17th January 2024

Gooood morning. Here’s what hit the wires today in all things oil, gas, and energy:

• 🤖 “A bunch of dead robots”

• 😬 Oil supply crunch in 2025?

• 🇳🇴 Norway’s O&G licence bonanza

• 🔽 China’s weakening long term prospects

• ➕ plus debauchery in Davos; BP’s new boss; declining US shale output; China’s record coal production.

Let’s take a look.

📈 THE NUMBERS

🗞️ WELL-HEADLINES

 🗽 North America

• More energy activity frozen by winter storm - North Dakota’s oil output is now down by 650 kb/d and Total’s 238 kb/d Port Arthur refinery in Texas has suspended operations due to a full power outage. For context, North Dakota’s oil output is usually ~1.2 mmb/d, so this outage is significant.

• EIA sees small fall in shale oil output - the agency expects a decline of 900 b/d in February from the largest US shale regions, driven by falling production in the Eagle Ford and Bakken regions. That would represent the fifth consecutive monthly production fall. While the fall is tiny, even flat output from US shale will be seen as bullish for oil prices.

• Lawsuit accuses US shale producers of cartel behavior - the nonsense suit alleges that companies including EOG, Permian, Diamondback, and others have “collectively coordinated their production decisions, leading to production growth rates lower than would be seen in a competitive market”. Lol. Anyone involved in this has clearly never taken a look at a chart of the near vertical growth in US oil output in recent years.

• Trafigura and Tourmaline sign LNG supply deal - the commodity trader will buy 0.5 mtpa of LNG from the Canadian gas supplier for seven years starting in 2027.

🏰 Europe

• Norway’s O&G licence bonanza - while the country virtue signals on one hand by divesting O&G from its sovereign wealth fund, it reveals its true intentions on the other: yesterday it awarded 62 new offshore O&G exploration licences in its latest round (up from 47 last year). 24 companies were awarded licenses, including in the under-explored but promising Arctic Barents Sea.

• BP announces Murray Auchincloss as CEO - the company’s former CFO had been acting as interim CEO since Bernard Looney’s departure last year and has now been given the top job on a permanent basis. “Our strategy – from international oil company to integrated energy company, or IOC to IEC – does not change,” the new boss commented.

• Total declares force majeure at Arctic LNG 2 - the move comes as no surprise since the West hit the Russian mega project with sanctions last year, forcing all international partners to withdraw. The force majeure means that Total will not honor contracts to take LNG cargoes from the project, which will now have to find new buyers.

⛩️ Asia & Oceania

• China’s refinery activity hits new high - more evidence that the country’s post-pandemic recovery is complete as refinery throughput grew 9.3% in 2023 to a record of 14.7 mmb/d on average. Some new large refineries began operations last year, while the fleet of “teapot” refineries took advantage of discounted sanctioned oil from Iran, Venezuela, and Russia, to also ramp up activity.

• Majors close to settling $5bn Kashagan spat - the companies partnered in the giant oilfield in Kazakhstan are reportedly close to agreeing a deal with Kazakh authorities over a potential $5bn environmental fine. Reports are that they’ve offered to spend $110m on social projects over the new two years in lieu of the fine. $5bn to $110m…that would be one hell of deal.

🗿 Central & South America

• Exxon signs another LNG deal with Mexico Pacific - the 20 year deal is for 1.2 mtpa from a pre-FID third train at the Saguaro Engergia LNG plant in Mexico. This is in addition to two previous deals Exxon has signed for 2 mtpa from the first two trains. The 15 mtpa facility is due onstream in 2027.

🌍 GEOPOLITICS & MACRO

• China’s economic growth up, population down - the country’s economy grew at 5.2% in Q4 2023 (vs 4.9% in Q3), slightly above the official target but lower than many expected. Meanwhile, its population fell for the second consecutive year, highlighting the incoming challenge of an aging society that China will face in the decades to come.

• Mike Worth surprised by low oil prices - commenting at Davos, Chevron’s CEO, said he’s surprised oil prices haven’t been more impacted by unrest in the Red Sea. He also mentioned the company is working with the US Navy on shipping security through the region . On a different note, he sees further growth in US oil output, beyond current record highs.

• Oxy sees oil supply crunch from 2025 - CEO Vikki Hollub said a lack of oil exploration could create a shortage within a couple of years. She highlighted that in the mid 1900s oil companies were finding around five times as much oil as was used, but that ratio has steadily declined to about 25% in 2023.

💨 CARBON, CLIMATE, & OTHER ENERGY STUFF

• China’s coal output hits record high - the world’s largest coal producer hit a new high of 4.66 billion metric tons last year, an increase of 2.9% on 2022. The growth comes amid a focus on energy security and to meet growing demand: total power generation, which is dominated by coal, increased by 8% in 2023. Energy security will always trump sustainability.

• Aramco’s $7bn venture capital war chest - the company has more than doubled its funding for its venture capital arm, Aramco Ventures, which aims to invest in new technologies including in the energy, chemicals, materials, and digital spaces.

• Mitsubishi investing in world’s largest hydrogen project - the Japanese company is planning to invest $690m in the Eneco Electrolyzer green hydrogen project in the Netherlands. The proposed project, due onstream in 2029, will have a capacity of 80,000 tons of hydrogen per year, 30x higher than any other similar project in the world.

🛢️ BOTTOM OF THE BARREL

Today we’re sticking with the theme of energy reliability in the dead of winter:

Meanwhile in Chicago, the cold weather disabled Tesla’s EV charging infrastructure, leaving dozens of drivers queuing for hours in vain before eventually abandoning their cars.

And in other news…

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