19th January 2024

Rise and shine. It’s Friday. Here’s what I’ve got for you today in all things oil, gas, and energy:

• 🧠 The “renewables” marketing genius

• 😵 Port Talbot’s net-zero sacrifice

• 🪨 Coal breaks new records

• ❌ Norwegian O&G licences revoked

• ➕ plus Italy selling Eni stake, IEA sees a well supplied oil market in 2024; AkerBP invests in seaweed

See you Monday.

📈 THE NUMBERS

Wondering why natural gas prices are under pressure despite it feeling like the entire Northern Hemisphere is in a polar vortex right now? This is why:

🗞️ WELL-HEADLINES

 🗽 North America

• 15% of Gulf Coast refining offline - the cold snap has frozen ~1.5 mmb/d of refining capacity in the key US crude processing region. With temperatures finally beginning to recover, the outages aren’t expected to last long. Let the thaw begin!

• EIA confirms oil stock draw - US crude inventories fell by 2.5 mmbbls last week, while gasoline stocks rose by 3.1 mmbbls to multi-year highs. Cold weather tends to result in increases in fuel inventories as transport demand falls.

🏰 Europe

• Italy selling Eni stake - the government is aiming to raise $2.2 billion from selling a 4% interest in the oil major as part of a broader privatization push. The Italian Treasury currently owns a 4.7% stake in Eni, while state lender Cassa Depositi e Prestiti holds 27.7%.

• Norwegian O&G field permits revoked - a court has ruled in favour of climate groups and invalidated the licences for the Breidablikk, Yggdrasil, and Tyrving fields on the grounds there wasn’t sufficient assessment on future emissions from the projects. Production at the ~55 kboe/d Breidablikk must stop at the end of the year and so must the development of the other two fields. The verdict is likely to be appealed.

• Shell starts job cuts - the major has begun making the previously announced cuts, starting with ~200 in its low-carbon division. The new CEO has promised to be “ruthless” in improving performance and boosting investor returns at a “leaner overall organisation”. Sounds like there may be more to come.

⛩️ Asia & Oceania

• Eni and Kazakhstan’s gas-renewable hybrid deal - the Italian major will jointly develop with KazMunayGas a 250MW gas-renewable power station in the country.

🦁 Africa

• Nigeria’s government supports Shell divestment - the government will approve Shell’s exit from onshore Nigeria, according the country’s Petroleum Minister.

🌍 GEOPOLITICS & MACRO

• IEA ups oil demand forecast but sees well supplied market - in its latest oil market report the agency again revised upwards its 2024 oil demand growth estimate by 180 kb/d to 1.24 mmb/d. This is the third upwards revision in as many months but is still well below OPEC’s forecast of 2.25 mmb/d. Despite the growth, the IEA expects a well supplied market in 2024 thanks to climbing output in the US, Brazil, Guyana and Canada. The report reiterated the agency’s (very dubious) prediction that oil demand will peak in 2030.

• India’s demand for domestic air travel set to double by 2030- this is why peak oil demand by 2030 is a pipe dream. Over 80% of the world’s population have never been on a plane. There’s soooo much more demand to come.

• Houthis not backing down - they’ve fired more missiles at US ships as Biden admits the US airstrikes this week in Yemen have so far failed to deter the aggression but will continue nevertheless. Meanwhile, the Houthis have promised safe passage for Russian and Chinese ships…

• US enforces more shipping sanctions - a UAE company that owns 18 crude and chemicals vessels has been hit by US sanctions for breaching the Russian crude price cap. Any company hit by the sanctions will have all its US assets blocked and be barred from doing any business with US citizens or companies.

💨 CARBON, CLIMATE, & OTHER ENERGY STUFF

• UK loses 3,000 steel jobs to net zero - Europe’s sorry de-industrialization continues, as Tata Steel confirms it will be closing the blast furnaces at its steel plant in Port Talbot, UK, and replacing them with electric versions. They will be “greener and cleaner” apparently but are incapable of making virgin steel (only recycled steel) and will result in the loss of 3,000 local jobs. I can practically hear the laughs of steel producers in China and the US.

• Germany’s last solar manufacturer to close - back in the early 2000s when Germany embarked on its ill-fated Energiewende, politicians promised a green economy jobs boom. Today, the last of Germany’s major solar manufacturers, Meyer Burger, has succumbed to the inevitable and is set to close. Like many others that have gone before it, European business conditions mean the company cannot compete with international producers.

• Global coal power generation and exports hit record high in 2023- let’s face it, king coal isn’t going anywhere fast...82% of all coal-fired electricity generation occurred in Asia in 2023, up from an average of around 75% in 2019. The West’s expensive efforts to reduce emissions are being drowned out by Asia’s energy-hungry juggernauts.

• AkerBP is investing in seaweed carbon offsets - the idea is that the fast growing seaweed absorbs CO2 and then sinks to the bottom of the ocean where the carbon is trapped permanently.

🛢️ BOTTOM OF THE BARREL

Whoever managed to convince the world to call wind and solar power “renewable” deserves all the marketing awards now and forever more.

Sure, the wind and the sun are renewable, but the technologies used to harness them are not:

Thanks to their inherent low energy densities, wind and solar require large quantities of finite raw materials and land per unit of power output.

And, after ~20 years, they need to be dismantled and replaced, with only a small share of the inputs being recycled. Plenty ends up in landfill like these turbine blades in Texas:

All these resources have to come from somewhere, of course.

Enter, the mining industry.

Which, apart from being an inherently dirty business with plenty of waste and local destruction, runs on giant diesel-powered trucks, crushers, drills, and dozers.

Yes, wind and solar are low carbon, but unless you can convince me that steel, cement, copper, and diesel are self-replenishing and infinite, or that the mining industry runs on unicorn farts, let’s not pretend that these technologies are “renewable”.

Words matter.

Rant over, have a lovely weekend!

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