10th January 2024

Good morning crew. Here’s your daily dose of all things oil, gas, and energy, without the hot air:

• 🩳 Pants on fire

• 😬 UK’s near miss

• 📉 A rough year for energy stocks

• 👎 A setback in Namibia

• ➕ plus no interest in Alaska; coal keeps growing in China; crude inventories fall; Mexico fights back; a good day for SLB; record Norway gas exports; Whale starts up; China’s Iraqi ambitions; and barrels more.

Have a top weekend. See you Monday.

📈 THE NUMBERS

🗞️ WELL-HEADLINES

 🗽 North America

• No interest in Alaska - a planned drilling lease auction for 400,000 acres in Alaska’s Arctic National Wildlife Refuge has been cancelled after no oil & gas companies expressed any interest. High costs and public relations headaches have put them off.

• First production at Whale - Shell and Chevron’s new development in the GoM has begun operations, with production expected to reach a peak of 100 kboe/d. Whale holds estimated recoverable resources of 480 mmboe.

• SLB lands a flurry of Shell contracts - the service provider won a series of major gigs at deepwater assets in the Gulf of Mexico, UK North Sea, Trinidad and Tobago, and others. SLB said it would “use AI to enable repeatable delivery of consistent and cost-efficient wells”.

• Chevron - Hess resolution in 2025? - Chevron CEO Mike Wirth thinks so. The $53bn takeover stalled after Exxon claimed rights to Hess’ stake in the prolific Stabroek block offshore Guyana. The courts are set to soon decide.

• Crude stocks fall - US crude inventories fell by ~1 mmbbls last week to 415 mmbbls, compared with analyst expectations of a ~0.2 mmbbls draw. Gasoline stocks meanwhile jumped by 6.3 mmbbls to 238 mmbbls.

• Kimell bags Boren Permian interests - the deal is worth $231m and includes 1.8 kboe/d of production across ~7,000 net royalty acres.

🏰 Europe

• Norway gas exports at record high - a total of 117.6 bcm of gas was exported by Norway to Europe last year as the Scandinavian producer cashes in on the gap created by lost Russian volumes. Norway is a rare case of a European country nailing its O&G policy.

• Hammerfest outage continues - Europe's largest LNG export facility in Norway suffered a technical problem on 2nd January and is expected to be back online on 19th January.

• Norwegian state sells Aker Solutions holding - the sale of its 6.11% stake in the energy services company raised ~$85m.

🕌 The Middle East

• PetroChina’s big ambitions in Iraq - the Chinese operator has announced plans to invest big and more than double production at the giant Iraqi West Qurna-1 oilfield to 1.2 mmb/d. The field holds and estimated whopping 22 bnboe of recoverable reserves. PetroChina took over operatorship of the field from Exxon last year.

• ADNOC dishes out juicy Ruwais LNG contracts - the three contracts related to under development 9.6 mtpa facility in the UAE are worth a combined $2.1bn.

⛩️ Asia & Oceania

• BP lends a hand at India’s biggest oilfield - ONGC has hired BP to provide technical services at the offshore Mumbai High oilfield which back in the 1980s produced as much as 471 kb/d, but is now down at ~135 kb/d. Oil hungry India is desperate to reduce its import needs by ramping up domestic production.

• Petronas greenlights Hidayah development - the ~$900m development offshore Indonesia is targeting first oil in two years.

🦁 Africa

• A setback in Namibia - Shell has written off $400m of value in Namibia’s promising Orange Basin after it deemed discovered oil and gas resources in offshore block PEL39 were not commercially viable. Namibia has enjoyed a wave of exploration successes in recent year but has yet to produce a barrel.

🗿 Central & South America

• A new lease of life for Bacab - Pemex is going to invest $1.9bn over the next two decades to to boost production a the aging shallow water field in the Gulf of Mexico.

🌍 GEOPOLITICS & MACRO

• A rough year for energy stocks - while the S&P500 delivered returns of 23.3% last year, US energy stocks returned just 5.6%. Within that, upstream companies did the worst at just 1.5%, while midstream companies averaged a much healthier 20.8%. Refiners had a rough ride, logging a decline of 6.2%. Let’s hope for a better 2025…

• “Mexican America, that sounds nice" - after Trump proposed renaming the Gulf of Mexico, the Gulf of America, Mexico’s president joked that large parts of the US could be renamed “Mexican America”. She used an old map to point to the fact that a big chuck of the US used to be referred to in that way.

💨 CARBON, CLIMATE, & OTHER ENERGY STUFF

• UK on the brink of power cuts - the UK came perilously close to power cuts yesterday with spare generation capacity of less than one power station, its tightest day in over 15 years. Emergency gas power station were paid as much as £5,500/MWh (80x the 2024 average) to keep the lights on. Shambles.

• BlackRock back tracks on net zero - the world’s biggest fund manager, which manages an eye watering $11.5 trillion, has become the latest Wall Street financier to back away from net zero pledges by quitting the Net Zero Asset Managers Initiative.

• Constellation lining up $30bn Calpine buy - the US power generation company is looking to use its shares to make one of the largest ever deals in the power sector. With US power demand surging thanks to data centers and AI, this seems like a big but smart bet.

• China’s coal keeps climbing - the world’s largest producer and consumer of coal is forecast to increase its demand by another 1% in 2025, reaching hew highs. Yes, China is building wind and solar at breakneck speed but energy security trumps everything, which is why king coal’s reign has a long way to run.

🛢️ BOTTOM OF THE BARREL

As is now customary whenever somewhere floods, gets blown away, or burnt down, hysterical headlines rail against climate change and lay the blame squarely with fossil fuels.

Without wanting to minimize the devastation caused by the fires in Los Angeles, a quick look at the data will, as per usual, tell a different story than the media frenzy:

Climate scientist Michael Mann told CNN that drier conditions, caused by global warming and fossil fuels, was a key factor in the fires.

Annual rainfall in LA has remained basically flat for 150 years:

I’m not saying that changing weather patterns had no impact, but might it be that slashing the fire department’s budget and having poor land management practices had a bigger impact?

Blaming everything on climate change is an easy excuse made by those looking to deflect from their own failures or to advance an ideological cause.

👋 BEFORE YOU GO

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

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