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  • This month’s Country Risk Evolution (CRE) Risk Outlook focuses on the impact Chinese foreign policy is having on global aboveground risk. As China’s economy booms, it is moving beyond an almost singular focus on growth to other prerogatives, including a more active foreign policy. While economic growth remains a major foreign policy objective, achieving global recognition and influence reflective of its elevated economic and geopolitical status is also a key priority. Energy security is a key driver, and China is seeking to influence oil and gas producers through critical infrastructure loans and strategic investments. China is also challenging the US’ global dominance, by establishing closer relations with US adversaries to withstand pressure from Washington. Yet, not all developments are positive for the global risk environment as Chinese pressure interferes with oil and gas activities in the South China Sea, and resource-backed loans weigh on government finances.
    Tue, Apr 27, 2021
  • March’s devastating attack on Palma highlights the growing capacity of the Islamist insurgents and puts the future of the entire LNG sector into doubt. Our CRE risk outlook outlines three security and insurgency scenarios, based on how quickly the government can regain—and, critically, maintain—control of the northern insurgency. The base-case scenario forecasts an extended conflict over the next 12-24 months, where the government relies heavily on support from the international community. A lower probability scenario assumes quick resolution, and limited impacts on LNG construction, eventual final investment decision (FID) by Exxon Mobil, and possibly other investors. However, the state failure scenario would see insurgency risk spreading offshore and beyond Mozambique’s border, and the cancellation of LNG project development.
    Tue, Apr 20, 2021
  • Algeria is making a concerted effort to boost its flagging upstream sector with a new hydrocarbons law and a potential bid round. The law—introduced in 2019 but only now nearing full implementation—updates contract terms, reduces taxes and more firmly delineates the roles of regulatory bodies. Yet, it is not a panacea to the sector’s ills as implementation delays will blunt investment impact, especially as investor interest remains unclear. Political and economic risks—namely early elections in June and an deteriorating oil-dependent economy—are also a concern.
    Mon, Apr 19, 2021
  • This month’s CRE Risk Outlook focuses on aboveground risks in South Africa and Namibia, two low risk, frontier exploration areas, with initial investor interest, but limited resource development plans. South Africa hopes to build on Total’s Brulpadda and Luiperd discoveries to increase gas production as it seeks to satiate domestic demand and replace antiquated coal plants with renewable and natural gas electricity generation. South Africa has favorable fiscal terms and a supportive regulatory framework, but support for the ruling Africa National Congress (ANC) is slipping amid corruption and economic stagnation, while ethnic, racial and socioeconomic tensions continue to simmer. Meanwhile, Namibia’s sector is even less developed, and the success or failure of Total’s upcoming high-impact Venus-1 exploration well will likely be a key determinant of future industry interest. Namibia also has favorable regulatory and fiscal terms, but an underperforming economy and a long-ruling party seeing support slip, increasing medium-term political volatility risks. However, as the industry is built out, risk in both countries is likely to rise as they will likely turn to the nascent sector to raise badly needed government revenues and revive their economies via avenues like export restrictions or local content requirements.
    Mon, Mar 29, 2021
  • Leadership change in Tanzania following the death of President John Magufuli may facilitate long-delayed offshore gas developments, which have been hampered by aboveground political risks. Vice President Samia Hassan was quickly sworn in as president, easing short-term political instability concerns, but she must manage factions within the ruling Chama Cha Mapinduzi (CCM) party. Hassan faces key economic, security and public health risks, but is expected to favor more liberal economic policy, improved international relations and efforts to fight the Covid-19 pandemic than her predecessor. For the oil and gas sector, the new administration is seen as less antagonistic to foreign investment, but commercial and regulatory hurdles remain, limiting CRE score upside in the near term.
    Wed, Mar 24, 2021
  • This month’s Country Risk Evolution (CRE) Risk Outlook looks at evolving US sanctions strategy under President Joe Biden and its impact on aboveground risk for the oil and gas sector. Biden will take a more multilateral approach to sanctions and be more open to negotiation than was the case with former President Donald Trump’s unilateral, maximalist approach and will likely enact more humanitarian exemptions. These changes will likely lower aboveground risks and may open the door to greater exports—albeit in many cases only marginally—from Iran and Venezuela, even without formal sanctions relief. Biden’s desire to pursue sanctions multilaterally may also boost the prospects of Russia’s Nord Stream 2 pipeline as the US’ European allies are starkly divided on the project. Yet, sanctions risks will not dissipate altogether, and may increase in places like China and Myanmar where relations remain tense. Congress, sanctions enforcements, and the willingness of foreign actors to negotiate will also be key determinants of the impact of these shifts.
    Wed, Feb 24, 2021
  • Omani Sultan Haitham bin Tariq al-Said, who took power in January 2020, has advanced an overhaul of the government, finances and economy at a scope and pace uncommon for a traditionally staid Gulf monarchy. Political reforms, including the appointment of Oman’s first ever crown prince, are reducing political volatility and positioning the government to run more efficiently and tackle the country’s economic woes. Economic reforms are also progressing, focusing on reducing the deficit and diversifying Oman’s hydrocarbon dependent economy, but headwinds could stifle these ambitions and are likely to generate political blowback. CRE has upgraded Oman’s Political Volatility risk score from 4 to 3, while its poor Economics scores are also on watch for a potential upgrade should these ambitious reforms succeed.
    Wed, Feb 17, 2021
  • Myanmar’s recent military overthrow of the civilian government jeopardizes political and economic gains from the last decade. The military has a strong institutional hold on power, and potential elections next year are unlikely to diminish its structural influence. This will remain a key political risk in Myanmar. The US and China are key players to watch: the coup complicates Washington’s Asia pivot with broader sanctions possible; China needs a stable Myanmar for its own energy security and will maintain regime support. Energy sector investors are managing near-term policy uncertainty and proceeding with projects in the queue, but major policy changes, sanctions or rising corporate reputation risks put future projects at risk.
    Mon, Feb 8, 2021
  • Oil and gas producers will continue to face major economic and fiscal strains this year and next. Energy Intelligence’s updated external break-even price modeling indicates that the average break-even for 2021/22 will stay relatively flat at around $72 per barrel, compared to 2020, as Opec-plus cuts take a toll on export volumes. However, these cuts are a key component of our optimistic price outlook, which see prices rising to nearly $68/bbl by 2022, providing producers much needed breathing room. Nonetheless, 2021 will be a difficult year for many oil and gas producers, especially those who were in a weaker position pre-pandemic. After relying heavily on reserves and deficit spending to survive 2020, this avenue is increasingly unviable. Instead, producers are instituting deeper, more painful economic and fiscal reforms, including budget cuts, currency devaluations and increases in non-hydrocarbon taxes, as well as new avenues to monetize their oil and gas assets.
    Wed, Jan 27, 2021
  • Saudi Arabia’s announcement that it will reopen its land, air, and maritime boundaries to Qatar marks the beginning of the end of a 3½-year rift between Doha and its Gulf neighbors. US political developments played a role in the move as Gulf states—many of whom are apprehensive of President-elect Joe Biden’s Iran policy—attempt to display unity ahead of his Jan. 20 inauguration. The breakthrough is a key indicator of improving ties, but the fundamental drivers of the dispute have changed very little and the possibility that another diplomatic rift will open remains high.
    Wed, Jan 13, 2021
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AN INDUSTRY REDEFINED: ENERGY IN AN EVOLVING WORLD