24th November 2023

Happy Friday girls and boys.

Here’s Both Barrels with your highlights on all things oil, gas, and energy:

• 👩 The “Bernadettes”

• ⚔️ Fighting talk from the Houthis

• 👑 King coal’s long reign

• 🇯🇵 Japan’s LNG strategic buffer

• ➕ plus Eni going big on Ivory Coast; Gunvor bails out Namibia; Santos delays Narrabi; Europe’s expensive grid upgrades.

See you all next week.

📈 THE NUMBERS

🗞️ WELL-HEADLINES

 🗽 North America

• All quiet over here while our American friends tuck into their turkey.

🏰 Europe

• ADNOC eyes up Wintershall DEA - the European energy company, which was hit hard by Russian sanctions, was put up for sale by its owner BASF earlier this year. It’s estimated to be worth ~$11bn. Harbour Energy is also rumoured to be interested.

• Looney’s “primal external activity” - an FT article has uncovered more of the backstory that led to Bernard Looney’s sudden resignation as BP CEO. Referring to his relationships with colleagues, who were known as “Bernadettes”, a former BP exec said: “This was Bernard’s primary external activity. Other people whittle or fish or restore old cars …that was not what Bernard did”. Yikes. Sounds like he was a busy man.

• Russia trolling the oil price cap - “Even unfriendly countries note that the so-called price cap has not worked. More than 99% of oil traded well above the $60/bbl ceiling”, said a Russian Energy Ministry official.

• Belarus oil storage fire extinguished - the blaze occurred at a huge underground storage facility capable of holding 220 kbbls of oil.

⛩️ Asia & Oceania

• Japan kicks off its LNG “strategic buffer” - in the same way that countries have strategic oil reserves for emergencies, Japan is developing an LNG stockpile to enhance its energy security. Today it approved its first supplier for the reserve.

• Santos delays FID on Narrabri - FID on the $2bn Australian unconventional gas project will now take place in 2025 due to “ongoing approvals uncertainty [and] regulatory delays”. The project is the subject of fierce debate over its contribution to the local economy and energy supply vs its environmental impact.

🦁 Africa

• Eni’s $10bn Ivory Coast investment - this is how much the development of the offshore Baleine field will cost. The field, which was discovered in 2021 and is already producing, has estimated reserves of 2.5 bnbbls of oil and is set to reach production of 200 kb/d by 2027.

• Gunvor bails out Namibia’s NOC - Namcor has been facing “significant cash flow challenges” and Gunvor has stepped in to provide finance. In return, the trader will presumably receive oil at bargain prices. This is how traders accumulate so much power and wealth: by dealing with distressed producers when no one else will.

• Shell to face trial over Nigerian oil spills - a UK court has ruled that thousands of Nigerians can sue Shell for breaching their right to a clean environment following various oil spills in the country. Shell denies the claims and blames oil theft for the majority of the spills.

• Egypt to restart LNG exports - exports had been suspended for months due to high domestic demand and a lack of gas from Israel but both issues have now subsided.

🗿 Central & South America

• Petrobras confirms big spending plans - the Brazilian giant will invest $102bn over the next five years, a 31% increase from the last five. Roughly 75% of that capex is earmarked for E&P, ~17% for mid and downstream, and the remainder on low carbon projects. There’s a new energy superpower on the block.

🌍 GEOPOLITICS & MACRO

• Fighting talk from the Houthis - after seizing a ship in the Red Sea, the militant group has warned that any vessel belonging to Israel or its allies is a “legitimate target” if it crosses through the vital Bab al-Mandab straight which links the Arabian Sea to the Suez Canal. Messing with this shipping route would incur the wrath of the most powerful countries on earth….

• OPEC+ negotiations ongoing - disagreement over Angola and Nigeria’s production quotas are due to uncertainties over how much they are currently producing. OPEC has asked three independent consultancies - IHS, Rystad and Wood Mackenzie - to verify these countries’ production figures and report them at the next meeting on November 30th. Meanwhile, Angola has quashed rumors that it was considering leaving the group.

• Even Saudi needs to borrow sometimes - the kingdom has raised $11bn from a group of banks to help fund a budget deficit which it expects to last until at least 2026. It’s not that surprising given the eye-watering spending spree Saudi is going on as part of its Vision 2030 diversification strategy.

💨 CARBON, CLIMATE, & OTHER ENERGY STUFF

• The EU’s €584bn grid upgrade - the proposal is due to be announced next week and is to ensure the grid is capable of handling the influx of intermittent “renewable” energy sources. In particular, it will boost cross-border grid connections to help balance supply and demand across countries. Transmission costs are one of the three major hidden costs of wind and solar power (alongside back-up and curtailment) that will find their way onto your utility bill.

• India’s 80GW of new coal capacity - the country’s power minister made it very clear: “India needs 24x7 power supply for growth and we are not going to compromise on its availability…This power cannot be achieved by renewable energy alone. Since nuclear cannot be added at a rapid pace, we need to add coal-based capacity.” For context, India’s current coal capacity is 206GW, Europe’s is 190GW. Coal isn’t going anywhere anytime soon.

🛢️ BOTTOM OF THE BARREL

Coal is the dirtiest of hydrocarbons and by far the largest source of global CO2 emissions.

But it is also the most affordable of reliable energy sources. Which is why it has dominated the global energy mix for so long, earning the title “king coal”.

For all the talk of net-zero in Boston and Brussels, coal is still the preferred fuel for economic development in most of the developing world, as India reminded us today.

Far from closing down coal plants, Asia continues to build them apace. And, once built, they tend to last for ~40 years, thereby locking in that coal demand and those emissions for decades.

India has 58 new coal power plants in the pipeline, and China has a staggering 326 on the way.

King coal’s reign is far from over.

👋 BEFORE YOU GO 

Any feedback, requests, terrible jokes? Please click the poll above or just ping a reply to this email and let rip.

We read every word. 

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