Small business restructuring in Australia
From 1 January 2021, Australia’s insolvency framework for small businesses changed. The purpose of the change was to assist small businesses.
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Global | Publication | March 31, 2016
Genel Energy, the oil company set up by ex-BP head Tony Hayward and financier Nat Rothschild, announced last week that it had received its US$6.9 million share of a US$12.6 million payment from the Kurdistan Regional Government (KRG) to the Taq Taq field partners for oil sales in February 2016. The Taq Taq field is located in the Zagros basin in the centre of the Kurdistan region of Iraq, and is held by Genel and Addax Petroleum International (a Sinopec subsidiary), with the KRG holding a carried interest of 20%. Genel also received a share in the US$12.9 million payment for crude oil deliveries from the Tawke field in northern Kurdistan from the KRG. Tawke is operated by DNO International, listed on the Oslo stock exchange, with Genel holding a 25% participating interest. The KRG is also reportedly making payments to other oil producers to reduce the hundreds of millions of dollars in overdue payments.
The level of oil exports from Kurdistan in February and early March was significantly impacted by the shut-in of the export pipeline to Ceyhan in Turkey between 17 February and 10 March, following an attack in mid-February and ongoing security concerns. Repairs were completed and the pipeline reopened on 11 March, but average daily deliveries in February were approximately half of those in January. The pipeline runs from the Kirkuk field in Iraq through Kurdistan to Ceyhan and carries approximately 600,000 barrels of oil per day.
Separately, Hayward is reportedly in talks with investors, including a number of Middle Eastern sovereign wealth funds, to establish a fund to invest in distressed oil and gas assets.
US company Kosmos Energy has announced that it has successfully appraised a gas field offshore Mauritania, increasing its estimate for the Tortue West structure from 11 trillion cubic feet to 15 tcf, enough to support a LNG plant. The company’s Mauritania blocks adjoin its two blocks offshore Senegal in waters of some 2,800 metres. While there is no current demand for LNG in the region, Kosmos is also drilling for oil, starting in its Senegal acreage.
The Managing Director of Nigerian National Petroleum Corporation (NNPC) and state minister for petroleum reserves, Emmanuel Kachikwu, has announced that NNPC is to be broken up into 30 separate units within a matter of weeks, in order to make each company profitable by the end of the year. The restructured group will consist of seven new divisions – five business divisions of upstream, midstream, downstream, gas and power marketing, and refineries and ventures, with two service divisions, finance and accounts, and corporate planning and services. President Muhammadu Buhari came to power in 2015 promising to crack down on corruption, including in the oil & gas sector, and the break up of the notoriously opaque NNPC should enhance transparency as well as efficiency and profitability.
Separately, NNPC owes the government US$25 billion in back payments on revenue from sales of crude oil during 2011-2015, according to a recent statement from Nigeria’s Revenue Mobilisation, Allocation and Fiscal Commission. A figure of US$16.2 billion for 2014 alone has been quoted from a report by the Office of the Auditor General for the Federation, the independent auditor of the Nigerian state, and allegations have been made of payments to secret escrow accounts from gas feedstock sales. NNPC denies these allegations.
Meanwhile, the president of Nigeria’s Senate, Abubakar Bukola Saraki, has said that a harmonised version of the Petroleum Industry Bill (PIB) will be laid before both houses of the National Assembly in the first week of April, and that the PIB is expected to be passed shortly. The PIB has been under discussion since 2007-2008.
Ugandan newspapers are reporting that the Ugandan government has received seven bids for six exploration blocks on offer in the country’s first oil licensing round, from sixteen potential bidders who pre-qualified in late 2015. The bidders include three Nigerian companies, WalterSmith Petroman Oil Limited, Oranto Petroleum International Ltd and Niger Delta Petroleum Resources Ltd; two Australian companies, Armour Energy Ltd and Swala Energy Ltd; Rift Energy Corporation of Canada and Glint Energy LLC of the US. Awards will reportedly be made in June. Three international companies are already operating in Uganda – China National Offshore Oil Corporation (CNOOC), Tullow and Total.
Rival crude oil export pipeline projects are causing confusion in East Africa. The presidents of Uganda and Tanzania announced in mid-March that work on a 1,400 km pipeline from the Ugandan Lake Albert fields to the Tanga sea port on the Tanzanian coast will begin in August and could be completed as early as 2019. A memorandum of understanding was signed in September 2015 between the two governments, the Tanzanian Petroleum Development Corporation and Total, with a view to determining the most viable and lowest cost route for the pipeline. Two months earlier, the Ugandan and Kenyan governments had signed a communiqué to take oil from the Lake Albert fields, as well as Tullow’s Lokichar basin fields, to the port of Lamu in Kenya.
The 200,000 bpd Uganda-Tanzania line will cost more than an estimated US$5.2 billion, compared to the 300,000 bpd Uganda-Kenya option which is estimated to be cheaper at a cost of US$4.7 billion. The Uganda-Kenya option is being discussed as part of the planned Lamu Port and Southern Sudan-Ethiopia Transport Corridor (LAPSSET), a US$50 billion project to build infrastructure and create stability and jobs in a troubled area of East Africa. However, recent reports from a high level meeting in Nairobi indicate that Uganda is considering withdrawing from the agreement with Kenya, in part due to concerns about delays and increased costs in the land acquisition process in Kenya.
Energy officials from the three countries have been meeting in recent weeks for Uganda to assess the readiness of its partners. Total, CNOOC and Tullow representatives are said to have been present at a subsequent meeting between the Ugandan and Kenyan presidents in Nairobi. Tanzanian officials then reportedly refused entry to the Tanga port to a team of Kenyan energy officials, withholding their passports. Political machinations aside, whichever of the two pipelines proceeds it will represent a key infrastructure development for a region which is sorely lacking.
ENI announced in mid-March that it is planning to dispose of some €7 billion of newly-discovered assets by 2019. It is reported that these include a stake in ENI’s 50% interest in the Rovuma basin gas field, offshore Mozambique, as well as assets in Congo-Brazzaville and Egypt. ENI is reportedly in talks with Exxon-Mobil in relation to a 15% stake in the Rovuma asset, but it may be that the US super-major would acquire the entirety of ENI’s interest in the project.
The Dodsal Group has recently reported a major gas discovery in the Ruvu basin onshore Tanzania. The discovery is estimated to be in the region of 2.7 tcf with a current market value of between US$8 billion and US$11 billion. Dodsal has also reported a separate discovery elsewhere onshore Tanzania with preliminary studies suggesting 5.9 tcf of gas. Whilst these are not the scale of the discoveries offshore Mozambique in the Rovuma Basin, they are nonetheless sizeable finds and the fact that they are located onshore makes them transformative for Tanzania and reduces the scale of capex necessary to monetise the discoveries.
Protests continue around Brazil against the government of President Dilma Rouseff following her appointment of her predecessor Luiz Inácio Lula da Silva as chief of staff, which could have given him shelter from the ever-expanding investigation into corruption allegations at state-owned oil company Petrobras. Lula was brought in for questioning in connection with political donations allegedly made by contractors implicated in the scandal, and then released without charge in early March, after which President Rouseff moved to appoint him. Police phone taps, authorised by Judge Sergio Moro who is leading the “car wash” investigation, revealed conversations between Lula and the President regarding the political appointment which were then leaked to the Brazilian press. Moro’s remit is to investigate ordinary citizens and not members of the legislature or the executive, but the news of the alleged political manoeuvrings by the President has drowned out concerns raised about the judge’s power to authorise the phone tapping in the first place.
In the meantime, the President faces impeachment proceedings initiated by the Brazilian National Congress, for manipulating government accounts – although it is unclear whether Congress has legal grounds to impeach her. Brazil’s electoral court is also expected to deliver shortly a ruling on alleged irregularities in the 2010 and 2014 election campaigns. A ruling against President Rouseff would likely lead to elections immediately, otherwise not scheduled until 2018. At the time of going to press, she was fighting to hold the government together after the departure of coalition partner (and the biggest party in Congress) the Brazilian Democratic Movement Party.
The political situation is not helping Petrobras. On 22 March it reported a US$10.2 billion loss for Q4 2015, bringing its full year 2015 results to a US$9.6 billion loss, with net sales of US$23.5 billion for the quarter. The company is reportedly looking to sell offshore oil & gas fields worth up to US$2 billion to help it pay down debt, with Bank of America Merrill Lynch coordinating sales of the Bauna, Golfinho and Tartaruga fields. LetterOne and Petro Rio have reportedly put in offers for the Bauna fields.
Mexico has announced that a private bidding round will be held later this year for shale oil and gas fields, ahead of a further deepwater auction of ten blocks scheduled for December. The shale round is expected to include some opportunities in the Burgos Basin, reputedly part of the same formation as the Texas Eagle Ford Shale field. The announcement comes as Mexico continues to work on regulations to ensure best practices during hydraulic fracturing. The regulations, which are expected to be approved in the coming months, will also determine which regions have appropriate infrastructure and support in place to facilitate shale development. The shale and deepwater rounds this year will be Mexico’s fourth and fifth auctions since the 2014 energy reforms and the opening of the domestic market to international investment.
Separately, a prominent member of Mexico’s National Hydrocarbons Commission (CNH), Edgar Rangel German, passed away unexpectedly last week at the age of 41. Prior to his appointment to CNH in 2009, he worked as a petroleum engineer for Pemex and in various positions in the energy and finance ministries.
Argentina’s oil minister, former head of Royal Dutch Shell in Argentina Juan José Aranguren, has bet that the price of locally produced oil will reach US$67.50 per barrel in 2016 – the government’s buy-in price at which local producers are entitled to sell to refiners. In the same spirit of optimism, national company YPF is continuing to spend at a higher rate than its peers in Latin America, although it will cut spending by 25% in 2016, the outgoing CEO Miguel Galuccio told investors in mid-March. Galuccio’s relations with Minister Aranguren were reportedly tense and he is expected to be replaced by Miguel Gutiérrez, a former J.P. Morgan executive.
The latest session of the UN Commission on Limits of the Continental Shelf has sided with Argentina in determining the limits of the country’s maritime territory by an increase of approximately 35%. The decision (which is not binding) is significant because the expanded area includes the Falkland Islands (also known as the Malvinas) which are subject to an ongoing diplomatic dispute between Britain and Argentina in relation to sovereignty, and the Commission’s decision includes a caveat to that effect. The islands are self-governing but Britain retains responsibility for defence and foreign affairs, having fought a short war with Argentina in 1982 to protect its claims.
Companies including Rockhopper Exploration and Premier Oil are engaging in exploration activity in the waters around the islands, focusing on the Sea Lion prospect to the north. Some estimates of the amount of oil around the islands are as high as 60 billion barrels, but in the difficult price environment explorers are reducing the scale of their developments.
Recently installed Argentinian president Mauricio Macri is thought to take a more conciliatory view of the territorial dispute with Britain than his predecessor Cristina Fernández de Kirchner, who had previously threatened to sue British oil and gas companies looking to invest in and around the islands. However, since taking office President Macri has made it clear that, while rejecting Kirchner’s “isolation and empty rhetoric” Argentina is not giving up its claims to the islands. The UN decision is being celebrated in Buenos Aires, but the UK government has played down the significance of the decision and stressed that sovereignty over the islands is a question for the islanders.
The 2016 Budget includes a number of measures designed to relieve the growing pressure on the UK’s oil and gas sector which has seen an estimated 65,000 job losses since the oil price drop in summer 2014. In summary, the key measures are:
Oil and gas groups have been lobbying for a reduction in the PRT for some time so these changes have been welcomed by the UK industry as they improve the economics of North Sea projects at a time when any help is welcome. However, some commentators have called these changes too little and too late.
US giant ConocoPhillips is in talks with the UK’s Oil & Gas Authority about its plans to close down the Lincolnshire Offshore Gas Gathering System, one of the UK’s largest gas pipeline systems, and the Theddlethorpe gas terminal, which processes gas from North Sea fields, according to a report in the Times. The company has said that the closures, while not imminent, would be part of its phased decommissioning programme in line with the fact that several of the fields it has operated in the North Sea and which fed into the pipeline system have ceased production. The Theddlethorpe terminal is operating significantly below capacity due to the depletion of gas fields to which it is connected.
Royal Dutch Shell has successfully completed its £35 billion merger with BG Group, which is expected to increase Shell’s oil and gas reserves by over 25% and production levels up by nearly 20% and gives Shell “productive oil and gas projects in Brazil and Australia and other key countries”, says Shell chief executive Ben van Beurden. Following increasing pressure to justify the price paid for its rival, Shell has pledged to sell up to US$30 billion of assets from the combined group and has reportedly drafted in investment bank Lazard to prepare a global disposal plan. While the recent recovery in the oil price, if it continues, will increase the attractiveness of the assets selected for sale, for the moment it is unclear who will be buying in a crowded market of sellers. Meanwhile, the post-merger restructuring process is likely to include a reduction of Shell’s workforce and contractor positions by approximately 7,500 globally. A major proportion of those positions are likely to be in the UK, adding to the anticipated job losses in the North Sea.
Despite current low oil prices, Total SA has begun pumping natural gas in what was one of the last large North Sea projects to be sanctioned in 2010, prior to the oil price decline. The deep-water natural gas project, Laggan Tormore, located west of the Shetland Islands, is operated by Total, who also owns 60% of the installations, with Denmark's DONG Energy and Britain's Scottish and Southern Energy holding 20% each. The project is anticipated to produce the equivalent of 90,000 barrels of oil per day, amounting to nearly 6% of the UK’s total gas output. Industry analysts fear that the unexpected increase in UK energy production will be unsustainable in the current market.
Another project, also to the west of the Shetland Islands, awaiting final sanction is the Rosebank development led by Chevron. The company delayed giving its final investment approval in 2013 due to escalating costs. Alongside this, the dwindling opportunities and technically challenging fields have made the North Sea a struggling region, and at current oil prices, more than one third of the oil and gas fields in the North Sea are now operating at a loss.
The government granted new licences for onshore oil and gas exploration in 159 blocks in December in a move to try and establish a share gas industry in the UK. The UK is dependent for nearly half of the country’s oil and gas demand from overseas, and this is expected to continue to rise to over 75% during the next 15 years, without further onshore production in the UK. Cuadrilla, GDF Suez, Hutton Energy, INEOS, UK Oil and Gas, and Aurora Energy Resources are some of the international oil and gas companies that were awarded licences to explore the possibility of operating in a series of blocks around England. The companies must still undergo environmental, local planning authorisations and safety checks prior to commencing production of oil and gas commercially. INEOS has pledged to meet with local communities in the areas where it has been granted licences, including in North Yorkshire and the East Midlands, and has committed to share 6% of its revenues (4% to the landowner and 2% to the community).
Energy firm Cuadrilla is appealing the decision of Lancashire county council to refuse planning permission applications for fracking for shale gas in two sites in the county. The applications for exploration and monitory sites in Little Plumpton and Roseacre Wood were rejected on the grounds of noise and traffic impact. A co-joined public inquiry to be heard by a single planning inspector has now been launched following Cuadrilla lodging four appeals to communities secretary Greg Clark, and is scheduled to last five weeks.
BP announced in January that it will be cutting one in five jobs throughout its North Sea operations as the oil price fell below US$30 per barrel. The cost-cutting lay-off will amount to approximately 4,000 employees worldwide being made redundant over the next two years. The cutbacks form part of a larger reduction in the company’s global upstream workforce, but BP has confirmed that it still remains committed to the North Sea, and is investing US$4 billion into new projects and redevelopments in the region, including the new Clair Ridge project and Schiehallion and Loyal fields, near to the Shetland Islands. Other majors in the area have since announced cuts, with Sir Ian Wood, author of the influential Wood Review of the UK's oil and gas industry, predicting that as many as 45,000 jobs could be lost in the UK sector in 2016.
Cyprus is offering three offshore blocks – 6, 8 and 10, to the south and south-west of the island – in its third licensing round, it was announced last week. The initial exploration periods will be three years with two two-year renewals. Applications are due by 22 July and decisions are expected about six months after that. According to reports, Cyprus’ energy minister, Yiorgos Lakkotrypis, believes that the geology will be found to be similar to the Zohr structure offshore Egypt, and that the 2D seismic information already available will attract international companies. Total and ENI already hold exploration blocks from previous rounds.
Turkey has criticised Cyprus’ announcement, claiming that part of block 6 in Cyprus’ exclusive economic zone (EEZ) is within the Turkish continental shelf and that the announcements undermines the rights of Turkish Cypriots. Turkey is not a party to the UN Convention on the Law of the Sea, which (among other things) delineates EEZs.
Previous discussions in Cyprus on the de facto division of Cyprus ended in October 2014 when Cyprus’ President Anastasiades suspended his participation after a Turkish research vessel was dispatched to shoot seismic surveys in Cyprus’ EEZ. Talks resumed in May 2015 following a change of leadership on the Turkish Cypriot side.
Total and China National Petroleum Corporation (CNPC) have signed a strategic cooperation agreement in Beijing in mid-March, focusing on cooperation in areas of safety and environment, human resources and social responsibility. The two companies cooperate on a number of projects around the world.
Separately, Iran has announced that it has signed a non-disclosure agreement with Total in relation to potential development of the South Azadegan oil field, close to the Iraqi border. The adjacent North Azadegan field was reportedly awarded to CNPC in 2009.
Engie (formerly known as GDF Suez) is reported to be looking to sell off €5 billion of assets from its upstream portfolio in Australia, Indonesia, Malaysia and Azerbaijan and is in talks with Total. The planned sales are part of Engie’s three year disposal programme to return the group’s focus to its core business of electricity and power generation.
The first shipment of US shale gas to Europe arrived in Norway last week on a specially-built vessel. The cargo of 27,500 cubic metres of ethane was shipped by INEOS which is investing approximately US$2 billion in four (later to be eight) multi gas carriers, the world’s largest, according to the company. The gas is being delivered to INEOS’ two petrochemical sites in Scotland and Norway and weekly deliveries are expected to begin at Grangemouth during the summer, continuing for the next 15 years.
INEOS holds fracking exploration licences in central Scotland and is confident that despite the moratorium by the Scottish Government and the current evidence gathering process, new research will show that fracking can be carried out safely and the company will be able to start exploration in 2017.
Ukraine has reportedly come through the 2015-2016 winter – a mild one – without resorting to Russian gas, according to an announcement by the national pipeline operator Ukrtransgaz in early March. The combination of imports from EU countries, principally Slovakia, and stored supplies meant that Ukraine has not needed to import Russian gas since November 2015.
Talks between Ukraine, Russia and the European Commission are expected to resume in April, according to public comments from Naftogaz CEO Andriy Kobolev. The talks are likely to include further discussions of transit fees, with Ukraine insisting that Russia should be paying more. Russian gas monopoly Gazprom has indicated that it will stop shipping gas through Ukraine in 2019, but critics of Russia’s alternative pipeline plans are convinced that these alternatives are too expensive and too inefficient compared to the existing Ukrainian route.
Russia and other major oil producers, including several OPEC members, are due to meet in Doha on 17 April to discuss a production freeze and other measures to stabilise the oil price. An agreement to freeze output at January levels was reportedly struck between Russia and Saudi Arabia in mid-February, conditional on agreement from other producers, but both countries’ actions since then call into question the stability of the agreement. Russia’s oil exports will reach a 30-month high in April, as it has agreed international sales following a slump in domestic demand and planned maintenance works at refineries. Saudi Arabia and Kuwait have announced this week that they are to re-start production at the jointly operated Khafji field, which is capable of producing up to 300,000 barrels per day (bpd). Iran, meanwhile, is concentrating on its return to the international markets and has so far declined to participate in any production freeze until its output returns to pre-sanctions levels. All this activity has led to a senior International Energy Agency (IEA) official to describe any production freeze as “meaningless”, since only Saudi Arabia is able to increase production. However, even if any agreement is a mere gesture, it may at least help to build much-needed confidence in price stability.
The Asian Development Bank (ADB) is considering lending US$450 million to Azerbaijan to help finance the costs of expanding production at Shah Deniz, according to a statement from the bank this week. The gas field is Azerbaijan’s largest, estimated to hold 1.2 trillion cubic metres of gas, and is being developed by a consortium of oil & gas companies including BP and SOCAR. The Shah Deniz 2 expansion project will cost an estimated US$28 billion and includes 26 new wells, two offshore platforms, expansion of an existing terminal near Baku and some 500 km of subsea pipelines to connect the new wells to the terminals. Like other oil producers, Azerbaijan’s economy has been severely affected by low oil prices and is seeking international funding for development of the Southern Gas Corridor, the pipelines which are expected to bring Shah Deniz gas to Turkish and European markets.
Following mid-March parliamentary elections in Kazakhstan, in which President Nursultan Nazarbayev’s Nur Otan party preserved its overwhelming majority, energy minister Vladimir Shkolnik has been replaced by the former president of Kazakhstan’s national electricity grid company KEGOC, Kanat Bozumbayev. In addition to his power sector experience, Bozumbayev was formerly the akim (mayor) of Pavlodar and Zhambyl regions of Kazakhstan and has held positions with Air Astana, KazTransOil and KazMunaiGas. Shkolnik served as minister of energy from 1999-2006 and again since 2014; the reason for his dismissal, the only post-election ministerial change to date, and his next position are not yet known. He had previously announced that Kazakhstan would not agree to freeze oil production at January 2016 levels as is being discussed between a number of OPEC member states. It is unclear whether Kazakhstan has been invited to participate in the planned April talks in Qatar (see above).
Russian company Lukoil has put its 50% interest in Kazakhstan oil producer Turgai Petroleum up for sale. The remainder of the company is held by PetroKazakhstan, whose shareholders are China National Petroleum Corporation (CNPC) and national company KazMunaiGas. The Lukoil stake is likely to be valued at US$200 million, according to reports. Turgai Petroleum is developing the Kumkol North field in the Kyzylorda region of southern Kazakhstan and holds a development licence for part of the nearby East Kumkol field, according to PetroKazakhstan’s website. It is also involved in transportation and refining jointly with PetroKazakhstan Kumkol Resources.
From 1 January 2021, Australia’s insolvency framework for small businesses changed. The purpose of the change was to assist small businesses.
In this edition of Regulation Around the World we review the position regarding beneficial ownership registers which has come into the spotlight following work by the Financial Action Task Force and the introduction of reforms in a number of jurisdictions.
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