oil

January 4, 2017

China’s CNOOC now only player in Iceland oil

Ithaca Energy and minor partners Petoro and Kolvetni have handed back their oil and gas exploration permit for a sector of the Icelandic Jan Mayen area after seismic exploration yielded disappointing results. Another license holder, Faroe Petroleum, had already given up already in late ’14. That leaves only one active license, whose operator and majority owner is China’s state-owned CNOOC (中海油), in partnership with local company Eykon and Norway’s Petoro.

CNOOC have been exploring in the area. Their local partner Eykon have talked of plans to continue exploring and shown optimism about the results so far. Eykon have a record of optimism on the probability of finding oil off Iceland, and have at different times aired estimates in the high gazillions. Judging by the consistent lack of interest in Iceland from oil majors, even when oil prices were high, no one in the industry shares that optimism. Except CNOOC of course.

For an older but deeper look into CNOOC and Icelandic oil, there’s always what I wrote back when they bought the license.

October 6, 2015

China’s CNOOC starts exploring for Icelandic oil

Surface exploration began last month in the Dreki area off Iceland, in an area licensed to China’s state owned oil company CNOOC (中海油) together with two minority partners, Norway’s Petoro and local company Eykon Energy. Measurements were conducted on the Oceanic Challenger, that operated from Reyðarfjörður with a crew of 60, and a support vessel. (News I reported in June indicated the operation would be exempt from port fees.) This first stage of exploration was expected to last for around three weeks (at any rate the ship is already in Dunkirk).

Eykon chairman Heiðar Már Guðjónsson says the plan is to conduct exploration drilling in three phases, in 2020, 2022 and 2023. The area is quite expensive to explore, and estimates about possible hydrocarbon reserves tend to be rather speculative due to the presence of a thick layer of basaltic lava that makes ascertaining the presence of any oil at all rather tricky without boring actual holes through it. Heyðar Már and others from Eykon have attracted a lot of attention in the past with estimates in the high gazillions, but hardly anyone else is half that upbeat. No oil majors showed interest in Dreki licenses when they were for grabs, and the holders of one of the three awarded licenses, Faroe Petroleum, actually gave up on it last year. CNOOC, on the other hand, are enthusiastic enough to invest in exploration, while keeping remarkably quiet about it (no information on Icelandic oil has shown up on Chinese media).

September 3, 2015

Silk Road through the Russian Far East: Chinese to invest in Yakutsk IT park

Meetings with Chinese companies at the East Russia Economic Forum (Восточный экономический форум) in Vladivostok have resulted in agreements to build an IT park in Yakutsk, capital of the Sakha Republic, also known as Yakutia. There have also been further talks on an oil refinery project said to be backed by CNPC.

The Chinese partner is Huaqing Housing Holdings (华清安居控股有限公司), a developer established by research institute of Tsinghua University (‘Huaqing’ is just ‘Tsinghua’ spelt backwards) and backed by SOEs and state financial institutions. As I’ve been describing in a series of posts during the last few months, Huaqing have been one of the Yakutian government’s main interlocutors in talks on potential Chinese investment in the republic, and Zhu Chunyu 朱春雨, the company’s chairman, is a frequent visitor to Yakutsk.

Huaqing has also signed an agreement to cooperate with Almazergienbank Алмазэргиэнбанк, the largest in Yakutia, which has been increasingly partnering with Japanese and Chinese institutions, including China Construction Bank (建设银行).

August 11, 2015

General Nice buys into Canadian oil

General Nice (俊安集团), owners of the Isua iron ore project in Greenland, have acquired a 30% stake in a small Alberta oil company through their HK-listed arm, Loudong General Nice Resources (楼东俊安). The operaton cost Loudong General Nice, where General Nice and related parties are shareholders, some $65m in consideration shares.

The Calgary-based target of the acquisition, Rockeast Energy, has a few oil licences in Alberta. The company was, already before General Nice’s entry, at least partially Chinese-run and owned. Rongshi United Investment Management (嵘世联合) aka Runiworld have a stake in Rockeast, and some sort of ‘alliance‘ has existed between Rockeast and Zhefu 浙富 Holding Group. Zhefu, chaired by Sun Yi 孙毅, primarily make hydropower equipment, but they have an interest in Canadian oil since the purchase of a number of oil fields from Zargon. As of last year, Zhefu’s Canadian subsidiary, Ascensun Oil and Gas, shared an address with Rockeast. It’s unclear who did General Nice buy the stake from, since the transaction was made through a series of BVI companies.

Loudong General Nice Resources, the HK-listed company that has bought Rockeast, is partially owned by General Nice Group (I’ve written about other shareholders here). The Isua licence in Greenland is not owned through Loudong General Nice, but through a Jersey-based of another, non-listed, company of the group. I have a whole series of posts and a background article on General Nice.

A bit as in the case of the Greenland mine and other recent acquisitions, this latest move can be seen as part of General Nice’s effort to diversify away from its historical core business, Shanxi coal, by buying cheap overseas assets.

Meanwhile in Australia, Pluton Resources, partially owned by General Nice, has halted operations at the Cockatoo Island mine amid a dispute with the Western Australian government over unpaid royalties.

July 31, 2015

Chinese-invested refinery in Amur oblast

A private company from China and its Russian partner will refine oil in the Far Estearn Russian region of Amur oblast to ship fuels to Chinese customers across the border (Amurskaya Pravda). In order to do that, they’ll have to build the refinery first. The location is the village of Beryozovka Берёзовка, some 50 km from the regional capital of Blagoveshchensk which itself faces Heihe 黑河, Heilongjiang across the Amur river. The place is expected to be designated as one of the ‘areas of priority development’, a federal government initiative to transform old ‘monotowns’ in the Far East into industrial parks through tax benefits and state investment (these areas are attracting a good deal of interest in China, as I wrote a few days ago). This should be good news for the refinery project, that has existed for a few years but only last April was approved by the National Reform and Development Commission.

The Chinese investor is Menglan Xinghe Energy (梦兰星河能源股份有限公司), a subsidiary of Jiangsu-based Menglan Group, led by chairwoman Qian Yuebao 钱月宝. Menglan started as in the textile industry but has diversified to invest, notably, in the company behind the Loongson (龙芯) microprocessor (said last February to be planning to invest in Intel rival AMD). Menglan have been active in the Russian Far East for a while, notably in Yakutia (to which I’ll return in a future post).

June 9, 2015

port chosen for CNOOC Iceland oil exploration

Eykon Energy, CNOOC’s local partner for their oil and gas license off Iceland, are being offered access to the Mjóeyri harbour, with a fee exemption during the exploration stages of the project, says the mayor of Fjarðabyggð municipality (Vísir). The announcement came after negotiations between Eykon and the municipality, which haven’t yet resulted in a formal agreement.

Mjóeyri harbour (Mjóeyrarhöfn), on the island’s eastern shore, was built for the Alcoa aluminium plant in nearby Reyðarfjörður.

Here’s more on Iceland oil.

May 4, 2015

Chinese company to build refinery in Yakutia

An agreement was signed two weeks ago in Beijing between Russian and Chinese companies to build an oil refinery in Aldansky district (Алданский улус) in the south of the Sakha Republic, a Far Eastern Russian region also known as Yakutia. The plant is planned to be have a refining capacity of 2m tonnes of oil per year, making it the fourth largest in Yakutia, and to cost $2bn.

The Chinese investor, Huaqing Housing Holdings (华清安居控股有限公司), is a developer established by a Tsinghua University architecture researc institute, with the backing of train manufacturer CNR (北车), a central SOE, financial institutions including China Development Bank (CDB) and the China Association for the Promotion of Development Financing (CAPDF, 中国开发性金融促进会, a new–ish institution whose top people come from CDB, among them its former and current chairmen Chen Yuan 陈元 and Hu Huaibang 胡怀邦). Huaqing is led by Zhu Chunyu 朱春雨. Besides a couple of projects in China, they claim to be about to build some villas in Dubai. The Beijing meeting also included representatives from oil giant CNPC, so presumably they might also become involved in the project.

On the Russian side we have a local company, Tuymaada-Neft (OAO НК Туймаада-нефть), based in Yakutsk and led by Ivan Makarov, who also chairs Sakhatransneftegaz Сахатранснефтегаз, a gas pipeline operator majority-owned by the Yakutia government, and sits as a deputy at the Il Tumen, the local parliament. Also present in Beijing was Valery Tian Валерий Тян, who besides working for Tuymaada is often involved in contacts between Chinese companies and the local government in his capacity as advisor to the president of the Republic.

The plant will refine oil into fuels to be sold locally. Fuel prices in Yakutia are among the highest in the country.

I have written before about the increasing cooperation between the Russian Far East and specifically Yakutia. The latest example semms to be an agreement between the sport bureaus of Yakutia and Heilongjiang province.

March 27, 2015

not just CNOOC to explore for oil off Iceland this year

Ithaca Energy, the operator for one of the two offshore oil and gas licenses in the Icelandic Jan Mayen area (Drekasvæðið), are planning to start 2D measurements this year, reports Vísir. Ithaca are thus joining China’s state-owned CNOOC (中海油), the operator of the other license and by far the biggest company with an interest in Icelandic oil, who have similar plans according to an announcement from last year.

CNOOC’s local partner, Eykon Energy, said in January that they’re optimistic about the project and undeterred by low oil prices. Faroe Petroleum, where Korea’s KNOC has a stake, don’t share such optimism and relinquished their own Jan Mayen license in December after preliminary studies yielded disappointing results.

The problem with any potential hydrocarbon reserves in the area is that they mostly lie under a thick layer of basaltic lava. Surface measurements like the ones planned for this year might not be enough to ascertain if there’s any oil worth extracting down there, making it hard to settle down the question without rather costly deepwater drilling. Those were precisely the reasons why the Faroe-led group gave up on the area, and Ithaca’s reported will to spend money on exploration counts as the first sign of optimism not coming from the CNOOC-Eykon partnership themselves (people with Eykon have a long record of enthusiasm about the area’s prospects).

More about Icelandic oil in my longish CNOOC backgrounder and here and there in shorter posts.

January 19, 2015

oil at $60 good enough for us: CNOOC’s partner in Iceland

Gunnlaugur Jónsson from Eykon, CNOOC’s (中海油) local partner for their license in the Icelandic sector of the Jan Mayen area, tells TV station Stöð 2 that they’re undeterred by falling oil prices. Actually, says Gunnlaugur, the current price level makes the 2d measurements they plan to carry out this year even cheaper. If they find large enough deposits, he adds, they might be able to make a profit with oil as cheap as $60 per barrel (Vísir).

Such optimism about Arctic oil is not terribly common these days. CNOOC’s neighbour offshore Iceland, Faroe petroleum, relinquished their license last December after preliminary studies yielded disappointing results.

December 14, 2014

Faroe gives up on Icelandic oil exploration next door to CNOOC

Faroe Petroleum, a sixth of which is owned by Korea’s KNOC through subsidiary Dana Petroleum, have handed back the license they had been awarded to explore for oil and gas under the seabed in the Icelandic sector of the Jan Mayen area, Iceland’s energy authority informs.

Íslenskt kolvetni or ARC, Faroe’s minority partner in the license, explain their exit from Icelandic oil exploration by pointing to the disappointing results of preliminary studies, that indicate that neither seismic data acquisition nor any other exploration method short of just drilling will help ascertain whether there is any oil down there. As I said in a background article a year ago, estimates about reserves in the Jan Mayen area are loaded with uncertainty due to the presence of a thick layer of basaltic lava. Ketill Sigurjónsson from consulting firm Askja is calling this a “prophecy that regrettably came true”: it was clear from the beginning that you had to drill through all that basalt to find out if there’s anything worth the trouble under it, and that all that drilling would be rather onerous.

The elephant in the room is of course CNOOC (中海油), the holder of another of the three licenses off Iceland. Their licensed area, that’s just next to the one Faroe have just given up on, would seem to be just as tricky to explore. They seem more upbeat though: last October they met with their Icelandic license partner, Eykon Energy, who told Icelandic TV data acquisition in their patch would start next year. Eykon officials have a record of optimism, to put it mildly, about the area’s potential.