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September 4, 2014

"Reckless Conduct" Could Cost BP $18 Billion in Fines For Deepwater Horizon Spill

NEW ORLEANS — In the four years since the blowout on the Deepwater Horizon oil rig killed 11 workers and sent millions of barrels of oil gushing into the Gulf of Mexico, BP has spent more than $28 billion on damage claims and cleanup costs, pleaded guilty to criminal charges and emerged a shrunken giant.

But through it all, the company has maintained that it was not chiefly responsible for the accident, and that its contractors in the operation, Halliburton and Transocean, should shoulder as much, if not more, of the blame.

On Thursday, a federal judge here for the first time bluntly rejected those arguments, finding that BP was indeed the primary culprit and that only it had acted with “conscious disregard of known risks.” He added that BP’s “conduct was reckless.”

By finding that BP was, in legal parlance, grossly negligent in the disaster, and not merely negligent, United States District Court Judge Carl J. Barbier opened the possibility of $18 billion in new civil penalties for BP, nearly quadruple the maximum Clean Water Act penalty for simple negligence and far more than the $3.5 billion the company has set aside.

The ruling stands as a milestone in environmental law given that this was the biggest offshore oil spill in American history, legal experts said, and serves as a warning for the oil companies that continue to drill in the deep waters of the Gulf of Mexico, where high pressures and temperatures in the wells test the most modern drilling technologies.

“We are pleased,” United States Attorney General Eric H. Holder Jr. said of the ruling. “The court’s finding will ensure that the company is held fully accountable for its recklessness.”

The decision also casts a cloud over BP’s future. Its reputation has already been sullied and important holdings in Russia are at risk because of tensions in Ukraine. In addition to the $28 billion in claim payments and cleanup costs it has paid, BP has been forced to divest itself of more than 10 percent of its oil and gas reserves, along with valuable pipelines and refining facilities to pay claims and increase its profitability. BP shares fell by nearly 6 percent Thursday, closing at $44.89.

In a statement, BP said it “strongly disagrees with the decision” and would immediately appeal to the United States Court of Appeals for the Fifth Circuit. BP added that the ruling was “not supported by the evidence at trial,” and that “the law is clear that proving gross negligence is a very high bar that was not met in this case.”

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Mexico's Pemex issues over $2 billion worth of debt

 Mexican state oil company Pemex has topped up three local debt issues to raise some 28 billion pesos ($2.13 billion), the company said on Thursday.

The three issues had maturities of between 4 1/2 and 11 years and the sale was about 2.7 times oversubscribed, with 75 billion pesos worth of bids put in, Pemex said.

"This is the highest demand for a local placement in the company's history," Pemex said in a statement.

The amount sold could still rise once an over-allotment option was exercised, it added, without giving more details.

The money raised would largely be used for investment by Pemex's production and exploration arm, the company added. (1 U.S. dollar = 13.147 Mexican pesos) (Reporting by Adriana Barrera; Editing by Ken Wills)

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ExxonMobil to Install New Gas Oil Unit at Norwegian Refinery

SLAGEN, NORWAY --( U.S. energy behemoth Exxon Mobil Corp. announced plans to install a new processing unit at the Slagen refinery in Norway, for production of high quality vacuum gas oil feedstock. This would be used to create finished products such as diesel. The new unit will improve the facility’s overall crude distillation process by replacing production of heavy fuel oil with lighter, higher-value gas oil.

This project, coupled with the recently announced major upgrade at the company’s Antwerp facility, will further strengthen ExxonMobil’s integrated downstream portfolio in Europe to better compete in the challenging refining industry.

ExxonMobil is investing for the future in its Slagen unit despite low refinery margins and industry-wide losses in Europe. This project demonstrates ExxonMobil’s long-term view, with strategic investments in advantaged refineries to more successfully face the challenging industry environment. The company is also evaluating investments in other advantaged assets in its global refining network.

The world’s largest publicly traded oil company, ExxonMobil is engaged in oil and natural gas exploration and production, petroleum products refining and marketing, chemicals manufacture, and other energy-related businesses. Approximately four-fifth of Exxon Mobil’s earnings come from its operations outside the U.S.

Exxon Mobil is one of the world’s best-run integrated oil companies given its track record of superior returns on capital employed. The energy giant has long been a core holding for investors seeking a defensive name with continued dividend growth. Exxon Mobil is fairly active in its investment program. The company plans to spend about $185 billion over the next five years, up 29% over the last five-year period.

The strength of Exxon Mobil lies in its balanced operations, strong financial flexibility, continued efficiency and cost control. The company’s efforts to build an unconventional resource portfolio both in North America and overseas are aimed at increasing production through a wider exposure to large energy resources with a long reserve life and low field declines. However, we are skeptical about the company’s near-term performance due to its muddled refining fortunes.

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August 31, 2014

Saudi Aramco Seeks Bids for Unconventional Gas Projects

DHAHRAN, SAUDI ARABIA--( Four companies have expressed interest in bidding for work on unconventional gas in Saudi Arabia as the world's top oil exporter pushes ahead with plans to develop challenging shale deposits, industry sources said.

The companies are South Korea's GS Engineering and Construction, Italy's Maire Tecnimont, Japan's JGC and Canada's SNC-Lavalin, the sources told Reuters.

State-run Saudi Aramco's project will involve building processing facilities, wellheads and pipelines for the gas in Turaif in the northern part of Saudi Arabia where the big mining project Waad al-Shamal is under development, the sources said.

Saudi Aramco, SNC-Lavalin, JGC and GS declined to comment, while Maire Tecnimont was not available for comment.

The search for gas has been a priority for Saudi Arabia as it struggles to keep pace with rapidly rising domestic demand.

Aramco plans to produce as much as 200 million cubic feet per day of unconventional natural gas by 2018 to supply the Waad al-Shamal project and a power plant.

Inspired by a shale gas surge in the United States, which has transformed it from the world's largest gas importer to an exporter, Saudi has begun investigating its large unconventional gas reserves.

The kingdom has made appraisals in the northwest area, the Eastern Province and in the Empty Quarter, but the hunt is yet to prove fruitful.

Saudi Arabia, which holds the world's fifth-largest proven reserves of gas, expects domestic demand for natural gas - which it uses mainly for power generation - almost to double by 2030 from 2011 levels of 3.5 trillion cubic feet per year.

Saudi Oil Minister Ali al-Naimi had estimated the country's unconventional gas reserves - those held in reservoirs that have not been traditionally exploited - at over 600 trillion cubic feet, more than double its proven conventional reserves.

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Pemex Raises Oil Production Goals for 2015

MEXICO CITY--( State-owned oil firm Petróleos Mexicanos said Friday that it is raising its 2015 goal for crude-oil output to 2.4 million barrels a day.

The outlook comes after Pemex was forced last week to reduce this year's production figures to account for water and other impurities pumped from offshore fields that were erroneously counted as oil.

"We are looking at an upward tendency for 2015," said the company's director of exploration and production, Gustavo Hernández, at a news conference.

Pemex, as the company is known, lowered its estimated production for this year to 2.35 million barrels a day from 2.44 million to account for measuring errors at its offshore fields. Equipment at three production areas wasn't accurately detecting the amount of water and impurities that are a common byproduct of oil production, particularly offshore, Pemex said.

Mr. Hernández said its 2015 estimate for next year is for crude that will be accurately measured using international standards, since the problem was detected last year and is being corrected.

Production of natural gas next year is expected to be slightly higher than this year's current average of about 6.5 billion cubic feet a day. Mexico is a net importer of natural gas from the U.S. and is rapidly building new gas pipelines to import far more of the fuel to take advantage of its relatively low price compared with other industrial fuels.

Pemex's bump of 50,000 barrels a day in crude-oil output next year will come from improved management of the continuing decline at mature fields, along with the ramping up of recent projects and the start of production at new fields, including an extra-heavy oil complex in the southern Gulf of Mexico where Pemex's has most of its big projects.

Pemex, currently a government oil monopoly, will face private competition next year for the first time since 1938 under a broad energy overhaul that was signed into law by Mexican President Enrique Peña Nieto earlier this month.

Under the overhaul, Pemex was allowed to keep all of its currently producing fields and most of the oil reserves it has already discovered, in addition to being granted large swaths of unexplored areas where it is expected to make new discoveries. But in most of the new areas, Pemex will have to compete with international oil majors that are expected to be particularly interested in the deep waters of the Gulf of Mexico since there is heavy production on the U.S. side of the waterway and none in the deep waters on the Mexican side.

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