24th October 2023

Good morning crew.

Here’s Both Barrels, your daily dose of all things oil, gas, and energy, without the hot air. Today’s highlights:

• 🔀 Diverging paths of US and European majors

• 🤞 Putin heart attack?

• 🎉 Hess’s toy trucks to live on

• 📊 IEA’s latest World Energy Outlook

• ➕ plus Hyundai’s Jafurah contract, Mexico restricts fuel imports, Sonatrach’s planting 420m trees

📈 THE NUMBERS

🗞️ WELL-HEADLINES

 🗽 North America

• Hess’ toy trucks to live on - after yesterday’s announcement that Chevron was snapping up Hess, there was one question on everyone’s lips: will Hess keep making their famous toy trucks? You’ll be pleased to hear the answer is “yes”. And some other less important highlights from the deal:

  • Chevron will add ~380 kboe/d to its production mainly in the Bakken, Guyana, Gulf of Mexico, and Guyana.

  • Hess’ crown jewels position in Guyana includes >3bnboe of resources.

  • Chevron expects $1bn in annual synergies.

  • John Hess will join Chevron’s board.

  • “Both US Majors have evidently decided that (even) bigger is better. Meanwhile, two of the largest and highest quality Independents have decided their future is not independent." Wood Mackenzie.

🏰 Europe

• Equinor bites dust at Njord field - the exploration well at the Norwegian Sea prospect will be plugged and abandoned.

🕌 The Middle East

• Hyundai lands $2.4bn Aramco contract - the South Korean conglomerate will build a gas processing plant at Saudi’s giant Jafurah project. The field is Saudi's largest unconventional gas field, with reserves estimated at 200 tcf of raw gas. The development of the field is expected to cost an eye-watering $110bn in total.

• Oman extends LNG sales - Oman LNG signed various 10-year LNG supply deals with buyers including Shell and Total to replace deals that are expiring next year. Oman LNG has a capacity of 10.4 mtpa.

⛩️ Asia & Oceania

• Underwater art? - Santos’ $3.6 billion Barossa gas project off northern Australia is facing delays as an indigenous group is trying to block construction of the pipeline from the project, claiming the route crosses underwater ancient burial grounds, aboriginal art, and other sacred ancestral sites.

🦁 Africa

• Nigeria dodges $11bn bullet - a London court has ruled in Nigeria’s favour and overturned an order to pay $11bn in damages to private company P&IG for a failed gas project. The sum is equivalent to 10x the country’s annual health budget and a third of its forex reserves. In passing his verdict, the judge rebuked P&IG lawyers for greed, one of whom was set to bag $3bn if they’d won the case!

• Sonatrach’s tree planting plans - the Algerian NOC is planning to invest $1bn in tree planting as a form of natural carbon capture. The initiative will involve planting 420 million trees in 10 years.

🗿 Central & South America

• Petrobras dividends under threat - shares in Brazil’s NOC fell by ~5% yesterday after it proposed changes that could reduce how much it pays in dividends and how it appoints senior management. The gov’t wants Petrobras to invest more into refining and renewables, rather than pay dividends.

• Mexico restricts imports of various fuels - in an attempt to combat black market trading and fuel theft, Mexico has banned the import of various fuels and petchems. The decree includes jet fuel as well as certain non-conventional types of gasoline and diesel.

• Oil-backed debt in Suriname - the country is offering to exchange $675m in bonds due in 2023 and 2026 for new 10-year oil-backed debt.

• More gas in Colombia - Shell and Ecopetrol have made another gas discovery at a promising offshore gas play in Colombia.

🌍 GEOPOLITICS & MACRO

• Putin heart attack? - some media outlets are reporting that Russian President Putin suffered a heart attack on the weekend and was found “lying on the floor, rolling his eyes” but has since regained consciousness. Putin’s health has been the subject of plenty of unfounded speculation in the past so don’t get your hopes up just yet.

💨 CARBON, CLIMATE, & OTHER ENERGY STUFF

• Peak hydrocarbons before 2030? - in its latest annual World Energy Outlook, the hydrocarbon perma-bears at the IEA have forecast that oil, gas, and coal demand will peak this decade, under all scenarios. The agency cites EVs, slowing growth in China, and solar expansion as the main drivers behind hydrocarbon demand plateauing. As Chevron CEO Mike Worth said yesterday, these forecasts don’t “live in the real world”.

🛢️ BOTTOM OF THE BARREL

The divergence in climate strategies between US majors and their European counterparts has been stark in recent years.

Seemingly unphased by public pressure (or perhaps it’s less intense in the US?), Chevron and Exxon have been investing heavily in their core oil and gas businesses both at home and abroad, confident about the long term prospects for hydrocarbons.

Across the pond, it’s been a very different story.

BP, Shell, and Total, have caved to the ESG narrative and have been pouring capex into wind, solar, and other low carbon initiatives. Some even targeted declining oil & gas production. (Granted, they’ve backpedaled on this over the past ~12 months after realizing it wasn’t good for returns).

The two US mega mergers of the past weeks mark a further widening of this yawning gap.

Exxon and Chevron have made it very clear where they’re placing their long term bets.

Your move, Shell.

👋 BEFORE YOU GO 

Spread the word. If you like this, please do us a solid and forward Both Barrels to your colleagues, drinking buddies, lovers. They can join the crew for free here:

Tell it to us straight. Got any feedback, requests, terrible jokes? Please just ping a reply to this email and let rip.

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