Malcy’s Blog – Oil price, Challenger Energy Group, Chariot, Prospex Energy & finally

WTI $73.98 +68c, Brent $78.09 +84c, Diff -$4.11 +16c, NG $5.14 +16c, UKNG 177.32p +5.32p

By Malcolm Graham-Wood

Oil price

Oil had a good week, WTI gained $2.01 and Brent $2.75 which has put the differential at over $4 now. Today both crudes are up around a dollar at over $75 and $79 respectively, at the top of the range which reminds me of how clever those sellers thought they were just three weeks ago.

Hurricanes are still making their mark, Ida has left a bigger than expected impact with quite some production in the GoM still offline and refinery rates only just picking up into the 80’s%. Category 1 Storm Sam is expected to become a hurricane anytime now but seems to be headed west of the Leeward islands into the Atlantic.

Elsewhere I think we can expect continued stock draw downs particularly as China has seen a further rise in imports which triggered a draw from their strategic reserves after a tender for 4.43m barrels. Finally the rig count saw a rise of 9 units overall to 521 and 10 in oil to 421.

Challenger Energy Group

CEG announces its final results to end December today and publishes its financial statements ahead of next month’s AGM. Accordingly this report covers a good many historical events as well as ongoing activities. ‘Since early 2020 the Company has pursued a strategy to broaden its asset base and diversify its risk profile such that the Company’s future was not solely reliant on the outcome of exploration drilling in The Bahamas, albeit still highly leveraged to its outcome’.

In 2020, successful execution of that strategy saw the Company’s business transform to become a full-cycle exploration and production company, centred on the Caribbean and the Atlantic margin, the Company’s portfolio now consists of 14 assets in four countries that span the industry value chain from production to development, appraisal, and both infrastructure-led and high-impact frontier basin exploration.

A focussed work program since August 2020, when the Company assumed control of its portfolio of mature producing Trinidadian oilfields, has enabled natural reservoir decline to be mitigated and increasing revenues achieved. The licence for the Goudron field in Trinidad was extended for 10 years in November 2020; work is underway in respect of extensions of the Innis-Trinity and South Erin fields (for 2022 and beyond)

The Saffron-2 appraisal well in Trinidad was planned during 2020 and subsequently drilled in July 2021 – the well is currently producing and has demonstrated the commercial viability of the Saffron project, with work underway in support of pursuing a development of the Saffron field in 2022.

Planning, design and environmental approval of the Weg Naar Zee appraisal well and Extended Well Test in Suriname has been completed, with that project targeted to commence as soon as Covid-19 circumstances in Suriname allow

The Perseverance-1 exploration well was drilled offshore The Bahamas between December 2020 and February 2021 – the first exploration well in The Bahamas since the 1980s. Post well analysis has indicated the potential for a deeper Jurassic oil source, with activity now focussed on securing a farm-in partner and renewing licences for the next phase of activity.

Following a competitive bid process, the Company was awarded the OFF-1offshore block in Uruguay in May 2020, a 15,000 km2 licence area with estimated exploration potential in excess of 1 billion barrels of oil recoverable.

Work has continued throughout the period to better define the exploration potential of the Southwest Peninsula in Trinidad, including reprocessing of the regional 3D seismic grid – several prospects have been identified with an estimated aggregate of more than 200 million barrels of oil recoverable

The time under consideration here has seen considerable change and restructuring, moving away from the Bahamas and towards its new geographies and projects in the Caribbean and Atlantic margin. Under exciting new management with plans to explore, appraise, develop and produce its asset base CEG offers promise in the region.

Chariot

Chariot has announced that it has signed an MoU for Development of Large-Scale Green Hydrogen Project in Mauritania and will be partnering with Mauritania to support its objective to become world leader in the production of green hydrogen.

The Government of Mauritania, through the Ministry of Petroleum, Mines & Energy and Chariot, are pleased to announce that they have signed a Memorandum of Understanding to progress a potential green hydrogen development, denominated as “Project Nour”, of up to 10GW.+

Project Nour has been given exclusivity over an onshore and offshore area totalling approximately 14,400 km2 to carry out pre-feasibility and feasibility studies with the intention of generating electricity from solar and wind resources to be used in electrolysis to split water to produce green hydrogen and oxygen. The traditional method for creating hydrogen splits natural gas into hydrogen as well as carbon dioxide, a contributor to climate change.

Chariot is to deploy its in-house team who have a track-record of successfully delivering large renewable projects in Africa to immediately commence work on assessing the wind and solar resources, environmental impact as well as macroeconomic and social impact studies.

Benefiting from Mauritania’s world class solar and wind resources, Project Nour has the potential to allow Mauritania to produce the cheapest green hydrogen in Africa and to become one of the world’s main producers and exporters of green hydrogen and its derivative products, close to potential large European markets.

These products have the potential to replace traditional fossil fuels in both power generation and chemical manufacturing processes, with a significant reduction in associated emissions of greenhouse gases such as carbon dioxide. The intention to carry out partnering process on the project with the objective to form a world-class consortium.

H.E Minister Abdessalam Ould Mohamed Saleh of Mauritania’s Ministry of Petroleum, Mines & Energy, commented:

“Developing Mauritania’s green hydrogen industry promises to bring a combination of environmental, economic and social benefits to our country.  We have the potential, and desire, to be a world leader in the field of hydrogen production from renewable energy sources. The Ministry is pleased to have signed this agreement with Chariot and hopes for a long and rewarding partnership.”

Adonis Pouroulis, Acting CEO of Chariot, commented:

“I am very excited by today’s announcement of this agreement with the goal of quickly realising the potential of green hydrogen.  In Mauritania, Chariot has a history of previous significant investments and bringing in world-class partners to projects, and we are looking forward to working with the Government of Mauritania again to fast-track Project Nour.

This is a potential large new market, set to bring multiple benefits to all parties and deliver positive impact to Mauritania. We thank the Government of Mauritania for the opportunity to partner with them on what we believe will be one of Africa’s largest projects of its kind and look forward to providing updates regarding the near-term pre-feasibility study and beyond.”

 Chariot promised that the new board would be active and do some deals and they have certainly kept that promise. Indeed, Adonis Pouroulis and the board have moved incredibly fast in difficult circumstances and I get the definite impression that this is not the last one we are going to see. There is so much scope for deals like this and as the energy landscape changes Chariot are securing a front row spot to take advantage of this all across Africa, investors should take notice, Adonis and team are on the move. 

Prospex Energy

Prospex Energy has reported on the progress that its joint venture company Tarba Energía S.L. (“Tarba”) has made with respect to recent legislation changes in Spain and its possible effect on its Tesorillo exploration permit in southern Spain. The company tries to explain where it stands under the new Spanish Climate Change Act.

Application to convert Tesorillo into an exploitation concession was submitted to the relevant authorities before Spain’s Act 7/2021 on Climate Change and Energy Transition (the “Climate Change Act”) came into force. Specialist legal advice received by Tarba confirms that applications from existing permits prior to the Climate Change Act coming into force maintain their validity under the new law.

Tarba’s application is being considered by the regulators at a time of significantly rising prices for gas and LNG imports in Spain, which the Board believes should work in the Company’s favour. The El Romeral exploitation concessions at which Tarba operates its gas to power plant are in force and unaffected by the Climate Change Act.

The Tesorillo Project in the Cadiz province of Southern Spain comprises two petroleum exploration permits, the Tesorillo and Ruedalabola Permits that were approved as a joint investigation programme.  The Tesorillo Project covers 94,000 acres and includes a known gas discovery at the Almarchal-1 well.  The Tesorillo Project is estimated to contain 831 Bcf gross unrisked prospective resources on a best estimate basis and has excellent proximity to pipelines and infrastructure.  (Best Estimate Prospective Resource assessment independently verified by Netherland, Sewell and Associates – 5 May 2015.)

On 22 May 2021, Spain’s Act 7/2021 on Climate Change and Energy Transition came into force.  Whilst the new legalisation states that no new hydrocarbon permits or licences will be granted in Spain, it specifically excluded existing permits, including applications from existing permits to convert into an exploitation concession.

In advance of the enactment of this law, Tarba sought specialist legal advice in Spain.  Based on this advice, an application was submitted to convert the vast majority of the existing Tesorillo Project to an exploitation concession.  This application was submitted to MITECO on 12 May 2021 together with a field development plan for approval and all of the necessary supporting documents.  The application was submitted before the Climate Change Act came into force.  The outcome of this application will not be known for some time.

‘The Tarba team has continued to liaise with various government agencies to progress drilling and environmental approvals for both El Romeral and for Tesorillo.  Tarba is targeting conventional sandstone gas reservoirs.  There are no financial or drilling commitments attached to the Tesorillo Project Exploitation Concession application’.

Mark Routh Prospex’s CEO commented:

“In communicating with shareholders over the past few months, we felt the need to clarify our position with Tesorillo in light of the recent legislative changes taking place in Spain and offer reassurance on the steady progress being made.  This comes as a direct result of a successful collaboration between the existing joint venture parties in Tarba during an ongoing delicate application process with local and national authorities.”

“We are ever mindful of the environmental impact of our activities in the region and the need to balance this against the current economic situation where gas is in short supply.  To put things in context, local indigenous onshore gas production in Spain has a carbon footprint which is ten times lower than the importation of LNG from the USA and at a substantially lower delivered cost.  With this in mind, the Tesorillo Project has the potential to become a world class gas production asset and a model for the energy transition process.”

And finally…

The bookies had the Ryder Cup right and there was no Miracle at Whistling Straits as Europe were blown away in some style.

In Sochi the Grand Prix had everything-except a win for Lando which was on the cards until the rain came and he was a couple of laps too late changing his tyres. Lewis won but Max came from the back of the grid to take 2nd place.

The Premiership is already very exciting and that might be increased tonight. In what is a long standing and tetchy fixture the M23 derby between the Eagles and the Seagulls has the added spice tonight as should the latter win they will go top of the table.

Elsewhere at the weekend the Noisy Neighbours beat Chelski, and Villa beat the Red Devils at Old Trafford and with the table at their mercy Liverpool could only draw 3-3 at the Bees. And the Gooners upset the odds winning the North London derby.

The opinions expressed here are those of the author

Malcolm Graham-Wood

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Disclaimer: Malcy’s Blog is provided for general information about the international oil and gas industry and the companies that operate within it. It does not constitute investment advice and Malcy does not buy or sell shares, warrants or bonds in any company written about within the blog. Information is taken from publicly available sources and any comment is that of the author who does not take any third party comment in the blog


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