7th December 2023

Rise and shine, ladies and gents.

This is Both Barrels with today’s highlights across oil, gas, and energy:

• 🚨 Venezuela's 90-day ultimatum

• 🦘 Santos and Woodside merger talks

• ☠️ Skeletons coming out of Trafigura’s closet

• 📉 WTI falls 4% to below $70

• ➕ plus Putin’s red carpet reception; Chevron & Exxon ramping up spending; Venture Global repeating its tricks.

Let’s go.

📈 THE NUMBERS

Oil prices fell by 4% yesterday, before recovering some losses this morning.

As we wrote last week, the current market has some shades of 2014 with high OPEC spare capacity and US output continually surprising to the upside.

On the other hand, oil demand seems pretty solid and geopolitical risk in the Middle East and South America is intensifying.

It wasn’t long ago that some analysts were predicting +$100/bbl by the end of the year. Now, $60/bbl is looking more likely.

Oil price forecasting is a dangerous game!

🗞️ WELL-HEADLINES

 🗽 North America

• Venture Global doubling down on its tricks - the company said its new Plaquemines LNG plant, which is due to being operations in 2024, will undergo the same extended start-up period that has so angered customers of its Calcasieu Pass facility. The move means that original buyers who provide financing for the project may have to wait up to 3 more years for their cargoes. Venture isn’t going to make too many friends…

• Chevron & Exxon’s budget bumps - Chevron plans to increase O&G capex by 11% next year to $19bn, while Exxon announced annual investments of $22-27bn through 2027 (vs its previous forecast of $20-25bn). Despite the increases, the combined total is still well below the $84bn that the two majors spent back in 2013.

• Canada’s cap and trade system for the O&G sector - the government is set to announce an emissions trading system in an attempt to reduce emissions from the country’s oil & gas sector. The cap will kick in in 2026. The O&G industry is Canada’s largest emitter and the Trudeau administration has made climate policy a core part of its agenda.

• EIA reports crude draw - US oil inventories declined by 4.6 mmbbls last week (contrary to the APIs estimate yesterday). Gasoline stocks jumped by 5.4 mmbbls, helping to add further downwards pressure to US gasoline prices.

🏰 Europe

• Norway to “leave no stone unturned” - after a report earlier this week found that 65% of Norway’s gas resources have yet to be produced, the country’s O&G regulator urged companies to extract as much as they can. It’s welcoming to see at least one European country support domestic hydrocarbon production.

• Finder Energy identifies potential 150 mmbbls prospect - the company said it used new technology to uncover the Whitsun prospect in the UK, which it says is “analogous to the nearby giant Buzzard field”.

• EnQuest launches Veri - the new business will focus on managing existing infrastructure and on new energy initiatives.

⛩️ Asia & Oceania

• Santos and Woodside discuss merger - the two Australian big dogs (or should I say ‘kangaroos’) are in early stage talks to merge. The combined company would be worth ~$52bn, creating a major LNG players, and would follow a global trend of consolidation among energy firms.

• China oil demand to peak in 2030 - state-owned CNPC forecasts that the country’s oil demand will max out at ~16 mmb/d and eventually fall to ~4.5 mmb/d by 2060 due to declining demand for transport fuels. Current demand is ~14.3 mmb/d.

🦁 Africa

• Trafigura charged with Angola oil bribe - the company’s former COO is accused of orchestrating millions of dollars of bribes to an Angolan official to secure preferential treatment. Separately, Trafigura is setting aside $127m to cover a possible fine for “improper payments” it made in Brazil and which are being investigated by the US DOJ. Both incidents took place ~10 years ago and it makes you wonder how many other skeletons they have in their closet…

• Nigeria’s expanding LNG industry - two deals announced at COP involve developing a new FLNG project to supply the international market and a 421-tonne-per-day LNG project for the domestic market.

• Energean farms into Chariot’s Morocco assets - Energean will acquire 45% and 37.5% interests in the Lixus and Rissana licences respectively, and take operatorship of both.

🗿 Central & South America

• Repsol and Eni progressing in Venezuela - despite the specter of sanctions and even war, the two European heavyweights are in advanced contractual talks with PDVSA over oil export deals. Eni runs five oil ventures in Venezuela, while Repsol operates four.

🌍 GEOPOLITICS & MACRO

• Venezuela’s 90-day ultimatum to producers - Venezuela has said oil companies have 90 days to stop operations in disputed waters off the coast of Guyana. Or what? They didn’t say. The Caracas government has printed new maps showing the Esequiba territory as part of Venezuela and has said it will issue new ID cards for people who live there. Guyana has called for the UN to respond with sanctions.

• Putin’s Arab charm offensive - the Russian president flew, flanked by fighter jets, to the UAE and Saudi Arabia, where they rolled out the red carpet for him with a flypass, bands, and an elaborate military guard. He reportedly chatted about all things oil and Middle East stability with MBS and was hailed as a “dear friend” by UAE’s president. There will be a few in the West wincing at how well Public Enemy #1 was received in these Arab states.

💨 CARBON, CLIMATE, & OTHER ENERGY STUFF

• UK net zero goal to cost £900bn - according to a new report from BCG and Natwest that highlights the huge financing challenge required. That’s a cool £13,500 for every man woman and child in the country…

🛢️ BOTTOM OF THE BARREL

Careful whose advice you take:

👋 BEFORE YOU GO 

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