The Oil & Gas: Ezine December 2016

Schlumberger executes Contract with PETRONAS for Multiclient Wide-Azimuth Deepwater Seismic Survey in the Campeche Basin
September 22, 2016

Schlumberger announced that PETRONAS, through its wholly-owned subsidiary, PETRONAS (E&P) OVERSEAS VENTURES SDN. BHD., has signed an agreement to license a significant part of the Western Geco Campeche wide-azimuth (WAZ) deep water multiclient seismic survey in the southern Gulf of Mexico which will help unravel the hydrocarbon potential in the complex and under explored Mexican deepwater basins. More than 80,000 km² of newly imaged subsurface data, which have been acquired in the last 12 months, are available for oil and gas companies participating in exploration in Mexico. The project follows the Mexican government’s opening of licensing rounds to non-government companies for the first time.

 Golar and Schlumberger Form OneLNG Joint Venture
July 25, 201

Golar LNG Limited (Golar) and Schlumberger have announced the creation of OneLNG℠, a joint venture with 51:49 ownership respectively to rapidly develop low cost gas reserves to LNG. The combination of Schlumberger reservoir knowledge, wellbore technologies and production management capabilities, with Golar’s low cost FLNG (Floating LNG) solution, will offer gas resource owners a faster and lower cost development thereby increasing the net present value of the resources. OneLNG will be the exclusive vehicle for all projects that involve the conversion of natural gas to LNG, which require both Schlumberger Production Management services and Golar’s FLNG expertise.

Chevron and ENN Sign LNG Sales and Purchase Agreement
August 29, 2016

Chevron Corporation’s wholly-owned subsidiary, Chevron U.S.A. Inc., has signed a binding LNG Sales and Purchase Agreement (SPA) with ENN LNG Trading Company Limited (ENN), a subsidiary of ENN Energy Holding Ltd., which is one of the largest natural gas distribution companies in China for the delivery of liquefied natural gas (LNG) to China from Chevron’s global supply portfolio. Under the terms of the SPA, ENN will receive up to 0.65 million metric tons per annum (MTPA) of LNG over 10 years, with the first delivery expected to start in 2018 or the first half of 2019.

The SPA delivery requirements are expected to be fulfilled by Chevron’s growing LNG portfolio, including the company’s Australian LNG interests at Gorgon, Wheatstone and the North West Shelf.

 Oil India Limited signs Memorandum of Understanding with University of Houston
October 05, 2016

Oil India Limited (OIL), an Upstream Oil & Gas PSU, with intent of augmenting its reserves base and maximising recovery from its aging oilfields has entered into a MoU with the University of Houston, one of the leading universities on oil & gas of the world. The MoU is focused to collaborate in the fields of Improved Oil Recovery & Enhanced Oil Recovery for production enhancement from matured fields, seismic interpretation & reservoir characterization studies, improvement of drilling and well intervention practices and unconventional hydrocarbon studies. It is envisaged that the collaboration will help OIL to further consolidate and upgrade the various initiatives the Company has undertaken to improve production and contribute significantly to the energy security of the country. This will also contribute towards national obligation as set by Hon’ble Prime Minister to reduce import dependency of oil & gas by 10% by 2022.

Oil India Limited (OIL) led Indian consortium successfully completes two landmark acquisitions in Russia
October 05, 2016

The Indian consortium led by Oil India Limited (OIL), including Indian Oil Corporation Limited (IOCL) and Bharat PetroResources Limited (BPRL), a 100% subsidiary of Bharat Petroleum Corporation Limited (BPCL), have successfully completed two landmark acquisitions of producing upstream assets in Russia. The consortium acquired 29.9% stake in LLC Taas-YuryakhNeftegazodobycha (TaasYuryakh) and 23.9% stake in JSC Vankorneft (Vankorneft) from Rosneft Oil Company, the National Oil Company of Russia (Rosneft). The transactions received approvals from relevant government authorities of India and Russia in late September and completed simultaneously on 5th October 2016 in Moscow, Russia. The definitive agreements for the TaasYuryakh and Vankorneft deals were signed on 16th March 2016 and 17th June 2016 respectively. TaasYurakh is a producing asset and one of the largest green field developments in Eastern Siberia Region. Post this transaction, Rosneft now holds 50.1% stake in the field. BP is the other partner with 20% stake. Vankor is a producing giant oilfield, also located in Eastern Siberia. It is the second largest field in Russia by production and contributes to about 10% of Rosneft’s entire oil production. Post this transaction Rosneft now holds 61.1% in the field. ONGC Videsh Limited currently holds 15% stake. The current combined production from both fields is around 440,000 bopd or ~22MMTPA and OIL’s share of current oil production is 1.7 MMTPA. The fields are also producing about 5.6 BCM of sales gas per annum. The remaining oil and gas reserve of the two fields together are approximately 3.86 billion barrel oil equivalent.

Limitation of liability under maritime law is a presumptive right of a vessel owner to limit its liability after the occurrence of a maritime accident and the burden of proof lies with the party or person seeking to defeat the same right.

India is a signatory to the Convention on Limitation of Liability for Maritime Claims 1976 (the 1976 Convention) and the amending Protocol of 1996. Prior to this, India has been a signatory to the International Convention for the Unification of Certain Rules relating to the Limitation of Liability of Owners of Sea-going Vessels and Protocol of Signature (Brussels Convention of 1924) which was amended by the 1957 International Convention relating to the Limitation of the Liability of Owners of Sea-going ships and protocol of signature (Brussels Limitation Convention of 1957).

While the Brussels Convention of 1924 first fixed the limit of liability of an owner of a sea-going vessel based on the tonnage of the vessel contrary to the previously followed principle of the limitation of liability dependent on value of the vessel, it was replaced by the 1769 Convention and to incorporate the concept of limited liability as per the 1976 Convention, in Indian law, the Merchant Shipping Act 1958 (‘Act’), was amended in 2002 with the introduction of Part XA via Merchant Shipping (Amendment) Act, 2002.

It has been observed that the 2002 amendment, while incorporating certain aspects of the 1976 Convention, does not include the Article 4 ‘Conducts barring Limitation’ and Article 10 which deals with the limitation of liability without constitution of a limitation fund, of the same Convention. This omission and the absence of an amendment subsequent to signing of 1996 Protocol, has created uncertainty regarding the law with respect to the cap applicable on the limitation of liability.

The Bombay High Court, in the case of Murmansk Shipping Company v Adani Power Rajasthan Ltd, wherein the Russian vessel set to arrive at Mundra and Mumbai incurred partial damage and loss to the cargo, answered two important issues namely, whether there are any conducts which can bar limitation as per the Indian law and whether the limit of liability shall be as per the 1976 Convention or the 1996 Protocol.

 The court held that the absence of Article 4 of the 1976 Convention in the Act is not damaging as the Convention aims to provide a virtually unbreakable right to limit which is derived from the requirement of proof that the loss was due to a fault of the owner and because of a personal act or omission which was intentionally done[1]. Subsequently, the court denied the petitioners contention of the limit to be decided as per the 1976 Convention as under section 352C of the Act, the amount of the limitation fund is linked directly to the Convention and, ‘Convention’ is defined as ‘the Convention on Limitation of liability for Maritime Claims, 1976 as amended from time to time’.

With this judgment, the Court establishes;

• an absolute right of a vessel owner to limitation, irrespective of fault.
• that the provisions Act shall be subject to any subsequent amendments to the 1976 Convention as and when referred to in the text.

[1] Para 37 of the Judgment; Murmansk Shipping Company v Adani Power Rajasthan Ltd; (MANU/MH/0060/2016)

Glencore buys stake in Rosneft PJSC
December 8, 2016

Commodity trader GlencorePlc and Qatar’s sovereign wealth fund have agreed to buy a 10.2-billion euro ($11 billion) stake in Russia’s largest oil producer, Rosneft PJSC, the crown jewel of the Russian oil industry. Glencore gets access to millions of barrels of Russian crude, just as OPEC production cuts open the door to the first supply deficit in four years. The deal is seen to give the buyers a 19.5 percent stake in Rosneft PJSC, which the U.S. and European Union have targeted with punitive measures, and is labeled to be the biggest foreign investment in Russia since the crisis in Ukraine.