11th December 2023

Welcome back Both Barrels crew. Here’s what went down over the weekend in oil, gas, and energy:

• 🔥 Thank you, hydrocarbons

• 🤑 Commodity traders making bank

• 🛒 Endeavor up for sale

• ⏰ 11th hour at COP

• ➕ plus SPR refill’s demand support; Houthi’s even bolder threats; early Christmas for US motorists; solar slowing after mad growth in 2023.

Let’s dive in.

📈 THE NUMBERS

US natural gas prices diving further as a warm winter is predicted across much of the country.

🗞️ WELL-HEADLINES

 🗽 North America

• Endeavor Energy up for sale - the largest privately held O&G producer in the Permian, which is expected to be worth ~$30bn, is rumoured to be exploring a sale. Apparently, 85-year old founder Autry Stephens doesn’t trust his estate to decide what to do with the company after he’s gone so he’s determined to settle the company’s future while he still can (he must’ve taken some inspiration from Succession). With Exxon and Chevron having already recently made some big buys, who might have the firepower to snap up Endeavor? Conoco? EOG?

• Souki ousted from Tellurian - the co-founder and chairman of the troubled LNG player was removed by shareholders. Tellurian has been developing the 27.6 mtpa Driftwood LNG project but has struggled to make much progress and recently warned about it’s precarious financial position.

• SPR refilling to support oil demand - the White House is buying an additional 3 mmbbls to top up the half-empty SPR that it has drained of over 280 mmbls in the past few years. Recent purchases of ~12 mmbbls are still a drop in the ocean but given how much is needed to refill, US gov’t buying may act as support for oil prices in the coming months.

• Oil rig count falls by 2 - the count has been hovering around ~500 rigs for the past 3 months after a steady decline for most of the year. OPEC will certainly be hoping it has further to fall. There’s usually a 3-6 month lag between oil prices and rig count so the impact of the recent fall in prices likely won’t be seen until at least next year.

• US gasoline prices hit a two year low - many locations around the US are now selling gas below $3/gal and the national average is expected to fall below this symbolic level by the end of the year. Happy Christmas to US motorists and to the Biden re-election campaign.

🏰 Europe

• Commodity traders making bank - Trafigura, one of the world’s largest commodity traders, has paid out an average of $5m to each of its ~1,200 top executives and traders after recording record profits in the last financial year. Traders have been raking in the cash thanks to high market volatility in recent years. Not bad work if you can get it…

• Azerbaijan grows gas exports to Europe - taking advantage of a rather large hole left by the loss of Russian piped gas, Azerbaijan’s gas exports to Europe are set to hit 12 bcm this year, up from 8 bcm back in 2021, and the target is 16 bcmpa by 2027. The future looks bright for non-Russian exporters of gas to Europe.

• Perenco hits gas in UK Southern North Sea - the indy has made a new gas discovery near its producing Ravensprun South field offshore UK.

🕌 The Middle East

• Fire rages at Iranian refinery - over 1.5 million litres of fuel have been burnt by an out-of-control fire at a small refinery in the east of Iran. It’s not clear what caused the fire and no casualties were reported.

⛩️ Asia & Oceania

• China ready to fund PNG LNG megaprojects - the gas rich country had also been in talks with Western financiers but many had withdrawn over concerns around funding hydrocarbons. Papua New Guinea is looking to raise $1.4bn to buy the remainder of a 5% stake in PNG LNG from Santos as well as capital to fund the under-development Papua LNG project.

• China’s underground oil storage - the excavated water-sealed cavern, which will be able to store ~18 mmbbls of oil, will be the first commercial facility of its kind in the country. China has been stockpiling huge volumes of crude in recent years to bolster its energy security although few know exactly how much oil it has bought.

• Valuera restarts Wassana field - the oil field offshore Thailand had been shut in for over three years.

🌍 GEOPOLITICS & MACRO

• Houthis up their threats - the Iranian-backed militant group that has been responsible for attacks on several ships in the Red Sea in recent weeks has now said that any ship heading to Israel is a target, regardless of the vessel’s nationality. Would they really be foolish enough to attack a US ship, for example? Sounds like a death wish…

💨 CARBON, CLIMATE, & OTHER ENERGY STUFF

• 11th hour at COP - with the summit set to end tomorrow, delegates are scrambling to agree on a final text. The main sticking point is the language around phasing out of hydrocarbons. OPEC has issued a letter to its members asking them to oppose such a call which is being pushed for by many Western countries. Any agreement needs to be unanimously agreed on by all 197 nations. Don’t hold your breath.

• US solar set to slow after bumper 2023 - installations this year grew by a massive 55%, year on year, to 33GW. Analysts expect growth to slow to 10% in 2024, however, due to the impact of higher interest rates which are hammering the economics of wind and solar around the world.

🛢️ BOTTOM OF THE BARREL

As delegates at COP fight tooth and nail over the minutiae of the language around phasing out hydrocarbons (which is largely irrelevant anyway as countries just go away and do their own thing), it might be worth taking a step back and looking at the bigger picture.

Hydrocarbons have, and continue to, enable miraculous improvements in the quality of life for almost everyone on earth.

Since ~1850, when coal became mainstream and we unlocked abundant supplies of affordable energy, here are some of the good things that have happened:

• Global life expectancy: 29 → 71 years

• Absolute poverty: 87% → 10%

• Child mortality: 48% → 4.3%

• Average GDP/capita: 13x increase

Not a bad contribution to society, is it?

Everyone at COP, and indeed anywhere, would do well to remember that life before hydrocarbons was cold, dark, brutal, and short.

If you want to upend the existing energy system that has served us so well, you better be damn sure you have a viable replacement ready to fill the void (spoiler: we don’t).

👋 BEFORE YOU GO 

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