Good morning crew - this is Both Barrels. Your daily dose of all things oil, gas, and energy, without the hot air.

Here’s what’s happening:

• 😬 Bonking Bernad quits BP

• 🎯 The EU’s faulty targets

• 🐂 A bullish OPEC

plus a lot more. Let’s get to it…

📈 The numbers

Oil prices have risen further following OPEC and IEA’s predictions of a large supply deficit in Q4 2023.

Meanwhile, the S&P E&P Index hit new highs for the year.

🗞️ Well-headlines

 🗽 North America

• The US reclaimed its position as the world’s largest exporter of LNG in H1 2023, thanks largely to the ramping up of Freeport LNG that was damaged by a fire in 2022. The rapid emergence of US LNG in recent years, thanks to the shale gas boom, has been remarkable (see chart below).

• Chevron has acquired a majority interest in the Advanced Clean Energy Storage hydrogen project in Delta, for an undisclosed sum from a PE fund. The project, which aims to be commercial in 2025, will produce hydrogen through electrolysis and store it on site.

• The API’s crude inventory report has shown a build of 1.2 mmbbls, compared with expectations of a 2 mmbbls decrease. Gasoline stocks rose by 4.2 mmbbls.

• The governor of Georgia has suspended taxes on gasoline and diesel (~$0.3/gallon) for the next month in an attempt to ease some of the economic pressure on the state’s inhabitants.

• Venezuela-owned oil refiner Citgo Petroleum has been valued by its parent company at between $32-$40 billion. The valuation comes amid a possible sale of Citgo shares to help repay Venezuelan debts.

🏰 Europe

• Bernard Looney has suddenly resigned as CEO of BP over “personal relationships with colleagues”. It turns out that Mr Looney hadn’t been entirely truthful to the BP board about the extent of his, errr, cavorting with coworkers. He bagged over £10m last year so those were some expensive encounters. CFO, Murray Auchincloss, will temporarily take the reins.

• Maintenance at the Troll gasfield in Norway is taking longer than expected. Outages at several large fields have pushed Norway’s gas output down to its lowest level in a decade, and its exports are currently at ~137 mcm/d, compared with ~300 mcm/d usually.

🕌 The Middle East

• ExxonMobil has so far invested a cool ~$30 billion into long-term gas projects in Qatar, according to an Exxon senior exec. Exxon and Qatar are also partners in the $10bn Golden Pass LNG project in Louisiana, US.

⛩️ Asia

• All quiet on the Eastern front today.

📍Everywhere else

• The expansion of Chevron’s Tengiz’s oilfield in Kazakhstan will be delayed by at least 6 months. The project, which was due be completed by mid 2024 and will cost $40bn, will increase production from the field by ~260 kb/d, to ~650 kb/d.

• Ecopetrol’s CEO has said that several IOCs are interested in increasing their involvement in Colombia’s offshore gas sector. Colombia’s Caribbean coast holds several sizable offshore gas discoveries, raising the prospect that it could emerge as a gas exporter.

🌍 Geopolitics & macro

• OPEC estimates that global oil demand will grow by 2.2 mmb/d in 2023 to 102.1 mmb/d, and by a further 2.4 mmb/d in 2024. The vast majority of this growth will come from non-OECD countries, particularly in transportation, industrial fuel demand, and a recovering China. The OPEC data indicates a ~3 mmb/d supply deficit by the end of the year.

• The IEA also released it’s monthly oil market report today. It highlighted that OPEC+ cuts have so far largely been offset by growth in volumes from the US, Iran, and Brazil, but agrees that the market will enter into a significant deficit towards the end of the year due to the cuts. Unsurprisingly, the IEA isn’t so bullish on future oil demand as OPEC is, estimating growth in 2024 of ~ 1 mmb/d.

💨 Carbon, Climate & other energy stuff

• The EU parliament has finalized a bill to increase renewable energy targets, requiring 42.5% of the energy mix to be “renewable” by 2030, vs a current 32% target for that date. Ridiculously, most nuclear energy will not count towards this target. The bill comes just as European wind and solar companies warn of insolvency. Ideology, meet reality.

• Amazon, of the e-commerce variety, is getting involved in carbon removal credits. It committed to purchase 250,000 tons of credits over 10 years for an undisclosed amount from Oxy’s 1PointFive DAC plant in Texas. DAC credits can cost up to $1000/t so this purchase will be no small sum. Over here at BB we generally prefer nature-based carbon removals to expensive, energy-intensive DAC.

🛢️Bottom of the barrel

Some jokes write themselves:

It always seemed strange that the EU sets “renewables” targets. After all, “renewables” penetration is not the goal, lower emissions are.

Countries should instead be focused on emissions intensity of power generation and of energy supply. You can cheer all you like about having lots of wind, but if you’ve also got a giant coal fleet then you’re doing no good for the environment.

Relative to “renewable” targets, Germany’s dirty wind and coal mix is succeeding, but nuclear-dominated, low-carbon France is not.

Any country using lots of biomass, which burns dirtier than coal and is laughably labelled as “renewable” by the EU, will also be doing well under this system.

If you set the wrong incentives, expect the wrong results.

👋 Before you go

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