23rd January 2024

Good morning. This is Both Barrels with your daily dose of all things oil, gas, and energy. Here’s what hit the wires today:

• 📈 Brent bounces as Britain bombs

• ⏫ Fuel tanker rates surge

• 🐢 The tortoise and the hare

• 🇩🇪 Germany’s meeting with reality

• ➕ plus record gas output in Norway; YPF privatization cancelled; North Sea exits incoming; Sunoco acquires NuStar.

Let’s take a look…

📈 THE NUMBERS

Oil bulls will be feeling a little happier as Brent briefly touched $80/bbl (before retreating this morning) amid heightened tensions in the Middle East.

🗞️ WELL-HEADLINES

 🗽 North America

• Sunoco acquires NuStar for $7.3bn - the US gas station owner is diversifying its business by buying the pipeline and fuel storage company in an all stock deal. NuStar’s assets include 9,500 miles of pipelines and 63 terminals across the the US. Shares of Sunoco fell by ~5% on the news, while NuStar was up ~17%.

• Plenty of interest in Citgo Petroleum auction - a court-ordered auction of the Venezuela-owned company has attracted dozens of interested parties. The auction of Citgo, which is the seventh largest refiner in the US with total capacity over 800 kb/d, is being held to help creditors recoup $23bn of debt owed by Venezuela.

• Restart imminent at Total’s Port Arthur refinery - the 238 kb/d facility in Texas has been down for a week, but water supply to the refinery has now been restored, paving the way for a restart to operations. Water supply is critical as steam is required in the refining process.

🏰 Europe

• More North Sea exits imminent - consultancy Wood Mackenzie expects more O&G companies to say goodbye to the North Sea this year as international players shed non-core assets and private equity looks to monetize its investments. CNOOC, Exxon, Dana, Apache and various PE backed firms like NEO and Sval are highlighted as possible exit candidates.

• Equinor’s clandestine capital markets day - in a sign of the times Equinor is keeping the details of its annual shindig in London a secret to reduce the risk of disruption by protesters with nothing better to do.

• Norway’s gas output hits record high - European customers will be pleased to hear that the continent’s major gas supplier reached an all time high gas production of ~138 bcmpa in December. There’s plenty of life in the North Sea yet.

🕌 The Middle East

• Saudi dishes out some mega contracts - Aramco has awarded two contracts worth $3.3bn to a JV of Spain’s Tecnicas Reunidas and China’s Sinopec Engineering for work on its giant 510 kb/d Riyas NGL facility. Not bad work if you can get it.

⛩️ Asia & Oceania

• No luck with key Indian exploration well - a JV between Reliance and BP has drilled a dry well at Block KG UDW1 in the Krishna Godavari basin. The region is home to several producing fields but this well will now be plugged and abandoned.

🗿 Central & South America

• YPF privatization off the cards - the proposal to privatize Argentina’s state-run oil company has been removed from new president Javier Milei’s raft of sweeping reforms. It appears he shelved the plan as a concession to push his other changes through Congress.

• Petrobras eyeing up wind and solar investments - the company wants to “reign alone” in Brazil’s domestic wind and solar market and has said it will be buying various stakes in renewable projects to build a 2GW portfolio. It’s a bold bet at a time when many other O&G players are moderating their wind and solar plans to focus on profitability.

• Not all plain sailing in Guyana - Total and Qatar Energy have exited the Orinduik exploration block, offshore Guyana, leaving minnow Eco Atlantic on its own.

🌍 GEOPOLITICS & MACRO

• Tensions rise further in the Middle East - the US and UK have launched a second round of joint airstrikes at Houthi targets in Yemen, while the head of the US Navy in the region has said Iran “is very directly involved” in the attacks in the Red Sea. Meanwhile, the US confirmed two Navy SEALs died while trying to board a ship containing Iranian weapons bound for the Houthis.

• Fuel tanker day rates are surging - the cost of shipping a cargo of gasoline from Europe to the US East Coast has almost tripled since the start of this year, reaching $38,000 / day. A key driver is the disruption in the Red Sea which is forcing tankers to take longer journeys around South Africa, meaning there’s a shortage of available ships on the spot market.

💨 CARBON, CLIMATE, & OTHER ENERGY STUFF

• Germany’s gas ambitions - the German government is set to agree on a much-anticipated roadmap to build several new gas-fired power stations at a cost of $44bn. Having shut down its nuclear plants, and while trying to phase out coal, Germany has finally realized that baseload power supply is actually quite important and that relying on intermittent wind and solar is really bad idea.

• Saudi “supercharging” the growth of electric motorsport - the kingdom’s Public Investment Fund is partnering with Formula E, Extreme E and E1 powerboat racing as part of its push into broader energy technologies and sport. They’re buying the world…

🛢️ BOTTOM OF THE BARREL

The tortoise and the hare

Everyone knows this story.

Apart from the anti-nuclear crowd.

They’ll keep telling you that nuclear is too slow, we don’t have time, blah blah blah.

They’ve been saying it for decades. We shouldn’t have listened to them then, and we shouldn’t listen to them now.

Yes, it takes a lot longer to build a nuclear plant than a solar farm, but when the former comes onstream it brings with it a giant wave of solid 24/7 power for 80 years.

In contrast, wind and solar bring drips and drabs of weather-dependent electricity and need to be rebuilt in 20 years. Just like the hare, they are unreliable and regularly stop to take naps.

The UAE has demonstrated the art of the possible. It deployed some long term thinking and is now reaping the rewards as its new nuclear power stations come onstream to transform its economy.

Be more like the UAE.

👋 BEFORE YOU GO 

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