11th January 2024

For some reason, yesterday’s email bounced for a bunch of you so apologies if you never received anything. Not sure what happened there.

Anyway, here’s what we’ve got for you today in all things oil, gas, and energy, without the hot air:

• 🟨 Let’s talk about energy density

• 🍾 Galp shares jump after Namibia success

• 🇷🇺 Russia’s mammoth crude export pivot

• 🚢 Tanker seized in the Gulf of Oman

• ➕ plus API warns against LNG regulations; UK’s nuclear expansion; helicopter shortage in Norway; Saudi’s broad energy ambitions.

Let’s take a look.

📈 THE NUMBERS

🗞️ WELL-HEADLINES

 🗽 North America

• API warns against slowing LNG approvals - “Halting US LNG approvals would put our allies at risk. This should not be controversial”, said the API President. He also commented that US gas is a key tool for displacing dirty coal overseas. Couldn’t agree more. The White House has been considering including more climate considerations in the LNG approval process amid increasing pressure from activists. Slowing US LNG expansion would be another massive own goal from the climate lobby.

• US grid’s hydrocarbon reliance - PJM, the US’ largest power grid operator, has asked Talen Energy to postpone the retirement of several oil & gas power stations to ensure future grid reliability. Is anyone surprised? Anyone at all? Turns out that baseload power is quite important after all.

• TC Energy plans to sell pipeline stakes to indigenous groups - the Canadian pipeline operator invited representatives from 72 groups to discuss the proposal. “We want to create mutually beneficial partnerships with Indigenous communities. Potential ownership in our projects and assets means that Indigenous communities can share in Canada’s resource economy.” Talk above aligning incentives. Smart move.

• Canada offshore oilfield stakes on the market - OilCo, which owns a 4.9% stake in Exxon’s 750 mmbbls Hebron project in Canada, among other interests, is looking to sell down some of its positions.

• EIA crude stocks rise - US crude inventories climbed by 1.3 mmbbls last week, according to official EIA data. Gasoline stocks surged by 8 mmbbls.

🏰 Europe

• Russia’s crude export pivot to Asia - the state-owned oil pipeline monopoly, Transneft, reported that Russia’s crude exports fell by 6.5% in 2023. A few weeks ago, Russia’s deputy PM revealed that around 90% of all Russia’s oil exports last year went to China and India. Before the war in Ukraine, 50% went to Europe. Today it’s just ~5%. Given that Russia exports ~5 mmb/d, that’s a fairly monumental shift in trade flows.

• Russia’s O&G revenues at pre-war level - as it happens, sanctions aren’t that effective, especially ones that push up the price of the target’s core products.

• Former Total boss, Thierry Desmarest, dies - he’s credited for transforming the French major into one of the world’s largest oil companies during his 1995-2010 tenure at the helm. He was 78.

• Norway’s oil output threatened by helicopter parts shortage - the unusual warning from the oil minister comes as increasing numbers of the dominant S-92 helicopters are grounded as they await spare parts.

• Equinor’s North Sea wildcat comes up dry - the well, drilled close to the Martin Linge field in the Norwegian North Sea, will be plugged and abandoned.

⛩️ Asia & Oceania

• India holding off on SPR building - plans to spend $600m building strategic crude reserves have been delayed. The Indian government is apparently holding off in the expectation that oil prices will fall and will instead lease out empty storage space to oil majors and refiners. The country’s SPR capacity only amounts to 39 mmbbls, ~8 days of demand.

 🕌 The Middle East 

• UAE bans Cameroon tankers from its waters - citing safety concerns about the vessels. Cameroon-flagged tankers are reportedly notorious for failing safety checks by maritime bodies.

🦁 Africa

• Galp makes “significant” Namibia find - the Portuguese indy has struck lucky with an exploration well at its Mopane prospect in Namibia’s offshore Orange basin. The discovery is close to other large finds made recently by Shell and Total. Galp’s share price jumped 8% on the news. The future looks bright for Namibia’s oil patch.

🗿 Central & South America

• Ecuador oil sector so far unaffected by state of emergency - violence has erupted across the country in recent days between the security services and gangs. President Noboa said that an "internal armed conflict" now existed in the country and he was mobilizing the armed forces to carry out "military operations to neutralise".

• YPF’s $800m bond issuance - the Argentinian E&P has sold the 5-year bonds at a 9.75% yield and is using a large chunk of the proceeds to pay down existing debt. The is move is set against the backdrop of Argentina’s fiery new president who plans on privatizing state-owned companies such as YPF.

🌍 GEOPOLITICS & MACRO

• Oil tanker hijacked off Oman - details are still scarce but the ship, identified as St Nikolas, was boarded by unauthorized military figures. Suspicion has fallen on Iran as it’s the same ship the US recently seized 1 mmb/d of Iranian crude from, citing sanctions breach.

• Saudi: “We’re an energy producer, not an oil producer” - the kingdom’s energy minister insists the oil behemoth is taking climate change seriously and investing big into a broad range of energies. “Tell us when you want that and where because we are now exploiting and surveying every corner of this country to ensure that anybody who wants to have any kind of electricity or hydrogen it can be delivered almost to his home address.", he remarked.

• Vitol expects continued OPEC+ cuts - the commodity trader believes the group will have to maintain cuts this year to offset new supply coming from the US, Guyana, Venezuela, and Brazil: “We have oil coming from everywhere". Depending on who you ask, demand is predicted to grow between 1.1-2.2 mmb/d this year.

💨 CARBON, CLIMATE, & OTHER ENERGY STUFF

• Wind power surpasses coal in Europe - output from wind hit 193TWh in Q3 2023 in Europe, surpassing coal for the first time. While it’s a symbolic milestone, I’m somewhat reluctant to compare intermittent sources with baseload sources. They’re fundamentally different services and there’s a big difference between a TWh on demand, and a TWh when the weather decides.

• UK’s “biggest expansion of nuclear power for 70 years” - the government has announced plans to quadruple the country’s nuclear power capacity to 24GW by 2050. It’s about time this hapless government did something right.

🛢️ BOTTOM OF THE BARREL

Let’s talk about energy density.

In a nutshell, this is the amount of energy that can be stored in a unit of space and mass.

Higher energy density fuels are generally easier to transport (although are usually more volatile) and provide a greater energy output for the amount of space and weight they use.

As humanity has advanced - or arguably enabling humanity’s advance - we’ve used increasingly energy dense fuels.

Hunter gatherers used firewood, the industrial age progressed to coal, oil, and gas, and the future will be fueled by uranium.

Why is energy density important?

1. The more energy dense a fuel is the more efficient it is to use. Less natural resources and land are needed to harness that energy.
   
   Nuclear uses just a fraction of the amount of land and raw materials that diffuse wind and solar need, while hydrocarbons sit somewhere in between.

2. Energy density is vital when there are weight and space constraints as there are in many uses, especially transport.
   
   Lithium batteries have very low energy densities, meaning that any battery that can theoretically store enough energy needed to power a plane or a ship, for example, would be impossibly huge and heavy.
   
   This is why many are hoping energy-dense hydrogen is the answer to decarbonising heavy transport.

👋 BEFORE YOU GO 

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