16th January 2024

Hello hello everyone.

Here’s Both Barrels to accompany your morning coffee and get you up to speed. This is what you need to know today:

• 🇳🇬 End of an era for Shell Nigeria

• 🙂 Has Europe survived the winter?

• 💥 Iran flexes while missile hits US ship

• ➕ plus stage set for Trump vs Biden rematch; Talos buys QuarterNorth; offshore wind and O&G facilities; Shell under shareholder pressure.

Let’s take a look.

📈 THE NUMBERS

🗞️ WELL-HEADLINES

 🗽 North America

• The cold halves North Dakota’s oil output - freezing temperatures have reduced the Bakken’s oil production by ~400 kb/d to 425 kb/d. The weather can cause equipment to freeze, loss of power to facilities, and icy roads that limit the trucking of supplies to the drilling sites.

• Talos acquires QuarterNorth for $1.29bn - the privately held Gulf of Mexico player produces ~30 kboe/d and has proven reserves of 69 mmboe across six major offshore fields. Talos said the cash and stock deal would increase its “operational breadth and production profile while enhancing our margins and cash flow”.

• Prairie snaps up Nickel Road Operating - the $95m deal for the exploration and production assets in the DJ basin includes 3.4 kboe/d of production and 22 mmboe of proven reserves.

🏰 Europe

• Has Europe survived the winter? - despite a recent cold snap, European gas prices have kept falling on the expectation the continent has plenty of gas in storage to get it through the second half of the winter. A fairly mild December and record high gas inventories saved Europeans from another price popping gas shortage in their second winter without Russian piped gas.

• Shell shareholders pushing for tighter climate targets - a group of 27 investors that own ~5% in the company have filed a resolution for Shell to adopt more ambitious measures that align with the Paris Climate Agreement. While these resolutions are fairly common, this one is notable for the quantity of shareholders involved and comes at a time when Shell is pedaling back some climate commitments in favour of profitability.

🦁 Africa

• End of an era as Shell sells onshore Nigeria business - Shell has been active in Nigeria since 1936 and in that time has been involved in its fair share of controversy, oil spills, and big money (yours truly even happened to write his dissertation on Shell and Petro-Capitalism in the Niger Delta). Anyway, today the major announced it was selling its onshore business to Renaissance, a consortium of companies, for up to $2.4 billion. I’ve heard from Shell employees that a stint in Nigeria was as tough as it got.

🗿 Central & South America

• Repsol in the dock for Peru oil spill - in 2022, over 10,000 bbls of crude were spilled into the Pacific Ocean and on beaches by Repsol’s La Pampilla refinery. 30,000 alleged victims are now seeking $1 billion in damages. This is in addition to a $4.5 billion civil lawsuit Repsol is facing over the incident. The company says the cases are without merit and that the spill was not its fault.

🌍 GEOPOLITICS & MACRO

• Trump’s Iowa landslide - in a result that cements his position as the clear front-runner for the Republican nomination in this year’s election, Trump won over 51% of the votes in the Iowa caucuses. After the result, Vivek Ramaswamy withdrew from the race, leaving DeSantis and Haley as the only things standing between a Trump v Biden rematch later this year.

• Red Sea war insurance, missile hits US ship - underwriters are now charging a premium of 0.75%-1% of the value of the ship to sail through the hot waterway. Given some of these vessels can be worth over $100m, that’s an additional cost counted in the millions just to pass through the Red Sea. Meanwhile, a Houthi missile hit a US merchant ship but didn’t do much damage. They ain’t backing down…

• Iran flexes with missile strike on Israeli “spy HQ” in Iraq - in what is being seen as the most aggressive overt display of force by Iran in years, the country’s Revolutionary Guards have struck what they claim to be a Mossad base in Iraq. Iran said the attack was in retaliation to recent killings of its commanders in Syria.

• More Chinese stimmy? - China is considering issuing $140bn of new debt under a special bond plan to fund projects related to food, energy, supply chains and urbanization. It would be the fourth such sale in 26 years and comes as China looks to shore up its post-pandemic economic recovery.

💨 CARBON, CLIMATE, & OTHER ENERGY STUFF

• World’s first floating wind farm maintenance - the five turbines from Equinor’s Hywind project in Norway that power offshore O&G installations will be towed to shore in the summer to undergo major maintenance and will be offline for 3-4 months. Equinor said the project has the world’s highest offshore wind capacity factor of 54% over its five years of operation. Probably some of the world’s highest costs too…

• Petrobras begins pre-salt wind studies - the Brazilian NOC is exploring the possibility of developing offshore wind farms in its prolific O&G region to power O&G facilities.

🛢️ BOTTOM OF THE BARREL

Albertan’s have their say about being asked to preserve electricity during the cold snap. He makes a fair point:

Imagine relying on wind and solar to keep your family warm in times like these:

Alberta, an apparent “renewables powerhouse”, has invested huge amounts into wind and solar capacity expansion in recent years.

But, as this week has proven, “renewables” can’t be relied upon to show up for work when you need them most.

👋 BEFORE YOU GO 

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