This is the 10-year anniversary of the Paris Climate Agreement. The COP30 climate conference is currently being held in Belém, Brazil. The annual gathering started on Monday and will run until 21 November. It will be interesting to see what the meeting is able to achieve during a time when some countries are shifting their approach to climate change.
We will discuss COP30 highlights next week. For now, let’s look into two energy newsbytes from this week.
Shangyou Nie
Editor, Well Read
Lukoil Declares Force Majeure in Iraq as Sanctions Start to Bite
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Russian oil company Lukoil declared force majeure for its Iraq operations. Additionally, last week, oil trader Gunvor withdrew its offer to buy Lukoil’s international assets, as the effects of U.S. sanctions on Russian oil companies started to take hold.
About the Iraqi force majeure:
According to Bloomberg, Lukoil declared force majeure for oil shipments from the giant West Qurna 2 Field in Iraq.
The Iraqi government froze payments to Lukoil after the Trump administration announced sanctions on Russian companies Lukoil and Rosneft at the end of October.
SOMO, an Iraqi government crude marketer, prevented Lukoil from loading three crude shipments.
About the field:
Lukoil is operating the West Qurna 2 Field under a service agreement.
Lukoil (operator, 75 percent) and state company North Oil Co. (25 percent) are producing 480,000 barrels per day from the field.
West Qurna 2 is one of the biggest Iraqi oil fields, with 14 billion barrels of recoverable oil reserves.
Lukoil won the license to operate West Qurna 2 in 2009 and started production in 2014.
In 2023, Lukoil had an ambitious plan to double production to 800,000 barrels per day after receiving an extension for the field until 2045, according to S&P Global.
The latest on U.S. sanctions:
On 22 October, the Trump administration announced its first economic sanctions against Russia during its second term.
Lukoil has upstream and downstream business in more than 30 countries.
According to Lukoil, it has upstream oil and gas operations in 11 countries: Azerbaijan, Iraq, Kazakhstan, Uzbekistan, Egypt, Cameroon, Nigeria, Ghana, Mexico, the UAE, and Congo.
According to Lukoil, it produced 2.4 million barrels of oil equivalent per day (76 percent oil, 24 percent gas) in 2022.
According toUpstream, Lukoil has 13.3 billion barrels of oil equivalent in reserves in Russia, and 1.3 billion barrels of oil equivalent in reserves overseas.
Lukoil has downstream business in more than a dozen countries, including Europe and the United States.
Lukoil and Gunvor — an on-and-off deal:
On 27 October, Lukoil announced that it would sell its international assets in view of the latest U.S. sanctions.
Three days later, Lukoil issued a press release stating it had received an offer from Gunvor to purchase Lukoil International. It stated the deal was “subject to conditions precedent including obtaining OFAC permission by the Purchaser (Gunvor).”
On 6th November, the U.S. Treasury Department commented on X that “As long as Putin continues the senseless killings, the Kremlin’s puppet, Gunvor, will never get a license to operate and profit.”
That same day, Gunvor said it withdrew its offer to buy Lukoil International. It also called the Treasury Department’s statement “fundamentally misinformed and false.”
Gunvor also issued a statement saying that “the company has for more than a decade actively distanced itself from Russia, stopped trading in line with sanctions, sold off Russian assets, and publicly condemned the war in Ukraine.”
About Gunvor:
The company was set up in 2000 by co-founders Töbjorn Törnqvist, a Swedish citizen, and Russian businessman Gennady Timchenko.
Gunvor was named after Törnqvist’s mother.
Timchenko, a Russian billionaire, made his fortune investing in Russian oil and gas companies. He is reportedly close to Putin and has been under U.S. sanctions since 2014.
Törnqvist bought out Timchenko’s shares to save Gunvor from further sanctions.
Gunvor is registered in Cyprus but has its main trading office in Geneva. It is one of the largest oil traders in the world.
What to watch:
How will Lukoil be able to continue its international businesses while under U.S. sanctions?
Will any other company attempt to acquire part or all of Lukoil overseas businesses?
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ENI and Petronas Form Partnership to Operate in Indonesia and Malaysia
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ENI and Petronas announced that they are forming a new company, NewCo, which will own and operate upstream assets in Indonesia and Malaysia. NewCo will focus on integrated gas projects. This is a unique partnership between an IOC and a NOC operating in a third country.
NewCo will focus on gas businesses and have a portfolio that is producing more than 300,000 barrels of oil equivalent per day.
It will have 19 assets — 14 in Indonesia and five in Malaysia.
NewCo aims to increase production to 500,000 barrels of oil equivalent per day in the middle term.
NewCo is expected to be established in 2026, pending government approvals. It will be a financially self-sufficient entity.
It will invest $15 billion from 2026 – 2030.
NewCo will develop at least eight new projects with 3 billion barrels of oil equivalent reserves.
It will drill 15 exploration wells with an estimated 10 billion barrels of unrisked resources.
What they’re saying: “The historical partnership between Petronas and ENI is envisaged to set a new benchmark for more efficient, cost-effective and responsible upstream development,” said Tengku Muhammad Taufik, President and Group CEO of Petronas.
What to watch:
Partnerships between IOCs and NOCs are common, but they tend to be around specific assets.
ENI said that NewCo follows a similar partnership model to other ventures it has previously established, including Vår Energi (with Point Resources) in Norway, Azule Energy (with BP) in Angola, and Ithaca (with Ithaca Energy) in the United Kingdom.
What other geographic areas will ENI form using a similar model?
Petronas said that this is its “first venture into a satellite business model” to accelerate upstream development. Will Petronas also try this model with another IOC in a different country?
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