17th October 2023

Hello girls and boys. This is Both Barrels. Here’s what’s new today:

• 🇻🇪 Venezuela comes in from the cold

• 🤞 Can Venezuela relieve crude markets? Unlikely.

• ✨ US offshore renaissance

• 🐋 A giant gas discovery in Iran

plus a lot more. Let’s get to it…

📈 THE NUMBERS

🗞️ WELL-HEADLINES

 🗽 North America

• Canada’s largest gas producer gets even bigger - Tourmaline is acquiring rival Bonavista Energy for a cash and stock deal worth $1bn. The assets in Alberta’s Deep Basin include 459 mmboe of proven reserves and ~ 60 kboe/d of long-life production.

• A renaissance in offshore - the US EIA believes that as production in US shale begins to decline, producers will increase their focus on offshore production for new volumes. The agency expects oil output from major shale regions to fall for a third month in a row in November to its lowest since May.

• Marathon & Glencore’s LNG supply deal - Marathon will ship an undisclosed volume of LNG from its Alba Field in Equatorial Guinea to Glencore in Europe in a 5 year deal. The deal is linked to the Dutch TTF gas price.

• Outage at Deer Park - Pemex has shut down the 270 kb/d crude distillation unit at its Deer Park refinery in Texas because of a ruptured line. If it remains shut, other units of the refinery will have to close.

🏰 Europe

• What’s in a name? - Norway’s Petroleum & Energy Ministry is removing “Petroleum” from its name, supposedly to reflect its commitment to a low carbon energy transition. Meanwhile, its oil output is due to rise 15% this year, with total O&G production climbing to 4.3 mmboe/d.

• Oil tanker hits a floating mine - the Liberian-flagged vessel only sustained minor damage and there were no injuries, but it’s the second vessel this month to have hit a mine in the Black Sea which is a battleground between Russia and Ukraine.

🕌 The Middle East

• Iran’s largest ever dry gas find - the country’s energy minister announced the discovery of a giant field in Fars Province. The field is estimated to contain a whopping 22 tcf of gas. We’ve said it before, we’ll say it again: there’s no shortage of hydrocarbons out there. “The stone age didn’t end because they ran out of stones”.

⛩️ Asia & Oceania

• Geng North on the fast track - Eni is pushing to begin production from the recently discovered 5tcf gas field in Indonesia as soon as 2027.

• China giant gas condensate field onstream - the Bozidabei field covers 13,000 km2 in a southern part of Xinjiang, and is expected to produce 9 bcm of gas and 600 kt of condensate this year.

🗿 Central & South America

• Brazil’s output keeps climbing - oil and gas output hit a new high of 3.98 mmboe/d in Q3 of this year, an 8% increase on the previous quarter. Brazil is a rare bright spot in the global conventional supply mix.

• Venezuela’s struggling refineries - the catalytic cracker of Venezuela's second-largest refinery, the 310 kb/d Cardon, was shut down over the weekend due to lack of feedstock. Venezuela’s deteriorating refineries have been struggling to operate thanks to sanctions preventing the import of replacement parts and feedstocks

🌍 GEOPOLITICS & MACRO

• Venezuela coming in from the cold - the US is due to announce a deal any minute now that will ease sanctions on Venezuela’s oil sector. In return, Maduro has agreed to allow opposition parties to run in next year’s presidential elections. Venezuela has been an international outcast since an election in 2018 which was widely denounced as fraudulent. Check out Bottom of the Barrel for what this might mean for oil markets.

• Japan’s sees LNG shortage - the head of Japanese trading giant Mitsui has commented that there aren’t enough new LNG projects planned to keep up with growing demand for the fuel which will play a major role in energy mixes for decades to come. Resource-poor Japan is the world’s largest importer of LNG so they know a thing or two about this sort of stuff.

• Russia’s O&G top dogs head to China - Gazprom and Rosneft’s CEOs will be joining Putin when he goes to China this week. After it lost its main gas customer when it invaded Ukraine, Russia will be cosying up to its energy-hungry southern neighbor in the hope of striking some more lucrative deals.

💨 CARBON, CLIMATE, & OTHER ENERGY STUFF

• Greta Thunberg is protesting against a wind farm - yep, you read that right. She’s joined Norwegian activists trying to block a wind farm that they say interferes with the rights of indigenous people. It turns out that wind farms use a lot of land, who could have known? There’s just no pleasing some people.

• Waning EV growth in China - the FT has reported that a slowing appetite for EVs in China is responsible for a sharp fall in prices for several battery metals. Since the start of the year, lithium prices have fallen ~70% and nickel prices have dropped by 40%.
  

🛢️ BOTTOM OF THE BARREL

It’s no secret that the US has been schmoozing up to Venezuela in recent months to help ease some of the country’s vast oil reserves back into global markets.

Venezuela holds ~300 bnbbls in crude reserves, the largest in the world, yes, more than Saudi Arabia. But, its oil industry, once the envy of the Western hemisphere, is in a mess and production has been volatile for decades.

International sanctions have hammered the country recently but plenty of damage had already been done. Back in the 2000s when Hugo Chavez was running the show, he milked PDVSA for everything he could to help finance his socialist agenda.

Reinvestment was ignored, IOCs were forced out by terrible contractual terms, and thousands of PDVSA’s smartest minds were replaced by Chavez’s cronies.

Now, with oil markets tightening and supply disruptions in Russia and possibly the Middle East, the US is keen as mustard to help revitalize this abundant source of crude.

But experience and decaying infrastructure take a long time to replace. Don’t expect a flood of crude from Venezuela anytime soon. At best they may be able to bring on a few hundred thousand barrels over the next year or so, hardly a relief valve for global markets.

And that’s assuming the notoriously prickly dictator in Caracas sticks to his side of the bargain…

👋 BEFORE YOU GO 

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