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Big oil companies operating in Mexico have launched a drive to convince leftist President Andres Manuel Lopez Obrador to resume auctions of oil and gas contracts he has branded a failure in reviving the industry. Chevron Corp, Exxon Mobil Corp and Royal Dutch Shell Plc, among other firms in Mexico's Association of Hydrocarbon Companies (Amexhi), say they have met output targets and investment pledges worth hundreds of millions of dollars in the initial phases of their contracts. "We've been complying (with contractual obligations), and by any metric you look at, we've been successful," Amexhi President Alberto de la Fuente told reporters this week.
(Bloomberg) -- Connecticut agreed to buy power from a huge wind farm planned in the Atlantic Ocean by a joint venture of Avangrid Inc. and Copenhagen Infrastructure Partners.The venture, Vineyard Wind, will provide the state with 804 megawatts, or about 14% of its power needs. It’s part of Governor Ned Lamont’s push to get to 100% of the state’s electricity from carbon-free sources by 2040, Connecticut officials said in a statement Thursday. The project is forecast to come online in 2025.U.S. states from Massachusetts to Virginia see massive turbines in the ocean as a way to bring clean power to crowded coastal cities and fight global warming. New York has awarded contacts to build 1.7 gigawatts. New Jersey has a contract for 1.1 gigawatts. Analysts forecast it could grow into a $70 billion industry, revitalizing ports up and down the Atlantic.Avangrid rose on the news, curtailing earlier losses.Offshore wind farms will mark a huge shift in how the U.S. generates electricity. While they have boomed in Europe, offshore wind is almost nonexistent in the U.S., largely because it’s among the most expensive sources of electricity. Costs are falling, however, as the industry grows and developers install larger and larger turbines.Connecticut didn’t disclose Vineyard Wind’s price but said it was the lowest amount publicly announced to date in the U.S. for offshore wind.“It’s clear we bid in with an attractive price for ratepayers,” Vineyard Wind Chief Executive Officer Lars Pedersen said on a call with reporters.The previous low was $65 a megawatt-hour that Massachusetts agreed to pay to Vineyard Wind for another project it’s building in the Atlantic. That’s almost double the overall average wholesale power price in the region.New York agreed to pay $83.36 per megawatt hour to buy power from two projects off Long Island. New Jersey will pay $98.10 for electricity from a wind farm off Atlantic City.Vineyard Wind, which is building the project south of Martha’s Vineyard, will negotiate contracts with Connecticut’s two electric utilities: Eversource Energy and Avangrid’s subsidiary, United Illuminating Co.Vineyard Wind declined to say how much the wind farm would cost. As part of its bid, the developer agreed to spend $890 million on local economic development efforts, including upgrading Bridgeport Harbor. Vineyard Wind’s project that’s selling power to Massachusetts is about the same size as the Connecticut one and will cost an estimated $3 billion.Connecticut eventually plans to buy up to 2,000 megawatts of offshore wind. Developers that bid against Vineyard Wind include Orsted AS and a partnership of Royal Dutch Shell Plc and EDP Renewables.To contact the reporter on this story: Christopher Martin in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: Lynn Doan at email@example.com, Joe Ryan, Pratish NarayananFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Companies including Canada's Parex Resources and Ecopetrol SA won contracts to operate oil blocks in Colombia’s auction round on Thursday, as the Andean nation seeks to reinvigorate its petroleum sector. Ecopetrol and its subsidiary Hocol SA, Frontera Energy Corp and Amerisur Resources Plc were all awarded one contract each, the national hydrocarbons agency (ANH) said, after their initial bids did not receive counter-offers. Other successful bidders included Gran Tierra Energy , and Parex, who were awarded two contracts each, while CNE Oil and Gas SAS was awarded three contracts.
(Bloomberg) -- Want the lowdown on European markets? In your inbox before the open, every day. Sign up here.Credit Suisse Group AG has acted to block Geneva prosecutors from using details of a critical report by the country’s financial regulator into the bank’s failure to prevent fraud at its wealth management unit.The bank asked Geneva prosecutor Yves Bertossa to seal the report, which he is legally required to do after a request, a spokesman for the prosecutor’s office said. Bertossa has now asked a court to lift the order in a bid to get access to the documents as part of an ongoing investigation into Patrice Lescaudron, the spokesman said.Credit Suisse, which is a party to the case, is relying on a clause in the Swiss legal system designed to prevent self-incrimination during a criminal investigation. Swiss law prevents evidence from being “examined or used” by prosecutors as long as it’s under seal. In making its case, the Zurich-based bank also invoked the right to keep confidential bank data secret.Lescaudron is a former Credit Suisse wealth manager who dipped into client accounts to cover up millions in trading losses. While he was convicted in early 2018 and released in November of that year, numerous victims have appealed parts of the verdict, meaning the criminal case remains open. Victims of the former wealth manager have long maintained that the bank should have more liability for his crimes.Bidzina Ivanishvili, his biggest former client, said in an interview last month that he still didn’t believe that Lescaudron acted alone. Geneva prosecutors have started a probe into allegations of forgery not covered in the original case and have been ordered by a court to re-examine claims from another client about Lescaudron’s past behavior.Officials at Credit Suisse and Finma declined to comment. A spokesman for Geneva prosecutors confirmed the order and the appeal, declining to give more details.While a decision on whether to lift a seal order is supposed to be made within 30 days, such cases can often linger for months, as happened with a long-running bribery case involving Royal Dutch Shell Plc and Eni SpA.Finma scolded Credit Suisse in a September 2018 report for numerous “deficiencies” in its money-laundering detection efforts in the case of Lescaudron, and how it managed assets tied to scandals at soccer’s global governing body FIFA, oil-producers Petrobras in Brazil and Venezuela’s PDVSA. The bank wasn’t fined, but was ordered to make a number of changes to bolster its compliance practices.That full report wasn’t publicly released, but the regulator issued a press release last year that summarized the findings.Instead of disciplining Lescaudron for repeatedly breaching the bank’s compliance rules, “the bank rewarded him with high payments and positive employee assessments,” Finma said in the press release. Credit Suisse has since adopted several measures to strengthen its compliance and combat money laundering, Finma said.Codename ‘Dino’Finma’s report, codenamed Dino, was considered sensitive enough by the bank that it wrote to the federal bank watchdog six weeks later, requesting that the financial regulator put it under seal, according to three people familiar with the correspondence.To share it with Swiss prosecutors, the bank argued, would be neither fair nor consistent with Article 248 of the Swiss Criminal Code, which dictates how and when documents can be sealed or should be returned to their original owners.Any disagreements about the possible release of the report seemed to have died down for at least a year. But on Sept. 11, Finma sent a copy of the report to the Geneva Prosecutor’s Office, two of the people said, who didn’t want to be named discussing an ongoing investigation.When the bank learned of this, a lawyer for Credit Suisse wrote to prosecutor Bertossa on Oct. 4 demanding, once again, that the report be put under seal, the people said.The report contains confidential information about bank management, the lawyers argued, which could do harm to the bank’s interests if revealed in a criminal investigation, according to the people.An earlier version of this story was updated to correct the process of sealing the documents.(Adds interview with former client in fifth paragraph)To contact the reporter on this story: Hugo Miller in Geneva at firstname.lastname@example.orgTo contact the editors responsible for this story: Anthony Aarons at email@example.com, Christopher ElserFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Shares in M&C Saatchi Plc plunged around a half in value on Wednesday after the ad agency issued its second profit warning in less than three months due to an accounting scandal. The accounting review related to several units in the company's UK business overstating income and receivables, among others, and M&C said it would restructure its UK operations. "This restatement of our numbers and the reduction in forecasts make for very difficult reading," said Chief Executive David Kershaw.
Investors cheered Spanish group Repsol's pledge to slash net carbon emissions to zero by mid-century, saying they hope it will pile pressure on rival oil and gas companies to follow suit in the fight against climate change. The world's top oil and gas companies are under heavy pressure, not only from environmental groups but also from institutional investors, to fall in line with targets set in the 2015 Paris climate agreement to limit global warming. Repsol on Monday became the first leading energy firm to commit to a net-zero emission target, outdoing Royal Dutch Shell that had set out an ambition to halve emissions by 2050.
Royal Dutch Shell, Mitsubishi Corp and Trafigura presented bids for a contract to lift some 20.2 million barrels of Ecuadorean crude between 2020 and 2023, the Andean country's energy minister told reporters on Tuesday. The country expects to pick a winner for the contract, which is expected to generate $950 million in export income for Ecuador, in the coming days, said the minister, Jose Agusto. Ecuador invited some 51 companies to participate in the auction, the first of its kind in more than a decade.
(Bloomberg) -- The European Union is gearing up for the world’s most ambitious push against climate change with a radical overhaul of its economy.At a summit in Brussels next week, EU leaders will commit to cutting net greenhouse-gas emissions to zero by 2050, according to a draft of their joint statement for the Dec. 12-13 meeting. To meet this target, the EU will promise more green investment and adjust all of its policy making accordingly.“If our common goal is to be a climate-neutral continent in 2050, we have to act now,” Ursula von der Leyen, president of the European Commission, told a United Nations climate conference on Monday. “It’s a generational transition we have to go through.”The commission, the EU’s regulatory arm, will have the job of drafting the rules that would transform the European economy once national leaders have signed off on the climate goals for 2050. The wording of the first draft summit communique, which may still change, reflects an initial set of ideas to be floated by the commission on the eve of the leaders’ gathering.The EU plan, set to be approved as the high-profile United Nations summit in Madrid winds up, would put the bloc ahead of other major emitters. Countries including China, India and Japan have yet to translate voluntary pledges under the 2015 Paris climate accord into binding national measures. U.S. President Donald Trump has said he’ll pull the U.S. out of the Paris agreement.In a pitch of her Green Deal to member states and the European Parliament on Dec. 11, von der Leyen is set to promise a set of measures to reach the net-zero emissions target, affecting sectors from agriculture to energy production. It will include a thorough analysis on how to toughen the current 40% goal to reduce emissions by 2030 to 50% or even 55%, according to an EU document obtained by Bloomberg News.Make It IrreversibleIn the next step, the commission will propose an EU law in March that would “make the transition to climate neutrality irreversible,” von der Leyen told the UN meeting. She said the measure will include “a farm-to-fork strategy and a biodiversity strategy” and will extend the scope of emissions trading.The EU Emissions Trading System is the world’s largest cap-and-trade market for greenhouse gases. It imposes pollution caps on around 12,000 facilities in sectors from refining to cement production, including Royal Dutch Shell Plc and BASF SE. Von der Leyen eyes the inclusion of road transport into the market and cutting the number of free emission permits for airlines.Some of the transportation industry’s biggest polluters have already stepped up efforts to reduce their environmental impact. In June, France’s Airbus SE, its U.S. rival Boeing Co. and other aviation companies pledged to reduce net CO2 emissions by half in 2050 compared with 2005 levels. EasyJet Plc, the U.K.-based discount airline, has promised to offset all of its carbon emissions by planting trees and supporting solar-energy projects, while Air France will take similar steps on its domestic routes.Germany’s Volkswagen AG, the world’s largest automaker, aims to become CO2 neutral by 2050, while Daimler AG plans to reach that target for its Mercedes-Benz luxury car lineup by 2039.To ensure that coal-reliant Poland doesn’t veto the climate goals next week, EU leaders will pledge an “enabling framework” that will include financial support, according to the document, dated Dec. 2. The commission has estimated that additional investment on energy and infrastructure of as much as 290 billion euros a year may be required after 2030 to meet the targets.The EU leaders will also debate the bloc’s next long-term budget next week. The current proposal would commit at least $300 billion in public funds for climate initiatives, or at least a quarter of the bloc’s entire budget for the period between 2021 and 2027.(Updates with details on draft sumit communique from fourth paragraph.)\--With assistance from Ania Nussbaum, Siddharth Philip and Christoph Rauwald.To contact the reporters on this story: Ewa Krukowska in Brussels at firstname.lastname@example.org;Nikos Chrysoloras in Brussels at email@example.comTo contact the editors responsible for this story: Chad Thomas at firstname.lastname@example.org, Chris ReiterFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- For years, OPEC ignored the rise of the U.S. shale industry and came to regret its mistake. Now, the group is making another bold gamble on America’s oil revolution: that its golden age is over.When the Organization of Petroleum Exporting Countries meets this week, ministers will discuss whether to extend their current output target, rather than reduce it, according to people familiar with the internal debate. The reason? They believe relentless U.S. oil production growth will slow rapidly next year.OPEC isn’t alone. Across the industry, oil traders and executives believe U.S. production will grow less in 2020 than this year, and at a significantly slower rate than in 2018. On paper, the cartel has the oil market under control.Brent crude has been trading around $60 a barrel for most of 2019, about 14% higher than at the start of the year but well below the peak of $75.60 a barrel set in late April.“Saudi Arabia is doing a reasonable job to balance the market,” said Marco Dunand, head of commodity trading house Mercuria Energy Group Ltd. He has some words of warning too: “OPEC will need to watch U.S. production very closely.”But Saudi Arabia and its allies should be wary of discounting competition from U.S. shale and other non-OPEC suppliers.Total U.S. oil production reached an all-time high of almost 17.5 million barrels a day in September, up 1.3 million barrels a day from a year earlier. That expansion is likely to continue at least into the beginning of 2020 before slowing down.Slower growth doesn’t mean no growth, however. While the independent companies which drove America’s shale expansion are struggling, and have announced big spending cuts, Big Oil is now playing a much bigger role in key basins such as the Permian. Companies with deeper pockets, such as Exxon Mobil Corp. and Royal Dutch Shell Plc are likely to continue spending, increasing production in Texas, New Mexico and elsewhere.Vitol Group, the world’s largest independent oil trader, expects U.S. production to increase by 700,000 barrels a day from December 2019 to December 2020, compared to growth of 1.1 million barrels a day from the end of 2018 to the end of 2019.Brazil, Guyana, NorwayPerhaps the biggest problem for OPEC isn’t American shale but rising output elsewhere. Brazilian and Norwegian production is increasing, and will advance further in 2020. After several years of low prices, engineers have made many projects cheaper, and the results are clear.Norway’s Johan Sverdrup oil field, the biggest development in decades in the North Sea, started up earlier this year, months ahead of schedule and several billions dollars under its original budget. And Guyana, a tiny country bordering Venezuela in Latin America, is about to pump oil for the first time.Join Bloomberg News Oil Strategist Julian Lee for a Q&A on OPEC+ at 2pm London time on Monday.“For OPEC, it remains a difficult first half of 2020,” Russell Hardy, Vitol’s chief executive officer, said in an interview. “U.S. production is growing strongly this quarter and in the first half of next year we’ll add non-OPEC production from Norway, Brazil and Guyana.”The cartel knows well that it’s taking a gamble. The group’s own estimates show that if it continues pumping as much as it has done over the last couple of months -- roughly 29.9 million barrels a day -- it would supply about 200,000 barrels more crude daily than the market needs on average next year. The oversupply would be concentrated in the first half, when OPEC estimates it needs to pump just 29 million barrels a day to prevent oil stocks building up.Iraq said on Sunday that OPEC and its allies will consider deeper production cuts, though the comments come after the coalition has widely signaled reluctance to take such action. Prices rallied in response, adding 2.2% to $61.79 as of 12:40 p.m. in London.Other OPEC officials, speaking privately, believe the world’s supply and demand balance could be tighter than many expect -- a big change from the past three years. They see non-OPEC output growth falling short of forecasts while global demand increases could be higher than expected.“The market’s fear of a global recession has receded,” said Vitol’s Hardy. “There are problems here and there, but in general the music hasn’t stopped and demand didn’t follow the 2008 model” when it slumped amid the financial crisis.And the crude market is, right now, relatively tight, giving OPEC some solace that it would be able to weather the first few months of 2020 when it will loosen up a bit. The tightness is particularly acute for the kind of oil that most Middle East nations pump: lower quality so-called heavy-sour oil. Riyadh, for example, is selling its flagship Arab Light crude at a premium of 40 cents to the benchmark into Asia, one of the strongest ever levels.The problem is that the oil market isn’t just crude: other petroleum liquids, such as so-called condensate and natural gas liquids -- which are by-products of oil and gas drilling -- are abundant. Condensate and NGLs are processed into refineries, and often blended with fuels such as gasoline and also used to produce petrochemical industry feedstock naphtha.“The crude oil balance for next year shows a tight market,” said Amrita Sen, chief oil analyst at London-based consultant Energy Aspects Ltd. “But when you add other liquids, like condensates, then the balance is looser.”(Updates oil price.)\--With assistance from Grant Smith.To contact the reporter on this story: Javier Blas in London at email@example.comTo contact the editors responsible for this story: Will Kennedy at firstname.lastname@example.org, James Herron, Christopher SellFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Markets) -- In a small office at the run-down hotel his family owns in Poza Rica, Mexico, Guillermo Salinas recalls how his country’s oil dreams imploded, along with many of his own hopes for a brighter future. A light flickers overhead. The air smells of chlorine, though hardly anyone uses the hotel’s blue-tiled pool anymore.On this muggy day in September, some of the few guests at the once-thriving Hotel Salinas are a dozen or so federal police sent to the area to protect pipelines from thieves who siphon off gasoline to sell on the black market. Having federales as paying customers is a mixed blessing: The sight of a bunch of guys in the lobby with rifles slung over their shoulders doesn’t exactly help lure tourists.Nowadays any paying customer is welcome here. Poza Rica, a city in the Gulf Coast state of Veracruz, lies on the edge of the vast onshore Chicontepec oil basin. About a decade ago, Petróleos Mexicanos, the state-owned oil giant that has iconic status in Mexico, was investing billions of dollars in Chicontepec. Salinas and other entrepreneurs rushed here to open restaurants, hotels, and oil service businesses.It looked like Poza Rica was going to be a boomtown. But the boom has become a bust. Joblessness is rampant—even some drug cartels that once terrorized the town have gone elsewhere because there’s not enough money to be made.So, like a lot of Mexicans, Salinas, who manages the hotel day to day, feels let down. “The government told businesses to prepare ourselves by creating new infrastructure and services for Pemex,” he says. “That didn’t last, and now a lot of investment has stopped. Many of us in the hotel business are fighting to survive.”The same could be said of Pemex. Ratings companies are sounding the alarm over the world’s most indebted oil company, with one already cutting its bonds to high-yield, high-risk junk. The biggest risk of all is that the state company’s distress will drag down the Mexican economy.Any hope of preventing that and of revitalizing such places as Poza Rica now rests with President Andrés Manuel López Obrador. When he took office in December 2018, one of his signature promises was to return Pemex to its glory days. AMLO, as the president is known, has placed Pemex at the heart of his ambitions to upend three decades of neoliberal policies. So while he’s pledged much-needed investment to revive the company, he’s dialing back moves that had ended Pemex’s monopoly on crude production and provided a whiff of modern management practices where do-little jobs-for-life weren’t uncommon.Pemex is now saddled with a mandate that looks a lot like a job creation program, including the construction of a refinery in AMLO’s home state that most industry analysts say isn’t needed. This populist prescription for saving Pemex, whose debt load is more than $100 billion, is exactly what disturbs ratings companies. The press offices for Pemex and López Obrador didn’t respond to requests for comment.In retrospect it seems clear the president was always headed in this direction. Early in the López Obrador administration, Pemex added the motto “For the Recovery of Sovereignty” to its logo—lest anyone mistake it for a more typical energy producer focused simply on drilling for oil and gas.And that’s where AMLO’s troubles began.QuickTake: How AMLO’s Plans to Transform Mexico Ran Into Reality When he became president, López Obrador had at least appeared to have the bona fides for revitalizing Pemex. As mayor of Mexico City from December 2000 to July 2005, he successfully juggled wildly divergent constituencies. What’s more, he was a child of the oilpatch: He spent his early years in Tepetitán, an off-the-beaten-path village with a couple of wells sunk into the ground.But the Pemex of AMLO’s childhood was vastly more successful than it is today. In 1953, the year he was born, the oil industry was booming in his home state of Tabasco. Nationwide, production had almost doubled over the previous 15 years. By 1968 it had doubled again.There were always concerns that Mexicans at the bottom of society weren’t getting a fair share of oil wealth, however. López Obrador, who’d worked as a bureaucrat and a college professor, latched on to that anger as he began his political career. After losing a controversial 1994 election for the state governorship—his opponent’s campaign spending came under scrutiny—he joined activists who blockaded Pemex wells and rose to prominence when he appeared on television covered in blood following a clash with police.In 2000, when he won Mexico City’s mayoral election, López Obrador positioned himself as a pragmatic leftist. While he expanded social programs for senior citizens, single mothers, and the disabled, he was also willing to work with billionaire Carlos Slim on development projects and former New York Mayor Rudy Giuliani on crime-fighting initiatives.AMLO used the job as a launchpad, running for president in 2006 on a left-wing agenda that included protecting Pemex from what he saw as efforts to privatize the company. He lost to center-right candidate Felipe Calderón by less than 1 percentage point, according to the official count, but claimed fraud and didn’t accept the results. He and his supporters formed a symbolic shadow government and shut down the heart of the capital city with weeks of protests.In the following years, as Calderón took steps toward modernizing Pemex, López Obrador led the resistance, packing arenas with angry citizens for hourslong rallies. He told his followers to close down airports, oil facilities, and highways to publicize their objections to Calderón’s plans. “The country’s oil belongs to the people, even the most humble,” López Obrador told protesters outside Pemex’s Mexico City headquarters in 2008. “We must defend this historic conquest.”As Calderón’s single six-year term was ending in 2012, López Obrador ran again for president. This time he lost by a much wider margin to another center-right politician, Enrique Peña Nieto.Peña Nieto’s administration finally achieved the cherished goal of the Mexican right: opening Mexico’s energy industry to foreign investment. Although the timing wasn’t ideal—the ink on the reforms was barely dry before the 2014-15 oil price crash—Mexican fields were attractive to international players such as BP, Chevron, Exxon Mobil, and Royal Dutch Shell.In the end, Peña Nieto’s government got bogged down in corruption allegations and the public’s perception that the president and his wife, a former telenovela star, were disconnected from the realities of everyday life. That opened up space for López Obrador to run once again as a reformer in the July 2018 presidential election.AMLO’s National Regeneration Movement (Morena) promised something new: a government that would focus on fighting poverty and putting ordinary workers over the entrenched business interests that many believed were coddled by previous administrations. He pledged to revive Pemex, shield it from foreign interference, and make it a company of the people again.At home and abroad, business executives and investors blanched at what they heard; the peso, bonds, and stocks all suffered heavy losses in the lead-up to the vote. But much of the citizenry embraced it, sending AMLO to a resounding victory. In his ascent, pundits inevitably heard echoes of Donald Trump, Brazil’s Jair Bolsonaro, and other unconventional politicians gaining ground around the world.Now, more than a year after the election, the problems plaguing Pemex are coming to a head, and its investors are increasingly restless.Production plummeted to 1.68 million barrels a day on average in the first nine months of 2019, half what it was in 2004, and Mexico’s most lucrative fields are drying up quickly. Investment is desperately needed, but the cash-strapped company dedicated about $2.5 billion to capital expenditures in the first nine months of the year, just 28% of its $9 billion target for the full year. That target was already not even half of Pemex’s capital expenditures during some of Calderón’s years in power.While Pemex is profitable—earnings before interest, tax, depreciation, and amortization in the first nine months of the year reached $17 billion—most of that was wiped out by taxes and duties that totaled $13.9 billion in that span. “The issue is that the government takes all of that away,” says Lucas Aristizabal, Latin America senior director at Fitch Ratings Inc. in Chicago.AMLO’s critics say his government has no realistic strategy to fix what’s wrong. They dismiss the centerpiece of López Obrador’s investment plan for Pemex—an $8 billion refinery in his home state—as a boondoggle, or worse. They say Pemex has no need for it, the business of turning crude into fuels is best left to someone else, and the project will divert attention away from its core business of drilling.Construction hasn’t yet started on the 340,000-barrel-a-day plant, though bulldozers are preparing the land for what’s to come. It will siphon off more than 4 of every 5 pesos in additional funds the government allocated to Pemex from 2020 to 2022 as part of its five-year business plan.Never mind that existing refineries were operating at only 40% of their potential in September because of underinvestment and a lack of light crude for processing, or that the plants lose more money as they produce more, according to analysts. “It’s cheaper for Pemex to buy gasoline [from abroad] rather than refine it in the country,” says Ixchel Castro, an oil and refining markets manager for Latin America at Wood Mackenzie Ltd.Even so, López Obrador’s notion that another refinery will help curtail foreign involvement and influence in Mexico’s oil business resonates with large swaths of the population that have long equated Pemex with national sovereignty. PEMEX grew out of Mexico’s expropriation of foreign companies’ oil interests in 1938, a time when units of Royal Dutch Shell and Standard Oil Co. were dominant players. Mexican schoolchildren learn from their history books that citizens lined up outside the Palacio de Bellas Artes in Mexico City to donate silver, gold, and even chickens to pay for the takeovers. More than 80 years later, the Día de la Expropiación Petrolera is celebrated across the country on March 18, especially in oil regions.López Obrador’s detractors argue that his policies, rather than rescuing Pemex, could push it into insolvency. That would be devastating for the economy and for government revenue. Oil revenue accounted for about 18% of federal government income in the second quarter of 2019, whereas oil and gas contributed just 3.4% of Mexico’s gross domestic product last year, less than half the level of 25 years ago. López Obrador’s budget for next year depends in part on Pemex boosting production by about 16%, a rate of growth unseen in almost four decades.Mexico needs to ditch the “pipe dream” of building refineries and integrate its energy industry with its northern neighbor’s, says James Barrineau, a money manager at Schroders Plc, the third-largest holder of Pemex’s peso-denominated debt. The failure to do so, he says, “is really the core reason why people have been cautious about AMLO.”In June, Fitch Ratings downgraded Pemex’s bonds to junk, citing the company’s falling oil production and ballooning debt, and cut Mexico’s sovereign debt rating, because of the government’s close ties to the company. Moody’s Investors Service Inc. and S&P Global Ratings have raised similar concerns.Swaps traders are paying more to buy insurance against a default, with the cost of five-year contracts up more than 40% since the end of 2017. Bond buyers are demanding more than 4 percentage points of extra yield to hold Pemex’s 10-year notes instead of similar-maturity U.S. Treasuries, almost three times the premium investors get on Mexico sovereigns.López Obrador, meanwhile, has belittled the credit rating companies and ignored their recommendations to plow more funds into Pemex’s oil production and exploration business, sell off non-core assets, and welcome private investment. “As soon as we arrived they started talking about how they were going to lower the rating,” he said at a press conference in August. “I hope they are more careful in their analysis, more professional, more objective.”Recent government measures to shore up Pemex have helped keep the ratings companies at bay. In September the government pumped $5 billion into Pemex to help ease its debt burden, and the company sold $7.5 billion in bonds to refinance short-term debt. Pemex had already received $1.3 billion as part of the budget approved in December 2018. It’s also gotten $1.5 billion in tax breaks and $1.8 billion in assistance with its pension obligations. In the first nine months of 2019, Pemex says, it saved $1.22 billion by reducing fuel theft and an additional $375 million or so by trimming its payroll of 124,000 and interest payments on its debt.All that money isn’t nearly enough to fund Pemex’s needs, according to Andrés Moreno, chief investment officer of Afore Sura, Mexico’s third-largest pension fund, which holds Pemex bonds. He says the company needs $10 billion to $15 billion a year in cash flow to reverse oil production declines, so the government support is just “a plug-in.” “They are removing the emergency for the next two years, but it doesn’t solve anything,” Moreno says. “What is missing in Pemex’s case is awareness of the emergency and willingness to put ideology in a drawer.”As an example of how things could work better, analysts and money managers point to Brazil’s state-controlled oil company, Petróleo Brasileiro SA. To be sure, it’s had plenty of problems of its own, including corruption and an enormous debt load of about $83 billion. But it does some things right: For two decades it’s worked with foreign oil majors to develop vast reserves in deep-water fields off its coasts, allowing it to tap outside expertise as it gained experience in the highly technical drilling required there.López Obrador’s strategy to increase oil production by focusing on onshore and shallow-water fields is shortsighted, according to these analysts and money managers; it also fails to acknowledge the huge promise of Mexico’s deep-water and unconventional acreage, which have much higher production potential but require foreign expertise and private investment.“The current administration has made revamping Pemex—as we call it, ‘making Pemex great again’—a priority,” says Pablo Goldberg, a portfolio manager at BlackRock Inc., which owns Pemex debt. “Eventually, what we need to be seeing is the production capacity of Pemex going up. Some of this financial assistance [from the government] should give Pemex capital to invest. Now we have to see whether it’s well done.”On the outskirts of Poza Rica, dried-up wells stretch into the distance, pockmarking surrounding citrus plantations. Chicontepec is estimated to hold about one-fifth of Mexico’s oil and gas reserves. In the early 2000s—after the gigantic shallow-water field Cantarell, discovered in the 1970s, started to decline at an accelerated pace—government officials promised Chicontepec would be a boon to Mexico’s production.Pemex drilled thousands of wells over the following decade. In 2010 it contracted global firms, including Baker Hughes Co. and Halliburton Co., to develop top-of-the-line production-enhancing techniques at five new field laboratories. That attracted transport and logistics companies, equipment and service providers—all to meet the needs of Pemex and its contractors.The black-gold rush didn’t last long. The drilling proved far more complicated and expensive than Pemex anticipated. At its peak in 2012, Chicontepec contributed fewer than 70,000 of the nation’s 2.5 million barrels in average daily output. The failure cemented Pemex’s reputation for incompetence after executives squandered billions of dollars on it, financed mostly with debt.During Peña Nieto’s administration, Pemex officials acknowledged that Chicontepec was a failure, and the company drastically reduced its investment in the field. Poza Ricans, believing new oil investment was coming their way, supported López Obrador at the ballot box. Pemex’s 2020 budget does call for doubling annual investment in Chicontepec to $319 million. But for the time being, Pemex’s operations in the region have continued their steady decline.Building a refinery in his home state hasn’t helped AMLO’s cause in Poza Rica (population: about 200,000). “It’s disappointing that we voted for him and all the support in the energy sector has gone elsewhere,” says Paola Ostos, operations manager of Poza Rica-based Transervices Energy, which shuttles workers and equipment to oil installations. “As a businesswoman, I feel that we’ve been forgotten. We were the principal oil zone of Mexico for many years, and now all the activity is being concentrated in the south.”Every March 18, Poza Rica still celebrates the Día de la Expropiación Petrolera. But life in the oilpatch isn’t what it used to be. Residents say the festivities—which used to span several days and include a carnival—have lost much of their luster.On the outskirts of Poza Rica at 9:30 a.m. on a late summer’s day, the sun is already turning the sheet-metal homes in squatter communities into ovens. Overhead, plumes from a Pemex processing plant streak the sky. Day after day, the installation burns natural gas that seeps from Pemex’s oil wells.Salvador Reséndiz, president of the Business Coordinating Council for the northern region of Veracruz, says López Obrador promised Poza Rica a new plant during his presidential campaign. Although Pemex’s 2020 business plan includes rehabbing the facility, Reséndiz worries that Poza Rica will be forgotten—and that the refinery in the president’s home state will take precedence.“It’s very clear that in these first three years of the new government, all of the investment in Pemex is going south, south, south,” he says. “When will it come north? When are they going to put money in Poza Rica?” —With Sydney Maki, Eric Martin, and Nacha CattanStillman covers energy. Villamil covers emerging markets. They are based in Mexico City. To contact the authors of this story: Amy Stillman in Mexico City at email@example.comJustin Villamil in Mexico City at firstname.lastname@example.orgTo contact the editor responsible for this story: Stryker McGuire at email@example.com, Brendan WalshFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
These two FTSE 100 (INDEXFTSE:UKX) income heroes could power you to a comfortable retirement, says Harvey Jones.
(Bloomberg) -- President Donald Trump may be withdrawing from the Paris climate agreement, but the U.S. is still going to be a force at the negotiating table as international leaders gather in Madrid next week to map out rules for carbon trading as a way to limit greenhouse gas emissions.Despite Trump’s rejection of the global agreement to cut carbon emissions, U.S. officials have long advocated emissions-trading schemes on the world stage and the government wants a say in the structure of those carbon markets -- a key issue before delegates at the annual United Nations climate summit that begins Monday.The transparency and accountability of such markets is a top priority for the U.S. government and businesses such as airlines and oil companies that may have to offset their own emissions through carbon trading.“Even though one might not care about climate, you don’t want countries to be able to cheat,” said Brad Schallert, deputy director of international climate coordination for the World Wildlife Fund, which supports global action to thwart climate change. “That is something in the long-term interest of the U.S.”The U.S. government is dispatching a small team of career diplomats and officials to the climate talks, largely mirroring the delegation that attended last year’s summit in Poland. They will also be joined by representatives of some businesses and state and local governments.But unlike the past two years, where the Trump administration played a contrarian role and held discussions to promote clean coal, the U.S. is not planning a similar side event in Madrid. And, in another shift, political appointees from the Trump administration also won’t be attending, according to two people familiar with the matter who asked not to be named before a formal announcement.The U.S. team is set to be led by two career officials from the State Department: climate negotiator Kim Carnahan and Marcia Bernicat, a principal deputy assistant secretary, the people said.Secretary of State Michael Pompeo emphasized earlier this month that the U.S. will “continue to offer a realistic and pragmatic model” and highlight the role of innovation and open markets during international climate discussions.While Trump has begun exiting the Paris pact, that withdrawal won’t be official until Nov. 4, 2020 -- the day after the next U.S. presidential election. Other countries still welcome U.S. negotiators in the talks, according to longtime climate summit-goers, because the diplomats bring expertise to the discussions and their participation could help forge rules that would be palatable to the U.S. should a future president seek to change course. Democratic presidential contenders have widely vowed to rejoin the pact.Oil and gas companies that unsuccessfully lobbied the Trump administration to remain in the Paris agreement have a vested interest in the negotiations, said Alden Meyer, director of strategy and policy at the Union of Concerned Scientists. “They are supportive of emissions trading and other mechanisms because in the event there ever is a domestic binding climate regime in the United States, that would give them flexibility to reduce the costs on their own facilities of compliance,” he said.Official negotiations will focus on one of the thorniest aspects of the 2015 Paris agreement: how to use markets to help slash greenhouse gas emissions. In Article 6 of the 2015 pact, countries agreed to create a new system for trading allowances covering greenhouse gases, but negotiators are still haggling over the details.New carbon markets could allow countries to sell emissions credits generated from programs that curb greenhouse gases, such as upgrading the efficiency of industrial plants, paring pollution from air conditioning systems, developing renewable power installations and planting trees.About half of countries in the Paris agreement are counting on such emissions trading to help fulfill their carbon-cutting promises. But environmentalists want to make sure the system isn’t undermined by loopholes and double counting.Many environmental advocacy groups also want to limit credits to projects that wouldn’t have happened otherwise -- responding to a major criticism of an earlier carbon-trading regime that came out of the 1997 Kyoto Protocol. They are fighting a push by Brazil to allow unused credits from the older system to be grandfathered in to the new approach.“The U.S. has been fairly helpful on Article 6, in terms of pushing for robust accounting standards and safeguards against double counting and raising skepticism about the proposal from Brazil,” said Meyer, of the Union of Concerned Scientists. “If we get it right, it can facilitate higher ambition and get us closer to being on track for the Paris temperature goals. If we get it wrong, it can really blow a hole in the integrity of the Paris commitments, and that would be a disaster.”The U.S. government’s active role negotiating international carbon market rules is tethered to a related effort to curb emissions from airlines, said Elliot Diringer, executive vice president of the Center for Climate and Energy Solutions. Even though Trump is withdrawing from the Paris agreement, the U.S. remains part of the International Civil Aviation Organization and supports its plan to offset plane pollution by planting trees, investing in clean energy and taking other steps to curb emissions.The aviation program “is somewhat predicated on the Paris agreement accounting system to guard against double counting reduction units, so the U.S. has an interest in seeing that system put in place,” Diringer said.Continued U.S. involvement at climate talks also reflects the country’s longstanding connection to United Nations action on the issue. The U.S. will retain a seat at the Conference of Parties to the Framework Convention on Climate Change, the underlying 1992 environmental treaty.The official U.S. delegation will be buttressed by scores of other Americans representing local governments, corporations and advocacy groups arguing that the U.S. is still committed to fighting climate change and meeting its Paris agreement pledge to cut carbon dioxide emissions 26% to 28% from 2005 levels by 2025. Panel discussions and other events also are planned to highlight ways businesses and local governments are curbing emissions.Representatives from oil companies Royal Dutch Shell Plc and BP Plc and electric utilities PNM Resources and DTE Energy are set to attend alongside the lieutenant governor of Wisconsin, the mayor of Pittsburgh, Pennsylvania, and other elected officials.Some of the U.S. activities planned in Madrid are supported by Bloomberg Philanthropies and Michael Bloomberg, the founder and majority owner of Bloomberg LP, the parent of Bloomberg News.“Despite what our federal government’s position is on the Paris agreement and climate change more broadly, there’s quite a bit of action going on that is making an impact,” said Elan Strait, director of U.S. climate campaigns for the World Wildlife Fund. “If these actors work together and scale up what they are doing, the U.S. target under Paris is actually within striking distance, and that’s the message they can take to the climate talks.”To contact the reporter on this story: Jennifer A. Dlouhy in Washington at firstname.lastname@example.orgTo contact the editors responsible for this story: Jon Morgan at email@example.com, Elizabeth Wasserman, Justin BlumFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Fires were still burning at a Texas chemical plant after multiple explosions injured three workers and forced residents of Port Neches to evacuate.As of about 6 a.m. local time Thursday, the fire was still burning and the evacuation order remains in place, an officer at Port Neches police department said by phone.The first blast at TPC Group Inc.’s facility on Wednesday morning occurred in the site’s south processing unit at a tank with finished butadiene, the company said on its website. A second explosion about 12 hours later sent flames and debris high into the air. Jefferson County Judge Jeff Branick declared a state of disaster.“It is not clear at this time for how long the plant will be shut down,” TPC Group Inc. said on its website on Wednesday, adding that affected products included both raw materials and processed butadiene and raffinate. The facility about 100 miles (160 kilometers) east of Houston produces more than 16% of North America’s butadiene, and 12% of gasoline additive methyl tert-butyl ether, or MTBE, according to data provider ICIS. Butadiene is used to make synthetic rubber that is used for tires and automobile hoses, according to TPC.Bonds in closely held TPC, which is headquartered in Houston, fell as much as 8% on the news, making them the worst performer among junk-rated securities.The blasts at Port Neches follow a string of similar accidents in Texas this year. An explosion at a chemical plant northeast of Houston in March left one person dead, just two weeks after a blaze at an oil storage facility caused thousands of gallons of petrochemicals to flow into Houston’s shipping channel. Exxon Mobil Corp.’s suburban Houston refining and chemicals complex erupted in flames in July.The Jefferson County evacuation order issued late on Wednesday covered a radius of 4 miles that included parts of Port Neches, Groves, Nederland and Port Arthur.“I don’t think the focus is on putting the fire out, but letting the materials in there burn themselves out and keeping the surrounding tanks cooled with the water being sprayed,” Judge Branick said at a press conference.The Coast Guard said earlier that traffic was moving with restrictions on the Sabine-Neches channel, which links refineries and terminals in Beaumont and Port Arthur with the Gulf of Mexico.TPC said the initial blast injured two employees and one contractor. All three have since been treated and released from medical facilities, Troy Monk, director of health, safety and security at TPC, said at a press conference Wednesday.“You don’t want to be downwind of this,” Monk said. He couldn’t say when the fires would be extinguished, saying the main goal was “fire suppression.”Total SA’s Port Arthur refinery hasn’t been affected by the chemical plant fire, a company spokeswoman said in an email. BASF SE’s steam cracker in Port Arthur and Exxon’s Beaumont refinery also weren’t affected, according to representatives for the companies.Royal Dutch Shell Plc shut the Nederland station on its Zydeco oil pipeline, which pumps crude oil from the Houston area to refineries in Louisiana, a company spokesman said by email.TPC received 11 written notices of emissions violations from September 2014 to August 2019, according to Texas Commission on Environmental Quality records. Three of those were this year and were classified as “moderate” violations. The company also received several high-priority violation notices from the U.S. Environmental Protection Agency.TPC was taken private in a $706 million deal in 2012 by private equity firms First Reserve Corp. and SK Capital Partners, which staved off a rival bid from fuel additives maker Innospec Inc. that was backed by Blackstone Group. The company, formerly known as Texas Petrochemicals Inc., competes with LyondellBasell Industries NV in the butadiene market and is run by former Lyondell senior executive Ed Dineen.“Our hearts go out to them as well,” Port Neches Mayor Glenn Johnson said of TPC at a press conference Wednesday. “We appreciate TPC,” he said twice.Spot butadiene prices in the Gulf region are down 43% this year to 26 cents per pound, according to data from Polymerupdate.com. The decline is due to weak tire demand caused by the slump in global car sales, analysts at Tudor, Pickering, Holt & Co. said in a note Wednesday. Lyondell, which also makes butadiene, may benefit if a significant outage at the TPC plant leads to an increase in prices, the analysts said.Port Neches is a city of about 13,000, halfway between the refining centers of Beaumont and Port Arthur, Texas. Located on the Neches River, the city has long been associated with oil refining and petrochemicals.(Updates with police comment on status of fire in second paragraph, details on location of blast, affected products in third and fourth paragraphs. An earlier version of the story corrected the name of the company.)\--With assistance from Mike Jeffers, Adam Cataldo, Stephen Cunningham, Sheela Tobben, Kriti Gupta, Dan Murtaugh, Bill Lehane and Fred Pals.To contact the reporters on this story: Rachel Adams-Heard in Houston at firstname.lastname@example.org;Catherine Ngai in New York at email@example.comTo contact the editors responsible for this story: Simon Casey at firstname.lastname@example.org, Carlos Caminada, John DeaneFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Ethical investors, including the Church of England, plan to extend their campaign for miners and other big businesses to stop funding industry associations that block progress on U.N. goals to curb climate change, they said on Tuesday. Shareholders of BHP , the world's biggest listed miner, voted at meetings in October and November against a resolution to suspend the global miner's membership in some industry groups, saying it was effectively paying the pro-coal lobby. Adam Matthews, director of ethics and engagement at the Church of England, told the Mines and Money conference in London on Tuesday he and other investors, representing large pension funds, would extend their campaign.
Oil and gas condensate output from Kazakhstan's giant Kashagan project has more than halved from early November levels due to unplanned maintenance that started last week, two industry sources told Reuters on Tuesday. The Kazakh energy ministry said last week that Kashagan was undergoing maintenance at a gas compressor unit, which was expected to last for seven days. The energy ministry said on Tuesday that Kazakhstan's total daily oil and gas condensate output had fallen to 240,700 tonnes from 264,000-270,000 tonnes at the start of the month, equivalent to around 1.9 mln bpd and 2.09-2.13 mln bpd respectively.
Royal Dutch Shell said on Monday it was disappointed to lose a tender for Dutch renewable energy business Eneco which went to a group led by Japan's Mitsubishi Corp for 4.1 billion euros ($4.52 billion).