21st February 2024

Hello hello ladies and gents,

• 💸 “Much more expensive than people imagine”

• 🛍️ Oxy’s $20bn sale

• 🇪🇺 Europe’s tumbling gas demand

• 🤡 Your favourite JSO name

• ➕ plus Germany in recession; crude tanker costs triple; Panama issues easing; Boeing bemoans lack of SAF.

Let’s dive in…

📈 THE NUMBERS

🗞️ WELL-HEADLINES

 🗽 North America

• Oxy considering $20bn divestment - the company is rumoured to be selling natural gas pipeline operator Western Midstream Partners. A sale would help Oxy reduce its debt following a spending spree than included the $55bn takeover of Anadarko in 2019 and the $12bn purchase of CrownRock earlier this year.

• Some earnings highlights: Chesapeake beats profits and eases growth plans for 2024; “value over volumes” for Diamondback after surpassing expectations; Santos’ profits fall on lower production.

🏰 Europe

• Europe’s tumbling gas demand - gas demand in the EU hit a 10 year low in 2023, 20% lower than before the invasion of Ukraine. High gas prices, declining demand amid de-industrialization, and wind and solar expansion are responsible for the sharp fall. As we’ve frequently written about, waning energy demand in Europe is a very ominous sign of economic malaise.

• Norway the big winner - its gas exports to Europe are set to hit a new record this year as the country fills the supply gap left by excluded Russian gas. Rich Norwegians are getting even richer.

• Russia loses $50bn Yukos payout appeal - a court in Amsterdam rejected Russia’s final argument against a ruling that ordered it to pay $50bn to the former shareholders of Yukos for deliberately bankrupting Russia’s biggest oil firm in the early 2000s. Will anyone of those shareholders ever see that cash? Doubt it.

🕌 The Middle East

• ADNOC kicking off Upper Zakhum expansion - the UAE is aiming to expand production from Upper Zakhum, the world’s second largest offshore oilfield, to 1.2 mmb/d by 2027 from ~ 1 mmb/d today. There’ll be some juicy contracts in there for the OFS sector.

🦁 Africa

• Ghana nearly ready for LNG imports - the west African nation will shortly join the growing club of LNG importers when its long delayed import terminal is finally completed by the end of this year. All of Ghana’s gas imports currently come via pipeline from Nigeria but supply has been unreliable.

• Perenco spinning the drill bit in Gabon - the company is targeting 20-100 mmbbls of in-place resources with an appraisal well at the “highly promising” offshore Hylia South West field.

🗿 Central & South America

• Panama Canal issues easing - US cargoes through the canal increased in January, suggesting that the drought-induced restrictions on vessels passing through the canal are beginning to be unwound.

🌍 GEOPOLITICS & MACRO

• Germany in recession - Bundesbank has said that Europe’s largest economy is likely in a technical recession as it expects output to decline in Q1 24, following a fall in Q4 23. (Two consecutive quarterly declines in GDP constitute a recession). Germany is paying the price for moronic energy policy that has driven up costs and hammered its industrial base. And there’s no end in sight.

• Crude tanker costs triple - the day rate for very large crude carriers (VLCCs) is currently ~$66,000 thanks to the impact of the Houthi attacks in the Red Sea that are driving up insurance costs and reducing the supply of vessels (because they now have to take longer journeys). In Q4 last year, the price was averaging ~$21,000/d.

💨 CARBON, CLIMATE, & OTHER ENERGY STUFF

• “Net-zero much more expensive than people imagine” - this is the warning given by the former chief economist at the IMF to UK lawmakers. “The public does not believe, or has not been made to understand, that is going to be costly for them. It is going to be costly and that message has to be sent out.”, he said. All that stuff about net-zero paying for itself and providing cheap energy? You’ve been lied to.

• Boeing moans about lack of SAF - the airplane manufacturer has accused oil companies of not doing enough to produce sustainable aviation fuel. This is a free market. If you want something, contractually agree to purchase enough of it at an attractive price and it will get made. SAF is generally in short supply anyway because it’s made from used cooking oils and waste animal fat, and there aren’t the systems and infrastructure currently in place to collect much of those feedstocks.

🛢️ BOTTOM OF THE BARREL

🤣🤣🤣🤣

👋 BEFORE YOU GO 

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