4th October 2023

Rise and shine girls and boys. This is Both Barrels, your daily dose of all things oil, gas, and energy, without the hot air.

Here’s what hit the wires today:

• 💰 BP selling US GoM pipeline biz

• 🟧 The not-so-Empty Quarter

• 🔥 A bright future for LNG

plus a lot more. Let’s get to it…

📈 THE NUMBERS

🗞️ WELL-HEADLINES

 🗽 North America

• BP cashing in on its US GoM pipeline biz - BP is rumoured to be selling a 49% stake in its GoM pipeline business, estimated to be worth ~$1bn. The portfolio, which generates BP ~$200m per year in earnings, includes assets like the Mars and Endymion oil pipelines, and the Cleopatra Gas Pipeline.

• Sharp fall in US crude stocks - API estimates show that US crude stocks fell by 4.2 mmbbls, far surpassing analyst estimates of a 0.1 mmbbls decline.

🏰 Europe

• Russian fuel storage filling up - Russia’s fuel export ban will last as long as it needs to, according to its energy minister. It’s working: domestic diesel prices have fallen by 23% since, and gasoline prices by 10%. However, not everyone is happy: domestic refiners are concerned they may soon run out of storage space and have to cut back on utilization.

• EU gas storage brimming - storage levels have surpassed last year’s pre-winter peak as the continent tries to prepare for another winter without (much) Russian gas. High storage can help soften the blow of demand spikes and keep a lid on prices but there’s a constraint on how quickly they can be drawn down to ease short term shortages. The weather will ultimately dictate how uncomfortable and expensive it gets this winter in Europe.

• Exxon sells Italian LNG terminal to BlackRock - Exxon has a 71% stake in the facility which is estimated to be worth $800m in total.

🕌 The Middle East

• Breaking ground at Qatar’s mega LNG project - The Emir of Qatar has laid the foundation stone for the world’s largest LNG facility, the North Field expansion project, which will boost Qatar’s export capacity by 48 mtpa by 2027 to 126 mtpa.

• The not-so-Empty Quarter - Rystad Energy estimates that the Rub Al Khali basin, aka the Empty Quarter as it’s nearly all desert, in Saudi Arabia could be one of the most prolific hydrocarbon basins in the world and eventually provide the feed gas for 20 mtpa of LNG. Just in case Saudi didn’t already have enough natural resources…

• Iraq’s latest licencing round - OPEC’s second largest producer is offering 30 oil & gas projects in its upcoming “fifth plus” and sixth licencing rounds, and has given potential bidders a deadline of January 2024 to formally express their interest. The terms are expected to be more favourable to producers than previous rounds.

• Al Zour refinery fully commissioned - full operations at the new 615 kb/d refinery in Kuwait will begin in the next few weeks. Construction started on the project back in 2015 and cost ~$16 bn.

• Will they, wont they? - after Turkey said yesterday that operations at the KRI / Turkey oil pipeline would start imminently, Iraq has now suggested there’s more work to be done in the negotiations. Who knows…

⛩️ Asia & Oceania

• India courting Total - the world’s most populous country has invited the French major to bid for exploration rights to 1 million km2 of blocks across the country that have been opened by the current govt. India imports over 80% of its oil needs and so is eager to boost domestic production.

🦁 Africa

• EACOP secures financing - Chinese company Sinosure is set to complete the financing of Total and CNOOC’s landmark 216 kb/d EACOP pipeline from Uganda to the Indian Ocean. Virtue signalling western financiers previously pulled out due to environmental concerns…

• The West African gas hub - Nigeria is seeking investment to help develop its gas infrastructure and become the “gas hub in west Africa”. This development will help NNPC get ready for an IPO, said the company’s CEO.

• Nigeria refinery explosion - At least 37 people have tragically lost their lives at an explosion at an illegal refinery in Nigeria. Illegal refining, using oil tapped from pipelines, is common in the unstable Niger Delta region despite attempts by the government to clamp down on the practice.

🗿 Central & South America

• Brazil eyeing up Venezuela - after seeing Chevron recently ramp up operations in Venezuela, envious Petrobras is exploring how to also get in on the party. It makes “geopolitical” sense for Petrobras given the countries are neighbors but Brazil won’t “carry Venezuela on its back.”, said Petrobras’ CEO.

• A new frontier in Brazil - after new licences were issued last week for the prospective Equatorial Margin region, Petrobras has announced plans to spend $300m on two exploration wells in the area. The environmentally-sensitive offshore region is seen as an exciting new frontier for the Brazilian oil & gas sector.

🌍 GEOPOLITICS & MACRO

• India’s oil price warning - India’s oil minister has commented at the ADIPEC conference that oil producers need to “show sensitivity towards the consuming countries” and that “if the price goes above $100, this thing is not going to be in the interest of either producing country or anyone’s interest. You will have large organised chaos”.

• Government bond yields hitting decade highs - from the US, to Germany, to Italy, government borrowing costs are rising further thanks to increases in government spending, a flight of capital away from bonds, and expectations that interest rates will remain high.

💨 CARBON, CLIMATE, & OTHER ENERGY STUFF

• Harnessing the desert sun - Abu Dhabi is just weeks away from unveiling the world’s fourth largest solar plant. The 2GW facility, which was announced in 2020, is located in the desert and consists of ~3.5 million solar panels.
  

🛢️ BOTTOM OF THE BARREL

Saudi Aramco’s recent investment into MidOcean Energy is the latest vote of confidence in the fast growing global LNG sector. Qatar’s huge expansion makes it pretty clear where they think the market is heading.

The understanding that gas will be a crucial part of the global energy mix for decades to come has spurred a spate of new investment into LNG infrastructure around the world.

This year, 3 new countries, Germany, Vietnam, and The Philippines, become LNG buyers for the first time. Several more countries are set to join the crew next year taking the total number of countries with regas capacity to 55.

Meanwhile, huge investments from the US, to East Africa, to the Middle East, are unlocking waves of new supply.

A more populous LNG market is a good thing. It should increase liquidity and allow for more competitive pricing. It should also encourage the development of new gas resources as producers know they will have long term buyers for their resources.

👋 BEFORE YOU GO 

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