Devex's earlier ii post4 Nov 2018 12:31
Who might it be? As we all await news of perhaps another potential partner I have been trying to avoid speculating on the outcome. Mainly because I always get this stuff wrong – and after all who would have put money on Baker Hughes (despite the incredibly compelling logic of the relationship)? However this time I can’t resist a few thoughts, particularly as the BHGE move really does suggest that one of the big seven is more than likely the remaining NDA holder. But first lets deal with any concerns about BHGE not releasing a press or news release regarding the MOU. Whilst this may well be price sensitive to FRR it was not to BHGE – certainly not at this stage. And by illustration Exxon have not released any shareholder statement regarding the SOAG agreement on exploration in Western Georgia. So simply not an issue in my view. Then the guessing. Well I will discount Total, Shell, ENI, Chevron and Conoco right away. If you check their websites there is virtually no upstream or midstream activity from any of them in either Georgia or indeed the immediate Region. I simply do not believe any of them would suddenly creep into Georgia or the region from a standing start. So we really are left with BP or Exxon. BP are of course the senior partner in Shah Deniz, and have extensive understanding of the regional geology. I have no doubt they have tracked the Kura basin evidencing, and are very interested in the prospects for Georgia and the wider Black Sea area. And of course they have huge midstream investments in Georgia and beyond – all of which need to be fully utilised. And they have a highly developed regional team. They really have to be a possibility for these reasons alone. Exxon have limited historic exposure to the region. Indeed the only substantive project is the Neptune gas field off Romania in the Black Sea (and that has encountered a series of political issues re how well the government is aligned). The 2.5% stake in the Azeri Baku-Tbilisi-Ceyhan (BTC) pipeline bought earlier this year therefore suggests a new focus, and of course we now have the recently announced work in Western Georgia. (You have to ask yourself what prompted all this? I really do believe Atlantic Council/Damon Wilson/US political agenda will have been a key feature behind the scenes). And you then have the Texan linkage, and heavy US government involvement in the regional politics. And finally, as someone recently pointed out, Exxon has now reported 7 quarters of reducing oil production share – they really need to reverse this trend quickly. So who to pick? I have to say having reviewed this lot the argument in favour of Exxon is in fact very compelling indeed, and I would now regard BP as a possibility but probably not the lead candidate. One more thought. Wednesday’s RNS would not have come about unless this was a serious prospect – why would Zaza set himself up for a fall? Plus the MOU with BHGE was so wide ranging that there simply has to have been 3 way discussions
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