1st August 2024

Good morning, good looking. Here’s what hit the wires today:

• 💯 Permian pipelines full to the brim

• ☀️ California’s power problems 

• 😥 Dwindling prospects for peace in Gaza

• 🇮🇷 Russian and Iran’s $40bn energy corridor

• ➕ plus Chevron / Hess delayed further; BP developing Kirkuk fields; expansion at Leviathan; crude stocks falling; Exxon nearly missed Guyana.

📈 THE NUMBERS

Oil prices are rising again today as things kick off in the Middle East.

🗞️ WELL-HEADLINES

 🗽 North America

• Further lengthy delay to Chevron / Hess deal - an arbitration panel will not hear Exxon and CNOOC’s claims over a Guyana pre-emption right until May 2025. "We had expected and requested that this hearing be held earlier, but the arbitrators’ common schedules did not make this possible," a Chevron spokesman said "Exxon and CNOOC continue to ignore the plain language of the operating agreement, and Chevron and Hess remain confident that the arbitration will confirm that the Stabroek ROFR does not apply to the merger."

• Texas oil pipelines nearing capacity - several major pipelines are 90% full, which risks constraining some barrels due for export if the pipelines run out of spare capacity. Some crude may have to be redirected to the Houston area to ease congestion.

• FID for new Blackcomb gas pipeline in the Permian - the much needed gas pipeline being developed by WhiteWater will transport 2.5 bcf/d of gas across 365 miles from the Permian Basin to the Agua Dulce area in South Texas.

• Texas gas prices go negative again - the Blackcomb pipeline will help to alleviate this exact issue where too much gas production (mostly associated) and not enough export capacity traps gas and pushes local prices negative. Next-day prices at the Waha hub in Permian have averaged below zero 22 times so far this year.

• BP signs $530m rig contract with Transocean - BP will pay $485k per day to charter the Deepwater Invictus drillship for three years in the US Gulf of Mexico starting in Q1 2025.

• Oil inventories keep falling - crude stocks declined by 3.4 mmbbls last week vs expectations of a 1.1 mmbbls draw. Gasoline stocks were down by 3.7 mmbbls vs expectations of a 1 mmbbls draw.

• Some earnings highlights - Hess beats estimates on strong Guyana output; high refinery localisation helps Phillips 66 top expectations; Noble profits and revenue up as it announces more contracts.

🏰 Europe

• Russian and Iran starting work on $40bn energy corridor - the plans include a direct gas transit from Russia to Iran, construction of LNG terminals in Iran, and the development of new gas fields. The mega project will effectively create a much tighter oil and gas trading alliance between Russia, Iran, and China – using local currencies rather than the US dollar…

• Trafi and Entara acquire French infrastructure - the deal with Esso includes the the Fos-sur-Mer refinery and the Toulouse and Villette-de-Vienne terminals from Esso. The value was kept under wraps.

• Some earnings highlights - Shell beats forecasts and promises more buybacks; LNG projects underpin a solid quarter for Technip.

🕌 The Middle East

• BP agrees to develop 4 Iraqi oil & gas fields - the deal signed in Baghdad involves fields in northern Kirkuk, including the the massive Kirkuk field which is estimated to contain ~9 bnbbls of recoverable oil.

• Leviathan partners approve $429m expansion - the expansion of the huge offshore Israel gas field will increase production from 12 bcmpa to 21 bcmpa.

🗿 Central & South America

• Exxon nearly ditched Guyana jackpot - the major was ready to give up on the country before a small group of geoscientists persuaded the powers that be to take a punt. What a great bet that was.

🌍 GEOPOLITICS & MACRO

• What now for Israel / Hamas peace prospects? - hopes for a peace between Israel and Hamas are fading after the Israel killed Hamas’ political leader. “How can mediation succeed when one party assassinates the negotiator on other side? Peace needs serious partners”, said the Qatari PM. Meanwhile, the US has promised to protect Israel if Iran escalates, which seems likely after Iran’s Supreme Leader ordered an attack on Israel in response.

  • The Hamas politician had been in Tehran as a guest of the president whom he had met just hours before Israel took him out. He was staying at palace provided by the Iranian government when it was hit by a missile. Iran clearly has a serious intel security problem.

💨 CARBON, CLIMATE, & OTHER ENERGY STUFF

• Wildfire smoke dims solar generation in California - I’ve heard of clouds and dust doing this but not smoke. Just as power demand hits peak too, in the hot summer months. Your regular reminder that relying on the weather for energy is a bad idea.

• Battery investments going flat - after rapid growth over the past few years, Rystad estimates that global investments in battery factories are set to decline this year due to supply shortages, rising raw material costs, and waning demand for EVs.

• LA port struggling with unreliable power - the Port of LA is feeling the consequences of California’s heavy investment into wind and solar. Companies that operate there have said that power surges and lulls are knocking out cranes and other cargo equipment, hindering efforts to phase out diesel-powered machinery.

🛢️ BOTTOM OF THE BARREL

👋 BEFORE YOU GO 

Any feedback, requests, terrible jokes? Please just ping a reply to this email and let rip. We read every word. 

Oh and if you could share us with your pals who might like a drop of us, then we’d be very happy.

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

Was this forwarded to you? Both Barrels is a concise and irreverent oil, gas, and energy briefing, delivered to you daily. It’s free to subscribe.