumes previously agreed for March and would make adjustments to volumes for coming months as well.
ET Energyworld: Russia's Rosneft Halts Work in Sanctions-Hit Venezuela, Selling Assets
Russian oil giant Rosneft announced it is halting its activities in Venezuela and selling its assets there, a country that has been hit by US trade sanctions. "Rosneft announces the termination of its operations in Venezuela and the disposal of its assets, related to operating in Venezuela," the company said in a statement. The interests sold by Rosneft include joint ventures of Petromonagas, Petroperija, Boqueron, Petromiranda and Petrovictoria, as well as oil-field services companies, commercial and trading operations.
Reuters: Mexico Poised to Provide Pemex with 'Extraordinary Support'
Mexico’s government will likely prop up state oil firm Petroleos Mexicanos (Pemex) due to its vulnerability to low crude prices as coronavirus erodes demand, S&P Global Ratings said Friday, a day after it cut the ratings of both Mexico and Pemex.
Natural Gas Intel: Colombia’s Ecopetrol First LatAm NOC to Slash Capex Amid Oversupply, Coronavirus
Colombia’s Ecopetrol SA became the first Latin American national oil company (NOC) to announce 2020 spending cuts in the wake of twin supply and demand shocks that have left global energy markets reeling. The 88.5% state-owned company said it is slashing its 2020 capital expenditures (capex) by $1.2 billion to a new range of $3.3-4.3 billion, citing plummeting oil prices and the coronavirus pandemic.
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