15th November 2023

Rise and shine. This is Both Barrels. Here's what’s what in all things oil, gas, and energy today:

• 🚢 A European naval blockade?

• 😬 Russia is fueling the US military

• 🔦 COP28: nuclear’s time to shine?

• 🏦 Interest rates and energy projects

• ➕ plus Chevron offloading Haynesville; US inflation keeps cooling; contaminated Texan crude.

Let’s go…

📈 THE NUMBERS

🗞️ WELL-HEADLINES

 🗽 North America 

• Chevron offloading Haynesville assets - the major is considering selling 70,000 acres of land in the shale gas region as part of a five-year $15bn divestment campaign. After big-money buys this year, Chevron wants to trim some fat.

• North America’s LNG capacity to double by 2027 - a note from the EIA serves as a reminder of the crazy growth in the US LNG export industry. Having had no export capacity in 2016, the US became the largest LNG exporter in the world in 2023, surpassing Qatar and Australia. And it’s only just getting started.

• Court rules controversial GoM Lease Sale must go ahead - the auction has been delayed by lawsuits alleging O&G activity in the area would endanger whales. The judge dismissed the attempted block and said the auction must be held within 37 days.

• Inventories build again - the API results show a 1.3 mmbbls build in oil stocks, more or less in line with expectations, after a mega 11.9 mmbbls increase last week. Official EIA numbers are out tomorrow.

• Check your crude - quality inspections on Texas crudes are being stepped up after excess metal was found in a cargo. Crude contaminated with certain metals can damage refineries.

🏰 Europe

• PGNiG after KUFPEC’s Norwegian portfolio - the Polish-state run O&G company has been looking for gas assets to supply to the Polish market via a new pipeline from Norway. The NCS package is estimated to be worth ~$300m. Poland has earmarked $22bn for investments into expanding oil & gas supply by the end of the decade.

• Italy’s new LNG terminal - Snam is investing $1.1bn to build a new 5 mtpa floating storage and regasification unit on the Tuscan coast, expected onstream in 2025.

🕌 The Middle East

• Saudi’s unconventional gas progress - production has started at the South Ghawar tight gas field. The field is one of three major unconventional gas fields in Aramco’s portfolio which form a core part of the kingdom’s goal to increase gas output by ~50% by 2030.

⛩️ Asia & Oceania

• Collaboration in SE Asia - Petronas and PetroVietnam have signed an MoU to work together in Vietnam’s upstream, downstream, and renewable sectors “to provide more energy responsibly to fuel economic growth that also moves us closer to a lower-carbon future”.

🦁 Africa

• No luck for Shell in Mauritania - the offshore exploration well at the PannaCotta prospect was targeting a potential billion-barrel resource but the results disappointed.

🗿 Central & South America

• First oil at Exxon’s Payara field - Exxon’s offshore development in Guyana will initially produce at 220 kb/d via an FPSO, taking Exxon’s total capacity in the country to 620 kb/d across 3 projects. Exxon is targeting 1.2 mmb/d by 2027. Guyana’s growth is wild.

🌍 GEOPOLITICS & MACRO

• How Russia is fueling the US military - the Washington Post reported that sanctioned Russian oil is ending up in the Pentagon’s supply chain via a Greek refinery. All it took was a change of route and swapping a few labels and hey presto, the fuel is no longer Russian. Ooops. The story further highlights the impossibility of effectively sanctioning oil in today’s vast and multi-leveled energy supply chains.

• A European naval blockage - hot off the heels of admitting the Russian oil price cap hasn’t worked, officials are trying something different: a naval blockade of Russian ships. Denmark will reportedly be tasked with inspecting and potentially blocking Russian ships sailing though its waters. That could get spicy…

• US inflation is cooling - CPI inflation in October unexpectedly fell to 3.2%, year-on-year, compared with 3.7% in September, giving hope that the Fed may not need to raise interest rates higher. Equity markets jumped upwards on the news.

• Into gas? Buckle up - Total’s CEO has warned that gas markets face a few more years of volatility while we wait for new supply to come onstream.

💨 CARBON, CLIMATE, & OTHER ENERGY STUFF

• The COP where nuclear goes mainstream? - the US and the UK are spearheading an agreement for the upcoming COP28 climate summit to triple global nuclear capacity by 2050. In past COPs nuclear has been largely overlooked but, as wind and solar falter, people are finally waking up to the key role that nuclear will play as a zero-carbon, baseload power source.

• Siemens’ $15bn rescue - the German government has confirmed it will provide $7.5bn in guarantees to private banks who are lending to troubled Siemens Energy (the banks can now lend to Siemens knowing the government will repay the loan if Siemens can’t). Other complex components take the package to $15bn. The deal is intended to ensure Siemens has the finances to keep developing its wind projects. You can’t fight physics and market forces forever though…

🛢️ BOTTOM OF THE BARREL

Higher interest rates have spelled severe trouble for capital hungry wind and solar.

But they’re arguably even more problematic for nuclear.

With high upfront construction costs and looooong production lives, nuclear’s profitability is very sensitive to discount rates (which are driven by interest rates).

The wind and solar welcome-to-reality shake-out was long overdue, but high interest rates ain’t good news for nuclear power either.

👋 BEFORE YOU GO 

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