3rd November 2023

Happy Friday ladies and gents.

Here’s Both Barrels with your daily round-up of all things oil, gas, and energy:

• 🪵 The other energy transition

• 🛑 Russian LNG in the crosshairs

• 📈 Neutral Zone ramping up

• ⛏️ Germany can’t kick coal

• ➕ plus more woes for Trans Mountain, GoM auction delayed, Nigeria’s mega refinery ready for action.

Have a top weekend. Catch you Monday.

📈 THE NUMBERS

🗞️ WELL-HEADLINES

 🗽 North America

• Another day, another hold up for Trans Mountain - a regulator has ordered work to stop on the $22bn, 590 kb/d pipeline, citing non-compliance with environmental and safety standards. The flagship project has lurched from problem to problem and is years delayed which is causing problems for producers who ramped up output in anticipation of the new export capacity that still hasn’t come online.

• GoM auction delayed - Lease Sale 261, the last until 2025, has been delayed by the US government pending the outcome of a lawsuit over whether drilling in the area will impact an endangered whale species. The American Petroleum Institute ain’t happy about it.

• Some Q3 earnings highlights: EOG beats estimates as production grows; Pioneer tops estimates and cuts costs; Cheniere shares climb as it surpasses forecasts; Conoco raises its dividend and out performs.

🏰 Europe

• Equinor strikes it lucky near Oseberg - the exploration well in the Norwegian North Sea discovered up to ~9 mmboe of recoverable oil & gas reserves in two separate formations.

• Germany as prepped as it can be for winter - in contrast to last year, its gas storage is full and supplies are secure, according to its energy regulator. However, “it is too early for a complete all-clear”, a lot depends on how cold the winter is…Cross your fingers, Europe.

🕌 The Middle East

• Neutral Zone ramping up - after a fire in August at the offshore Chevron-operated Khafji field which reduced production to 180 kb/d, output in the Saudi / Kuwait shared area is climbing and should reach 300 kb/d by next year. The co-managed area has the potential to produce ~600 kb/d but disputes between the two countries have restricted its development.

• Lukoil’s new West Qurna 2 contract - the company, which operates the mega 14 bnbbls oilfield, has signed a new agreement with Iraq to extend its operations to 2045 and double output to 800 kb/d (by an undisclosed date).

• Israel gas exports to Egypt restart - after Egypt’s gas imports fell to zero on the weekend, flows have now been resumed, albeit at a lower rate. Israel’s gas exports were disrupted when it closed the Tamar gas field due to the ongoing conflict with Hamas. Egypt relies on Israeli gas to meet domestic demand as well as for re-exports.

⛩️ Asia & Oceania

• Murphy moving ahead in Vietnam - the company has given the go-ahead on its 100 mmboe offshore Lac Da Vang oilfield development which is due onstream in 2026.

• Chevron can’t shake Myanmar - nearly two years after it said it would exit the country following the military coup, Chevron is still struggling to offload its assets. Its holdings include a 41% stake in the 6 bcmpa Yadana gas field.

🦁 Africa

• Firing up Nigeria’s Dangote refinery - the new 650 kb/d facility will start test runs in December. The huge $19bn project will turn Nigeria into a fuel exporter, having previously been heavily reliant on imports.

• Shell’s quiet confidence in Namibia - the company will drill at least two more wells in Namibia’s offshore oil patch after “encouraging data”. Shell is investing ~25% of its deep water exploration budget in the country which is yet to produce any oil or gas but has recently enjoyed a string of exciting discoveries.

🗿 Central & South America

• Petronas’ excitement in Suriname - an exploration well at the Roystonea prospect in the offshore Block 52 “shows promise”. The sector is keeping a close eye on activity in area as it’s adjacent to Guyana’s prolific offshore province.

• Swedish indy heads to Venezuela - Maha Energy has bought into the PetroUrdaneta oil development following the lifting of US sanctions. It’s a brave move given that the US sanctions could snap back at any moment if the Maduro government doesn’t hold up its side of the deal.

🌍 GEOPOLITICS & MACRO

• US hits Arctic LNG 2 with new sanctions - in an effort to “constrain Russia's future energy production”, a new raft of sanctions could threaten supply from the massive 19.8 mtpa project that is due onstream by the end of the year. The move may cause problems with gas-hungry Japan and China who are part owners in the project. This is the first US sanction that directly targets Russian LNG.

💨 CARBON, CLIMATE, & OTHER ENERGY STUFF

• Germany’s coal phase out? Not so fast - the finance minister has said the country may have to delay the planned 2030 coal phase-out if the country doesn’t have affordable, reliable energy by then. The government has reportedly rejected an offer from nuclear operators to restart recently shuttered nuclear plants. Make it make sense.

• Shell abandons US offshore wind project - it would rather pay the penalty for exiting the SouthCoast project than go ahead with the rising costs of building the project. Several companies including BP and Orsted have booked hefty write-downs on their US offshore wind portfolios in recent weeks.

• US coal fills Russian hole in Europe - US exports of coal to Europe have climbed by 22% since Russia invaded Ukraine. US energy suppliers are the big benefactors of Russia losing its major energy customer in Europe.
  

🛢️ BOTTOM OF THE BARREL

There are two energy transitions going on.

And the one that matters most isn’t the one you have in mind.

Around the world today there are still over 2 billion people (with a ‘B’!) that use primary biomass, aka firewood and faeces, as their primary source of household energy for cooking and heating.

This energy is dirty, harmful, and highly inefficient. Its smoke causes lung cancer, collecting it can take hours and drives local deforestation.

Providing all these people with access to the modern energy that would drastically improve their lives is a transition that those of us comfortable in the West should not lose sight of.

👋 BEFORE YOU GO 

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