Milbank, Tweed, Hadley & McCloy LLP has represented international lenders Mizuho Bank, Ltd. and Itaú BBA International plc in providing approximately $150 million in financing for the purchase of an innovative compact semi-submersible multi-service vessel destined for Brazil's most productive offshore oil and gas location.
The support unit, named Olympia, represents a groundbreaking new vessel design, which suppliers believe will change the long term landscape of the offshore vessel market. It was developed to help increase production in Brazil's Campos Basin, source of some 80% of the country's substantial oil reserves. DP-3 rated, meaning it has redundant systems designed to hold it in place in virtually all weather and sea conditions, the 276-foot (84.25 meters) craft was built in Fujian Province in southern China and holds up to 500 people.
Olympia is the first of a group of three sister vessels ordered by Rio-based oil and gas firm GranEnergia and will be leased to state-owned energy major Petrobras. Olympia is part of Petrobras'$5.6 billion program to increase operating efficiency in the Campos Basin, a 44,000-square-mile area off the coast north of Rio de Janeiro. The vessel, whose primary function is to act as a floating accommodation unit for rig personnel, will begin operating in the Campos Basin in the second quarter of 2014.
New York-based project finance partner Daniel Bartfeld led the Milbank deal team, which included London-based partner James Cameron, and associates Fernando Capellão, Russell King and Caroline Rasmussen. Milbank has previously advised on the financing of a new fleet of deepwater drillships produced in South Korea that are also on the frontlines of Brazil's burgeoning offshore oil recovery sector. "
We're delighted to participate in this important financing for a new generation of advanced support and maintenance vessels for the Campos Basin, site of significant ongoing investment by Petrobras,, Mr. Bartfeld said. "
The Olympia is one part of a larger effort to increase productivity and efficiency in this mature drilling area, which, despite challenging conditions, remains Brazil's most productive offshore oil field."
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NYC-based PIRA Energy Group believes that low inventories are currently supportive for oil prices. On the week, U.S. product stocks draw while crude builds, while in Japan crude and finished product stocks ease. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:
World Oil Market Forecast
Significant momentum in major developed economies should provide a lift for emerging markets, eventually easing financial market pressure. Low inventories are currently supportive for oil prices. Diesel cracks stay strong for two to three more weeks before seasonally weakening, while gasoline cracks will benefit from a substantial refinery maintenance program. Cushing crude stocks will drain, supporting WTI, while also weighing on LLS, but then back pressure on WTI will occur until refiners return from maintenance. Political risks were balanced in January and PIRA assumes disruptions remain high but will decline in 2014, although it is by no means a sure bet.
U.S. Product Stocks Draw While Crude Builds
Total commercial inventories decreased this past week with major draws in products partially offset by a large build in crude. The drivers behind this week were mostly due to a weather-related demand surge and a crude import surge to over 8 MMB/D for the first time since September (which was also partly weather-related as imports bounced back from earlier port delays). Products drew (and crude built) even with higher crude runs and higher product imports.
Japanese Crude and Finished Product Stocks Ease
Crude runs eased on the week and the crude import rate backed down from 4.2 MMB/D to 3.66 MMB/D. The 1.6 MMBbl crude stock draw was a reversal of the build seen the previous week. Finished products drew 1.5 MMBbls with a modest decline in gasoline and gasoil and more substantial declines in jet-kero and fuel oil. The indicative refining margin was modestly lower with all the major product cracks declining slightly.
U.S. Propane Continues to Lead the NGL Market
U.S. propane storage is at a new all-time period low for the latest week. The weather will remain quite cold with stocks drawing further. The imbalances in the Midcontinent are being somewhat relieved as movements are redirected. The flow of product from the USGC is expected to slow given current adverse trade economics.
U.S. Ethanol Prices and Margins Tumble
U.S. ethanol prices and margins tumbled in January. Higher corn and natural gas prices and lower co-product DDG credits also put downside pressure on margins. RIN prices soared due to uncertainty in the timing of the EPA finalizing the biofuel requirements for 2014.
The information above is part of PIRA Energy Group's weekly Energy Market Recap, which alerts readers to PIRA’s current analysis of energy markets around the world as well as the key economic and political factors driving those markets.
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Speaking to investors today, new Shell CEO Ben van Beurden updated on the company’s priorities: improving Shell’s financial results and achieving better 
capital efficiency, as well as continuing to strengthen operational performance and project delivery.
Van Beurden, who became the new CEO of Royal Dutch Shell plc (“Shell”) on 1 January 2014, said Shell’s strategy overall is sound. The company has a high quality portfolio and key strengths in technology and project delivery. Shell will continue to invest in new projects that deliver more energy to customers, and create value for shareholders. The strategy is designed to deliver through-cycle growth in cash flow, to drive competitive returns and a growing dividend.
Van Beurden said: “Our ambitious growth drive in recent years has yielded a step change in Shell’s portfolio and options, with more growth to come, but at the same time we have lost some momentum in operational delivery, and we can sharpen up in a number of areas.”
“Our overall strategy remains robust, but 2014 will be a year where we are changing emphasis, to improve our returns and cash flow performance”, he continued, highlighting three priorities:
• Improved financial performance, including restructuring in some areas of the company
• Enhancing capital efficiency, with hard choices on new projects, reduced growth investment,
and more asset sales
• Continued strong delivery of new projects, and integration of recent acquisitions.
The landscape the company had expected has changed. Factors such as the worsening security situation in Nigeria in 2013, and delays to non-operated projects in several other countries, have altered the outlook. Oil prices remain high globally, but North America natural gas prices and associated crude markers remain low, and industry refining margins are under pressure. Restructuring and improving profitability in North America Upstream resources plays, and Oil Products world-wide, is a particular focus for the company.
The recent Ninth Circuit Court decision against the Department of the Interior raises substantial obstacles to Shell’s plans for drilling in offshore Alaska. As a result, Shell has decided to stop its exploration program for Alaska in 2014. “This is a disappointing outcome, but the lack of a clear path forward means that I am not prepared to commit further resources for drilling in Alaska in 2014,” van Beurden said. “We will look to relevant agencies and the Court to resolve their open legal issues as quickly as possible.”
The company will increase the pace of asset sales, which are expected to be $15 billion for 2014-15 combined in Upstream and Downstream. “We are making hard choices in our world-wide portfolio to improve Shell’s capital efficiency”, van Beurden said.
With a changing operational landscape and the streamlining of Shell’s portfolio, the company will no longer be updating against previous cash flow and net spending targets. “I want Shell to be measured on our competitive performance”, van Beurden said.
Capital spending will be reduced. In 2013, this totaled $46 billion, including $8 billion of acquisitions. In 2014, Shell expects total capital spending of around $37 billion, including $2 billion of previously announced acquisitions.
Innovative large-scale projects such as Pearl gas-to-liquids have been the main drivers behind Shell’s recent increase in cash flow, which reached over $87 billion in 2012-13 combined, an increase of 35% on 2010-11. Recent start-ups and Shell’s latest projects and acquisitions – dominated by liquefied natural gas, and deep-water oil in the Gulf of Mexico, Brazil and Malaysia – are expected to build on this growth in 2014.
Shell has distributed more than $11 billion to shareholders in dividends and repurchased $5 billion of shares in 2013. Reflecting confidence in the potential for free cash flow growth in 2014, the company is expecting the Q1 2014 dividend to be $0.47/share, an increase of over 4% compared to Q1 2013, and total dividends announced in respect of 2014 to be potentially over $11 billion.
.Shell announces an agreement to sell a 23% interest in the Parque das Conchas (BC-10) project offshore Brazil to Qatar Petroleum International for approximately US $1 billion, subject to closing
The transaction is subject to approval by the National Petroleum and Gas Agency (ANP, Brazil's Oil and Gas regulator) and the Administrative Council for Economic Defense (CADE, Brazil's anti-trust authority).
Shell will continue to operate BC-10 with a 50% working interest and retains a significant upstream presence in Brazil. In addition to the recent entry into the Libra oil discovery, Shell is currently operating two floating, production, storage and offloading (FPSO) vessels in Brazil's offshore – the Espírito Santo at Parque das Conchas and the Fluminense at the Bijupirá/Salema fields.
Currently, BC-10 is producing approximately 50,000 boe/d. Since coming on-stream in 2009, BC-10 has produced more than 80 million barrels of oil equivalent (boe). Phase 2 of the project, to tie-in the Argonauta O-North field, came online on October 1st 2013, with an expected peak production of 35,000 boe per day. The final investment decision for Phase 3 of the BC-10 project was taken in July 2013 and once online is expected to reach a peak production of 28,000 boe.
Shell has also other interests in Brazil, particularly our Lubricants business and our joint venture Raízen, the leading sugar cane ethanol producer.
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