Did This Oil & Gas Deal Just Change The Global Energy Balance?

Authored by Dave Forest via OilPrice.com,

One of the biggest energy stories this year has been Russia’s Rosneft buying India’s Essar Oil - giving the Russian company a firm grip on one of the world’s biggest emerging oil and gas markets. 

And this past week, that story got more complex. With Rosneft striking another big deal — drawing in another heavyweight energy nation. 

China. 

Rosneft announced Friday it is selling a significant chunk of its equity to Chinese investors. In this case, little-known exploration and production firm CEFC China Energy. 

Although few investors know CEFC, the company is bringing significant capital to the deal. With the firm agreeing to pay $9 billion to acquire a 14.16 percent stake in Rosneft. 

The deal is historic in being the first major buy-in by China into the Russian oil and gas sector (although Chinese firms have been involved in financing LNG export projects in the Russian Arctic).

Showing the strength of the ever-growing ties between Russia and China in the energy space. 

Rosneft and CEFC have been at the center of that burgeoning relationship. With the two companies having signed a deal this past September for long-term supply of Russian crude into China. 

This week’s equity purchase further cements those business ties. And shows that China sees Russia as a critical ally in the energy game going forward.

But there are implications well beyond these two countries. With China now having backdoor access into markets like India — through Rosneft’s recently-acquired holdings in that country. 

That’s a critical development for the world energy picture. Given that Chinese companies haven’t directly gained much access into India — despite the nation being one of the most important emerging players on the energy stage. 

Ownership in Rosneft could help change that. And could open up opportunities in other parts of the world — with Rosneft currently having operations in places ranging from Egypt to Brazil to Venezuela. 

An intriguing side note to the story: CEFC is buying the Rosneft stake from Glencore, and Qatar’s sovereign wealth fund. Who reportedly purchased the interest just nine months ago — for $12 billion.

That means these holders are taking a 25% loss on the sale, less than a year after buying in. But in the meantime, Glencore was able to strike a lucrative deal to trade Rosneft’s Russian crude — probably making up for the losses on the Rosneft equity, and then some. 

All of which shows just how complex things are in this rapidly-changing corner of the energy world. Watch for more China-Russia energy deals — and emerging influence from these two energy superpowers in other key markets like India.

3 Out Of 4 US Energy Firms Were Hacked In 2016

Authored by Zainab Calcuttawala via OilPrice.com,

Hackers have targeted Russian oil giant Rosneft, the company said on Tuesday, just as Deloitte released a report on cyber-attacks targeting U.S. oil companies.

A “powerful hacker” attacked the company’s server in an assault that, according to TASS news agency, could be related to ongoing legal proceedings.

A Russian court recently froze assets of a holding company called Sistema as part of a suit lodged by Rosneft and Bashneft. The two companies are trying to recover $2.9 billion lost during Sistema’s 2014 restructuring.

Russian companies are not the only ones facing the new frontier in corporate espionage. U.S. consulting major Deloitte released a report on Monday that said American energy companies showed “limited strategic appreciation” for cyber-threats.

Analysts said three of every four U.S. oil and gas companies experienced a cyber-attack in 2016, but only a few firms said the computerized attacks posed a major security risk.

"Whether hackers use spyware targeting bidding data of fields, malware infecting production control systems, or denial of service that blocks the flow of information through control systems, they are becoming increasingly sophisticated and, specifically alarming, launching coordinated attacks on the industry," the report said.

Low crude prices have caused energy companies to focus their spending on operations that maximize value for shareholders, instead of investing in protective cyber security measures.

On the most vulnerable aspects of the oil and gas supply chain, Deloitte wrote:

“Among the upstream operations, development drilling and production have the highest cyber risk profiles; while seismic imaging has a relatively lower risk profile, the growing business need to digitize, e-store, and feed seismic data into other disciplines could raise its risk profile in the future.”