01st November 2023

Rise and shine crew, this is Both Barrels.

Today’s highlights in all things oil, gas, and energy:

• 📉 More carnage for offshore wind

• 🤷…and why we have little sympathy

• ⬆️ US crude output at record high

• 🛑 Anti-trust threat to mega mergers

• ➕ plus Europe’s reliance on US LNG, Eni & SLB methane partnership, more NGL infa in the Permian

📈 THE NUMBERS

🗞️ WELL-HEADLINES

 🗽 North America

•  Mega mergers and anti-trust - Senate Majority Leader Chuck Schumer is urging authorities to investigate whether the Exxon and Chevron deals violate anti-trust laws. Schumer claims the deals could push up gas prices for consumers.

• US crude production hits record high - monthly output in August hit 13.05 mmb/d according to the EIA. This is a slight 0.7% climb from the previous month. The EIA’s monthly figures are considered to be much more accurate than its weekly disclosures.

• NGL infra for the Permian - Enterprise Products is investing $3.1bn into a 600 kb/d NGL pipeline that it expects to be operational in 2025. NGL output in the Permian is set to climb by 700 kb/d over the next 3 years and new takeaway capacity is urgently needed.

🏰 Europe 

• Europe’s reliance on US LNG - Norway’s Energy minister commented that “Europe's import needs are expected to remain high for years to come, as domestic gas production declines further”. US LNG is seen as a key source of that gas. As he says that, trillions of cubic meters of neglected shale gas reserves sit below Europe’s soil…

• OMV and ADNOC chemicals merger - the two companies are still in advanced discussions to combine their chemicals businesses to create a new publicly-listed entity that could be valued at ~$30bn.

• Eni and SLB partnering on methane - the Italian major will be using SLB’s End-to-end Emissions Solutions business (SEES) to help measure and report on fugitive methane emissions.

🕌 The Middle East

• Iraq juices up bidding offer - in an attempt to woo investors, Iraq has added 6 more licences to its upcoming bidding round (for a total of 24), and offered improved contractual terms than in the past.

• Qatar celebrates 1000th LNG cargo to UK’s South Hook - the milestone delivery comes ~14 years after operations began at the import facility.

⛩️ Asia & Oceania

• Shell exits Pakistan business - the deal with Saudi company Wafi Energy mainly includes mid and downstream energy assets. The value wasn’t disclosed. Shell Pakistan has struggled in recent years due to economic crisis in the country.

🗿 Central & South America

• Venezuela & Guyana territory dispute - Venezuela plans to hold a referendum on whether it should annex the offshore Essequibo region which is rich in oil resources but contested with neighboring Guyana. Guyana has asked the International Court of Justice to block the vote.

🌍 GEOPOLITICS & MACRO

• China cooperating with Finland over damaged pipeline - China says it will comply with international law after Finland named the Hong Kong-flagged NewNew Polar Bear as the prime suspect in the damage of the Balticconnector pipeline. Given the ship’s broken anchor was found next to the gaping hole in the pipeline, it might be hard for them to wriggle out of that one.

• US sanctions Myanmar oil sector - in a bid to choke the flow of funds to the “military regime”, American companies are not allowed to offer financial services, like loans and insurance, to MOGE, Myanmar’s state-owned oil company.

• Fitch warns of O&G credit downgrades - the credit rating agency said the hydrocarbon industry is facing an era of credit downgrades if it is too slow to adapt to a low carbon future. It seems they’re smoking the same strong stuff as the IEA, citing a “very big” decline in hydrocarbon demand as they key driver of downgrade risk.

• Drought at the Panama Canal pushing shipping rates to record highs - ships are having to wait longer than usual to use the canal as lower water levels reduce the number that can pass through each day.

💨 CARBON, CLIMATE, & OTHER ENERGY STUFF

• Orsted’s wincing results - the once darling of the offshore wind industry has announced write-downs of $4bn and cancelled two US offshore wind projects. Meanwhile, BP is assessing its offshore wind projects after booking its own $540m impairment yesterday. The sector is in the doldrums as it grapples with high interest rates, supply chain problems, and increasing public awareness that the industry’s cost claims have been full of hot air.

• Endesa’s renewables “taking a slower pace” - the Spanish utility has become the latest company to put the brakes on wind and solar investment as economic reality bites.

• China eases carbon rules as the cold rolls in - to ensure sufficient power supply during winter, coal generators will be able to defer the purchase of carbon permits. When push comes to shove, security of energy supply will always triumph over sustainability.

🛢️ BOTTOM OF THE BARREL

I know we can be a little harsh on wind power over here.

But one reason we have little sympathy for the sector’s current struggles is that for years we’ve had to listen to their nonsense cost claims, parroted by useful idiots in the press.

“Wind is 9x cheaper than gas”

“Renewables are the cheapest form of power”

Etc etc etc.

Anyone who understands energy systems knows these claims are misleading at best, downright lies at worst. They are based on the deeply flawed LCOE cost metric which conveniently excludes the vast additional system costs of their intermittent technologies such as storage, transmission, and curtailment.

Gullible politicians and journalists swallowed the lies whole, offering up the social, financial, and regulatory support for more and more money to be pumped into the sector.

Plenty of “subsidy farmers” made a lot of $$$. Better solutions like nuclear were overlooked. And emissions savings have been dubious (see Germany).

Reality always catches up eventually though, and as the renewable roll out gathered pace, the true costs started feeding through into higher and higher end consumers’ utility bills.

When energy gets expensive, the poorest can’t afford to heat their homes, business go bust. There are very real and pernicious consequences of the incessant and false renewable cost claims.

The current reckoning is well overdue.

👋 BEFORE YOU GO 

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Thanks for reading. Have a day out there. 🛢️🛢️