15th December 2023

Time to wrap up the week and leave you to your festive frolicking.

Here’s what you need to know today in all things oil, gas, and energy:

• 💨 Offshore wind’s boaty bottleneck

• 🆘 2 more years for TransMountain?

• 🪨 Coal demand at record highs

• 😘 Guyana and Venezuela playing nice

• ➕ plus the US’ fragile power grid; Shell bags Linnorm stake; Diablo Canyon secures extension.

Have a good one. Catch you Monday.

📈 THE NUMBERS

After a torrid few weeks, oil prices enjoyed a rare day in the green yesterday, rising by ~4% thanks to general positive sentiment across markets after the Fed hinted rates may soon start to fall.

🗞️ WELL-HEADLINES

 🗽 North America

• Trans Mountain warns of new 2 year delay - Ooof. The beleaguered $26bn pipeline expansion project in Canada is due to start up in Q1 2024 having already faced years of delays and budget overruns. Now the developer is warning of another 2 year delay if the regulator doesn’t reverse its recent ruling to reject a change in some pipeline specs. Is it a bluff? Everyone from the upstream producers, to the government, to the developer must be desperate to get this project finished.

• Chevron slashing California investments due to “adversarial policies” - the company has already cut spending in the state by “hundreds of millions of dollars since 2022” and will continue to reduce its oil-refinery investments. The comments come as California lawmakers consider capping the profits of refiners. Meanwhile, you won’t be surprised to hear the Golden State has the highest pump prices in the country…

• BP restarts Olympic Pipeline after cleaning up spill - ~25,000 gallons of gasoline leaked in Washington state.

🏰 Europe

• Equinor buys Shell’s Linnorm stake - the field is the largest undeveloped gas discovery offshore Norway and is estimated to hold up to 30 bcm of recoverable reserves. Equinor is acquiring Shell’s 30% stake and taking over operatorship for an undisclosed sum.

• Gunvor and Italy strike LNG supply deal - the deal provides Gunvor with a €400m loan across five years to be used to secure natural gas supplies for Italy.

🕌 The Middle East

• ADNOC considering OCI takeover - the European chemicals company could be worth ~$5bn and its takeover would be in keeping with ADNOC’s strategic push to expand beyond oil & gas.

⛩️ Asia & Oceania

• PTTEP’s big expansion plans - Thailand’s NOC has revealed plans to invest ~$33bn in upstream growth over the next five years both at home and abroad. It hopes to increase production by 17% to 587 kboe/d across the same period.

🗿 Central & South America

• Petroperu considering $1bn bond offering - the state-owned oil company is suffering under high debt levels and a cash shortage so is looking to international capital markets for help. The Peruvian government gave Petroperu a $1 billion injection in 2022 but has said it cannot do the same this year.

🌍 GEOPOLITICS & MACRO

• Guyana and Venezuela agree to avoid conflict - the two presidents met at an airport in St. Vincent and the Grenadines and agreed to avoid the use of force in their dispute over the Esequibo territory. They will continue their dialogue in Brazil within the next three months.

• US pushing for a naval coalition in the Red Sea - following a spate of attacks on commercial ships in the crucial waterway, the US is looking to create a multi-national naval force to protect ships. Iran responded in typical fashion, saying such a force would face "extraordinary problems" and nobody "can make a move in a region where we have predominance". Meanwhile, Maersk is insisting that its fleet of fuel carriers have the option to avoid the Red Sea if they want.

💨 CARBON, CLIMATE, & OTHER ENERGY STUFF

• Global coal demand at an all time high - in its annual coal report, the IEA estimates that coal demand grew by 1.4% to 8.5 billion metric tons in 2023, thanks mainly to growth in India and China. The agency expects global coal demand to start falling in 2026.

• Tumultuous times ahead for US power grids - increasing electricity demand and the retiring of old power generators is making grids across the country vulnerable to capacity shortages, according to industry body NERC. Grid capability is a hugely understated challenge for the energy transition: governments are encouraging more power demand via EVs, heat pumps, electric stoves, while at the same time putting pressure on baseload power generation from coal and gas. Something’s gotta give.

• Offshore wind’s ship bottleneck - a major hurdle to the sector has been the availability of giant ships capable of carrying and installing the huge turbines. A lack of these ships, which can cost up to an eye-watering $350,000 per day to charter, was a key reason for Orsted recently cancelling projects in the US. Only ~50 of these ships currently exist in the world and many are not capable of handling the latest, biggest wind turbine models.

• California extends Diablo Canyon operations - the future of the nuclear power plant has been a battle ground between activists trying to shut it down and anyone with half a brain who realizes the important of nuclear power. It had been due to close in 2025 but regulators have come to their senses and granted approval for it to keep producing zero-carbon, low-cost, reliable power until 2030.

• $890m prize for carbon capture - the US government is offering the funds to gas and coal plants that can demonstrate the viability of carbon carbon and storage.

🛢️ BOTTOM OF THE BARREL

All I want for Christmas is…

And a fun fact for you to bore your friends with this weekend: the $2.1 trillion oil market is bigger than the top 10 metal markets combined.

👋 BEFORE YOU GO 

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