10th January 2024

Hello hello dear friends. Both Barrels is back with a brand new rap roundup.

Here’s what’s up today in the world’s most underrated industry.

• 🛑 Has US oil growth stopped?

• 🥶 America braces for a BIG freeze

• 🔋 Battery capacity in context

• 🤫 Secret Ukraine peace talks 

• ➕ plus peak ESG; Total ups its Namibia stakes; Norway approves deep sea mining; Exxon and Algeria; China’s shale boost.

Let’s go.

📈 THE NUMBERS

🗞️ WELL-HEADLINES

 🗽 North America

• Severe winter storm to test US energy grids - about 800,000 homes and business across the eastern half of the US have lost power as a severe storm gets going. The chilly weather is a reminder of the February 2021 freeze that left millions in Texas and other U.S. Central states without power, water and heat for days. The storm is set to last beyond the weekend and daily US gas demand is expected to hit a record high early next week. Wrap up warm, you lot.

• Crunch time for Trans Mountain - the Canadian regulator will hold a hearing on Friday about whether or not to approve some last minute changes to the pipeline mega project. If not, the developer has warned the 590 kb/d pipeline project could be delayed by another 2 years.

• API sees a surprise fall in crude inventories - the estimated decline of 5.2 mmbbls last week is in contrast to the 0.7 mmbbls increase expected by analysts. Let’s see what the EIA says tomorrow.

⛩️ Asia & Oceania

• China’s shale ambitions get a boost - Sinopec has reported strong oil & gas flows at a key exploration well in Chongqing, southwest China. The well may result in the confirmation of ~800 mmboe of reserves, Sinopec said. China’s NOCs are on a big push to expand domestic shale production to reduce the country’s large energy import dependency.

🦁 Africa

• Total ups its bets in promising Namibia play - the major has acquired additional stakes in the offshore oil blocks 2913B and 2912 (which include the giant Venus discovery) from Impact Oil & Gas. In return, Total will reimburse Impact for past spending and carry the smaller company until first sales.

• Exxon eyeing up Algeria - the country’s energy minister commented that an O&G investment deal with Exxon is imminent. Resource rich Algeria currently produces ~1 mmb/d of oil and 106 bcmpa of gas.

🌍 GEOPOLITICS & MACRO

• EIA expects US crude growth to end this year- in its Short Term Energy Outlook, the agency forecasts US crude output to remain more or less flat this year at around 13.21 mmb/d. Last year it grew by an OPEC-busting 1 mmb/d. Despite the slowing US growth, the EIA still sees a global oversupply of oil into 2025.

• Secret Ukraine peace talks (without Russia) - talks between Ukraine, Western allies, and other nations were held in Riyadh in December to try and agree on Kyiv’s conditions for holding peace talks with Russia. Peace is unlikely in the near future but a sudden end to the war would be a Black Swan event for energy markets as truce terms could involve the easing of sanctions on Russian energy.

• Norway approves Arctic deep-sea mining - despite fierce environmental opposition, Norway has become the first country to approve deep sea exploration for precious minerals such as lithium, scandium and cobalt,. The Norwegians know a thing or two about offshore extraction and are planning to create a structure that imitates it’s O&G licencing process.

• German industry paying the price - output from Germany’s once mighty industrial sector fell for the sixth consecutive month in November and is now 9% lower than its pre-COVID peak. I wonder if it has anything to do with Germany’s sky high energy prices? But at least its carbon emissions are falling.

💨 CARBON, CLIMATE, & OTHER ENERGY STUFF

• US battery storage to double, but still negligible - battery capacity in the US is predicted to jump by 89% this year to a total of 15GW, lead by growth in California and Texas where wind and solar penetration is high. For context, 15GW of capacity is enough to meet ~46 minutes of total US power consumption (assuming the batteries are fully charged). Estimates suggest that in a 100% renewable power grid, enough batteries would be needed to cover 30-50 days of power demand…

• France gets it - its not often a Brit is kind about France but credit where credit’s due as the country is moving forward with a bill that will scrap renewable energy targets and shift focus towards nuclear energy. The giant problem with renewable targets is that they create the wrong incentives: to develop renewables, rather than actually reduce emissions.

• EDF wants to extend UK nuclear plants - the operator is going to apply for approval to extend some UK plants, including one for 20 years longer than scheduled, and invest $1.7bn into its UK fleet to maintain output. EDF is building the troubled Hinkley Point C plant that has suffered long delays and large budget overruns but is finally due online in 2027.

🛢️ BOTTOM OF THE BARREL

Have we passed peak ESG?

Please dear God, say it’s so.

👋 BEFORE YOU GO 

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