2nd September 2024

Good morning crew. Trust you had a top weekend. Here’s what went down in all things oil, gas, and energy, while you were firing up the BBQ:

• 🥜 Ballsy OPEC

• 💪 4.5 years of work for $80

• 👋 Sinochem exiting Exxon Permian JV

• 🪦 Bleak times for the UKCS

• ➕ plus Talos CEO departs; new lows for Permian gas; tugs to the rescue; UK’s North Sea backfire; Total’s $100m forestry investment; Equinor downsizing renewables; Iraq anyone?; and plenty more.

Let’s go.

📈 THE NUMBERS

Despite the loss of 700 kb/d of Libyan output, oil prices continue their slide on rumors that OPEC+ will be charging ahead with production increases in October. Buckle up.

🗞️ WELL-HEADLINES

 🗽 North America

• Sinochem wants out of Exxon JV - the Chinese NOC is rumoured to be selling its 40% stake in the Wolfcamp JV in the Permian, which could fetch ~$2bn. Barclays is running the process, and Exxon has preemption rights over the stake which Sinochem acquired back in 2013 for $1.7bn from Pioneer.

• Permian gas prices hit record negative lows - they reached -$4.8/mmBtu at the Waha hub last week as surging gas production (mostly associated) has maxed out gas export capacity, meaning the molecules are stranded.

• Talos CEO departs - Tim Duncan had been CEO at the company for 12 years before the surprise announcement. The board are now looking for a replacement.

• Oil rigs flat - another week of limited action in the US rig count, with oil rigs staying the same at 483 last week. Gas rigs were down by 2 to 95.

🏰 Europe

• Labour’s North Sea tax backfire - the UK government’s plan to raise the tax rate for E&Ps in the North Sea to 78% (among the highest in the world) and scrap investment incentives will ultimately cost the state $16bn in lost tax revenue over the next five years, according to a new report. 35,000 jobs are also at risk, all sacrificed at the altar of net zero.

• Right on cue - North Sea indy Neo Energy has said it’s cutting back its UKCS investments due to the “materially increased level of uncertainty”. Jersey Oil & Gas, which partners Neo at the Buchan development, saw its share price fall 21% on the announcement.

🕌 The Middle East

• Tugs to the rescue - the operation to tow the battered and bombed Sounion oil tanker in the Red Sea, and hopefully avoid an environmental disaster, begun over the weekend. Meanwhile, more tankers have been hit today. Complete mayhem.

• Iraq courts investors - the country is set to offer 10 new exploration blocks for US E&Ps as it tries hard to attract US investment back into the country. Iraq’s oil minister is about to head to the US to drum up some appetite.

• Cracking on with Aphrodite - Shell, Chevron, and NewMed have submitted a development plan for the 3.6 tcf natural gas field offshore Cyprus. The $4bn development will pipe gas into the Egyptian transmission system.

⛩️ Asia & Oceania

• Indian refining giant after $3.8bn loan - Bharat Petroleum is looking to raise the cash from local banks to expand the capacity of its Bina refinery in the center of the country. India hopes to increase its refining capacity by around 1.12 mmb/d each year until 2028 as it seeks to meet surging fuel demand.

• Former CNPC chairman arrested - Wang Yilin has been accused of extensive bribery while in the top job.

🦁 Africa

• Confusion reigns in Libya - as the UN intervenes to try and prevent another civil war, mixed messages are coming out of the country about oil production. Some reports suggest various fields have restarted, although others say that is just for local use and not for export. Production is down ~ 700kb/d from 1.2 mmb/d amid the ongoing row over the boss of the country’s central bank.

🗿 Central & South America

• Guyana’s booming GDP - the country raised its 2024 GDP growth forecast to 43% thanks to rocketing oil output. The question is, can they avoid the resource curse unlike their neighbors in Venezuela?

🌍 GEOPOLITICS & MACRO

• OPEC+ sticking to its guns - various OPEC sources have leaked that the cartel will likely begin unwinding its production cuts in October as planned. 8 OPEC countries are set to increase output by 180 kb/d next month, and gradually phase out 2.2 mmb/d of cuts over the course of a year. Unsurprising, oil prices didn’t like that news. Bold from OPEC. Very bold.

• Russia and Ukraine go tit for tat on energy infra - Ukraine launched a wave of drones overnight at a oil refinery and two gas power plants in the Moscow region. Last week, a major Russian assault led to four nuclear reactors being disconnected from the national grid and massive power outages across Ukraine.

• Harris U-turns on fracking - the Democrat hopeful has reversed her stance and said that she wouldn’t ban fracking in the US. Good to see she’s come to her senses, although I’d like to see any president try to kill the country’s golden goose.

💨 CARBON, CLIMATE, & OTHER ENERGY STUFF

• Total pumps $100m into forestry carbon credits - the investment will go into sustainable forestry partnerships in the US and generate carbon credits that the company will use to offset its emissions. Good stuff. I’m a big believer in restoring and protecting nature as way of offsetting carbon and simply because the natural world is epic and should be preserved.

• Equinor downsizing its renewable biz - it has become the latest IOC to announce it’s slowing down renewables plans, axing projects with “poor economics”, and planning staff cuts. Turns out that high costs and low returns just aren’t that appealing after all.

🛢️ BOTTOM OF THE BARREL

Fun fact for you: a barrel of crude contains the equivalent energy of 4.5 years of human labour and costs just $80.

This is why humanity’s prosperity exploded when we unlocked the energy in hydrocarbons in the 1800s.

We found a vast source of dirt cheap labour to build, work, move, and carry on our behalf.

And it’s no coincidence that slavery petered out and was eventually abolished as hydrocarbon use accelerated.

👋 BEFORE YOU GO 

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

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