21st September 2023

Rise and shine. This is Both Barrels. Your daily dose of all things oil, gas, and energy, without the hot air.

Here’s what hit the wires today:

•  🇸🇦 MBS sits down with Fox News

• 💰 Investors hungry for O&G IPOs

• ⚡ Bloomberg hates baseload

plus a lot more. Let’s get to it…

📈 THE NUMBERS

🗞️ WELL-HEADLINES

 🗽 North America

• Ron’s energy agenda - $2 gasoline, “energy dominance”, expanded domestic O&G output. These were some of the promises made by presidential hopeful DeSantis in a speech in Texas where he outlined his plans for US energy. Many of Biden’s environmental regulations would also be repealed.

• Swimming in natgas - analysts forecast that a mild winter could push US nat gas prices below $2/mmBtu. Inventories are near a 5-year high and production is due to reach new record highs of 103 bcf/d by the end of this year. The US LNG sector is racing to unlock these volumes into global markets.

• Canadian CCS demands gov support - oil producers proposing a $12.3bn carbon capture project in Alberta have said they will only move forward with the project if the government guarantees them a fixed (undisclosed) price for the carbon. The high operating costs of the project mean such a contract is essential, they argue.

• Crude stocks keep falling - the EIA reported that US crude stocks fell by 2.1 mmbbls last week, more or less in line with expectations. Gasoline inventories were down by 0.8 mmbbls.

🏰 Europe

• Outage at Shell’s Pernis refinery - a gas leak at Europe’s largest refinery in the Netherlands has caused a partial shutdown of the facility. The impact on output is unlikely to be major, but the timing isn’t great given the tightness of global diesel markets.

• Stable Russian production - Russia expects its oil output this year to average 10.6 mmb/d, a slight decline from 10.7 mmb/d last year; unsurprising given the OPEC+ cuts. Gas output is on target for 642 bcmpa, compared with 673 bcmpa last year.

• Velocette disappoints - one of Norway’s hottest exploration prospects this year failed to strike it lucky.

• Where’s my gas? - Repsol is the latest European energy company to take Venture Global LNG to court over undelivered LNG cargoes.

🕌 The Middle East

• ADES’s mega IPO appeal - Saudi driller ADES has received orders of $77bn for its upcoming IPO where it was looking to raise just $1.2bn. The huge order book demonstrates the appetite among institutional investors for the oil & gas sector.

• Iraq output surging - Iraq’s crude production hit 4.71 mmb/d in August, up from 4.56 mmb/d in July as fields in the Kurdistan Region of Iraq ramped up, despite the continued closure of the KRI’s main oil export pipeline through Turkey.

⛩️ Asia

• China thirsty for gas - CNOOC expects Chinese gas demand to grow by 8% this year to 396 bcmpa and peak at 700 bcmpa in 2040. This demand will be met by increases in both LNG and piped gas imports (mainly from Russia via the Power of Siberia pipelines).

📍Everywhere else

• KUFPEC farms into Block 3 - KUFPEC is acquiring a 40% stake in Shell’s offshore Egypt Block 3 for an undisclosed amount. Exploration activity in the area started this summer.

🌍 GEOPOLITICS & MACRO

• A chat with MBS - Saudi crown prince MBS had a rare interview with Fox News, here are some of the highlights:

  • Efforts to normalize ties with Israel are getting closer

  • Saudi will get a nuclear bomb if Iran gets one

  • OPEC+ plus policy does’t aim to help Russia, it’s about balancing fundamentals

  • Saudi has good ties with both Russia and Ukraine and wants to see an end to the war

  • Saudi tried to join G7 but couldn’t so is joining BRICS instead

• Nord Stream 2, whodunnit? - Swedish investigators looking into the sabotage of the NS2 gas pipeline will decide by the end of the year whether they’ll bring charges against anyone. Don’t hold your breath. It’s unlikely we’ll ever find out the true culprit but only one country has openly threatened to “bring an end” to the project…

• The Fed leaves rates unchanged - the US central bank has chosen not to raise interest rates further, but warned that any easing of monetary policy would be cautious and slow. “People hate inflation. Hate it.” said Fed Chair Jerome Powell. You’re not wrong Jerome…but if you want to get inflation under control, you need to get energy prices under control.

• Big bets on oil - Speculators are helping drive up oil prices as hedge fund net-long positions in Brent and WTI reach an 18-month high.

💨 CARBON, CLIMATE, & OTHER ENERGY STUFF

• Japan’s nuclear 360° - Japan’s leading utility has restarted its seventh and final nuclear power reactor that was shut down following the Fukushima disaster in 2011. Take note Germany.

• Bloomberg hates baseload - Michael Bloomberg is pumping another $500m into his Beyond Carbon initiative, with the money directed at closing all US coal plants and cutting gas-fired capacity by half by 2030. One more time for those at the back: you cannot replace reliable baseload power generation with intermittent diffuse energy sources and not expect to suffer.

• Uranium just getting started? - uranium prices are forecast to continue their rally and hit $75-$80/lbs by the end of the year. "We see prices rising year-on-year for next 10-20 years or till the world finds another source for large scale un-interruptible baseload power with a low carbon footprint", said an analyst at SP Angel.

• Europe’s decrepit grid - annual investments into Europe’s power grid need to be double what they are this year, every year, until 2050, to facilitate widespread electrification and hit net-zero goals. That’s ~$600bn per year. Unlikely then.
  

🛢️ BOTTOM OF THE BARREL

Are you THIS obsessed with your job?

Some musings on Bloomberg

While we admire and agree with Mr Bloomberg’s determination to phase out coal, his opposition to gas is misguided and dangerous.

Why? Because the most effective way to get rid of the former is with the latter.

The US itself, along with the UK, has made remarkable reductions in its CO2 emissions over the past decade through a coal to gas switch in power generation.

These gains could be replicated elsewhere around the world if gas prices are kept low enough and long term, stable production is encouraged. But opposing gas will push up its price and force a retreat to coal, as was clear for all to see last winter.

Not to mention the fact that you cannot replace baseload power (coal and gas), with intermittent wind and solar, without putting huge amounts of stress on the grid and risking blackouts.

If Bloomberg gets his way, I’d make sure my home generator is working…

👋 BEFORE YOU GO 

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