9th September 2024

Good morning crew. Trust you had a top weekend. The barrels are back with all that matters in the world of oil, gas, and energy:

• 😥 Traders paint a gloomy picture

• 🎉 A “destiny changing” discovery

• 💦 Hydro-powering on

• ⏫ China’s brimming gas tanks

• ➕ plus Exxon not interested in Mopane; a hydrogen powered train; US rig count flat, again; Slim bags more Talos shares; unlocking new LNG markets with FSRUs; and plenty more.

Let’s go…

📈 THE NUMBERS

Last week was the worst week for oil prices in nearly a year as Brent lost ~$7/bbl…

It can only get better from here….right?

🗞️ WELL-HEADLINES

 🗽 North America

• Slim fattens Talos stake - the Mexico billionaire has spent ~$30m increasing his stake in the GoM E&P to 23.6%, just a few days after the CEO suddenly departed.

• US oil rigs stay flat - the count remained unchanged last week at 483, which is 30 fewer than this time last year. Gas rigs, meanwhile, fell by 1 to 94, 19 fewer over the year.

🏰 Europe

• Plenty of appetite for Norwegian licencing round - the country’s annual bidding round for exploration acreage in its mature regions attracted bids from 21 companies. “It is very gratifying that the companies still have great faith in the opportunities that lie in further exploration on the Norwegian continental shelf”, said Norway’s energy minister.

🕌 The Middle East

• An FSRU for Jordan - poor Jordan is one of those rare breeds of Middle East nations not to be blessed with an abundance of hydrocarbons. The country has just chartered an FSRU from BW LNG for ten years to import LNG.

• Iraq denies oil smuggling claims - the US has accused Iraq of helping Iran evade sanctions via an elaborate multi hundred million dollar oil smuggling scheme. Given Iraq is firmly under the thumb of its powerful neighbor, the accusations ain’t too far fetched.

⛩️ Asia & Oceania

• Pakistan’s “destiny changing” discovery - officials are claiming that a new find offshore Pakistan is the world’s fourth largest in terms of oil and gas resources! Three years of surveys have been carried out, but no exploration drilling yet. Big if true.

• India’s LNG powered trucks - India plans to convert a third of all its long haul trucks to run on LNG rather than diesel in just 5-7 years in a bid to cut emissions. Seems like a tall order to me.

• China’s gas tanks full to bursting - data suggests that China’s natural gas storage is reaching capacity, which could mean it reduces its imports of LNG over the coming months. As the world’s largest buyer of LNG, a dip in Chinese demand would certainly weigh on spot prices.

• Kazakhstan expecting significant output drop - planned maintenance in October at the country’s giant ~400 kb/d Kashagan oilfield will be responsible for the unquantified, temporary loss in output.

• MISC and SBM in FPSO swap - the two offshore players have agreed a deal whereby SBM will take over MISC’s 49% stake in the FPSO Espirito Santo in Brazil, and in return MISC will acquire SBM’s 49% interest in the FPSO Kikeh in Malaysia.

🦁 Africa

• Exxon out of Galp’s Namibia sale - the major is rumoured to have withdrawn its interest, for unknown reasons, in Galp's 40% operated stake in the offshore 10 bnboe Mopane discovery.

• Buyers lining up for Shell South Africa - Aramco, ADNOC, Trafigura and others are competing to acquire Shell’s downstream assets in the country. The portfolio, which Shell is selling as part of a global consolidation, consists mainly of a refinery and a bunch of gas stations.

🗿 Central & South America

• Brazil preps for next pre-salt round - the 2025 bid round will include 14 areas, 6 in the Campos basin and 8 in the Santos basin. The regulator is said to be revising its process after a lackluster round in 2023 where only a single block out of five was awarded.

• Pampa raises $410m for Vaca Muerta development - the successful bond raise (which received bids for over $1.7bn) indicates investor confidence in the future of Argentina’s massive, yet largely undeveloped shale play.

🌍 GEOPOLITICS & MACRO

• Hedge funds have never been so bearish on oil - net long positions in Brent and WTI have hit their lowest levels since Bloomberg started tracking the data 13 years ago. Time to buy?

• Traders paint a gloomy picture - speaking at the APPEC conference in Singapore, Trafigura sees risks of oil prices falling to around $60/bbl, while Gunvor thinks ~$70/bbl is fair. Persistent non-OPEC supply growth and sluggish Chinese demand are to blame. A reminder, no one really has a clue when it comes to oil price forecasting.

• JPMorgan expects OPEC to delay production hikes for a year - I don’t often agree with these banks, whose forecasts are as fickle as oil prices themselves, but in this case, I do. I’d be surprised if OPEC initiate another price war a la 2014 and 2020. But this industry has a habit of keeping us all on our toes…

💨 CARBON, CLIMATE, & OTHER ENERGY STUFF

• Hydro-powering on - the hydropower market is expected to grow by 5% every year between 2024 and 2031. Hydro is fantastic, largely-reliable, source of zero carbon power, but is limited by the availability of suitable locations (high altitude continuous water supply with topography that can be dammed). Many of the best spots have already been used, meaning new hydro projects tend to be on the smaller side.

• Another day, another EV target cut - this time it’s Toyota, which has reduced its 2026 EV sales target by 30%. It follows other major manufacturing giants like Ford and Volvo, which are shifting strategies to increase focus on hybrids as EV sales stall. Meanwhile, Renault’s CEO has warned that the auto industry could face billions in EU fines for not hitting emissions reduction targets unless EV sales pick up.

• Hydrogen powered train in California - the experimental project, the first of its kind in the US, will run on a 9-mile route between San Bernardino and Redlands using a hybrid hydrogen fuel cell and battery system whose only byproduct is water vapor.

🛢️ BOTTOM OF THE BARREL

👋 BEFORE YOU GO 

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

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