8th January 2024

Happy Monday, ladies and gents.

Here’s what happened in all things oil, gas, and energy over the weekend while you were maxing and relaxing.

• 💥 Fighting entropy

• 💪 A US gas Goliath

• ⛏️ Opening new mines ain’t easy

• 🚜 Germany’s angry farmers 

• ➕ plus force majeure in Libya; BP’s new CEO?; commodity traders in the dock.

Here goes.

📈 THE NUMBERS

🗞️ WELL-HEADLINES

 🗽 North America

• The creation of a US gas Goliath - Chesapeake and Southwestern are rumoured to be nearing a merger. The combined company would be the largest gas E&P producer in the US and be worth ~$17bn. Southwestern’s share price jumped ~10% on the reports, Chesapeake’s ~1%. It’s not just the oil guys having all the M&A fun.

🏰 Europe

• BP eyeing up BAE boss for CEO role - some of BP’s largest investors are keen for Charles Woodburn, the current head of BAE Systems, to fill the vacant top spot left by Bernard Looney’s sudden departure last year.

• Shell flags $4.5bn writedown - the impairment will be booked in Q4 2023 and is mainly related to the Singapore refining and chemicals hub the oil major is looking to sell. On the plus side, Shell is set to post bumper results from its gas trading business.

🕌 The Middle East

• A sellers’ market apparently - Iran is reportedly withholding some crude supplies to China in an attempt to extract a higher price. Chinese refiners have been buying plenty of the stuff at a heavy discount due to Western sanctions but it sounds like an emboldened Iran is tired of selling on the cheap. China saved >$10bn last year by buying discounted crude from sanctioned countries like Iran, Russia, and Venezuela.

⛩️ Asia & Oceania

• India signs LNG supply deal with Vitol - State-run GAIL will buy 1 mtpa a year for 10 years starting in 2026 from the commodity trader. India is pushing to grow gas’ share in its energy mix from ~6% today to 15% by 2030.

• Dragon Oil expanding in Turkmenistan - the Dubai-based company announced an agreement to drill three new wells in the offshore Block 19 and has recently completed a “promising” seismic survey at a cost of $35m. The central Asian country has 600 mmboe of proven oil reserves and ~19.5 tcm of proven natural gas reserves.

• First oil at India’s flagship deepwater project - ONGC started production from KG-DWN-98/2 block in the Bay of Bengal. The project is planned to reach peak production of 45 kb/d of oil and 10 mcm/d of gas, produced via an FPSO.

🦁 Africa

• Libya declares force majeure at El Sharara - protests since last week have shut down production at the country’s largest oilfield which produces ~300 kb/d. NOC said negotiations are ongoing to resume operations asap.

🌍 GEOPOLITICS & MACRO

• “We’re the good guys” says LNG boss - Cheniere’s CEO told the FT in response to mounting pressure from climate activists against the US LNG industry. “We’re trying to do our part to be that safe, reliable operator that our customers have to have in order to keep the lights on.” Dear US activists, we need that gas to survive, sod off. Thanks, Europe.

• Ex-Vitol trader in the dock for $1m bribes - prosecutors allege the trader paid the kickbacks to officials in Ecuador and Mexico to win contracts worth ~$500m. This is the first time a trader is standing trial as part of a large US investigation into shady activity of commodity trading firms. They’re not bribes your honour, they’re “facilitation payments”.

• Banks making some macro calls - Standard Chartered sees solid global oil demand growth this year and next of 1.5 and 1.4 mmb/d, respectively, and oil prices supported by slowing non-OPEC supply growth. Meanwhile, everyone’s favorite bank, Goldman Sachs has said that oil prices could double if disruption persisted in the Red Sea. They must have a large long oil position then.

💨 CARBON, CLIMATE, & OTHER ENERGY STUFF

• The world’s largest mining project set to start, finally - after decades of delays and countless complications, Rio Tinto’s $20bn Guinea iron ore mine is set to open this year, 27 years after it first secured an exploration licence. There’s absolutely nothing quick and easy about mining, and the energy transition requires hundreds of new mines to open in the coming decades to provide the need raw materials.

• Another oil man to lead the next COP - I can already hear the whining from climate activists as Azerbaijan names a state oil company veteran to lead COP29 climate talks. The last COP in the UAE was presided over by the CEO of the Abu Dhabi National Oil Company. But who cares? We should really be doing away with COP anyway…

• Germany’s angry farmers - several hundred farmers blocked a ferry that German Deputy Chancellor Robert Habeck (leader of the Green party and mastermind behind Germany’s economic demise) was returning from holiday on. He was forced to take the ferry back and get another one. The farmers are protesting planned cuts to diesel subsides and a general strike is planned for today.

🛢️ BOTTOM OF THE BARREL

We’re in a never ending battle.

The foe: entropy.

Entropy is the natural chaos and disorder that the universe relentlessly trends towards.

Left unchecked, everything degrades. Our bodies, buildings, social fabrics.

But we have a powerful ally in this battle. Energy.

The harnessing and application of energy allows us to impose order on our environment, to fight back against entropy and create a functioning society.

Have you ever seen a perfect right angle in nature? Probably not, because in nature, entropy runs wild.

But now look around you and you’ll see right angles everywhere.

They are the physical embodiment of order, the postponement of entropy’s march. All enabled by the channeling of abundant energy.

I like to say that energy is a lot of things. Energy is life. Energy is the economy.

Add one more to the list: energy is order.

👋 BEFORE YOU GO 

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