25th January 2024

Here’s what we’ve got for you today, dear reader:

• 🤡 Biden buckles to anti-LNG pressure

• 😬 Iran “a legitimate target”

• 🚗 Toyota’s EV skepticism

• ❌ Energy ≠ electricity

• ➕ plus Baker Hughes sees US slowdown; Australia’s E&P demise; IEA’s electricity report; finally some good news at Trans Mountain; more Russian energy getting whacked.

Let’s go.

📈 THE NUMBERS

Oil prices found more support following yesterday’s large draw in US crude inventories.

🗞️ WELL-HEADLINES

 🗽 North America

• Biden pausing new LNG approvals - the US administration has caved to pressure from those wanting to derail global energy security and announced that it’s reviewing environmental criteria for approving new LNG projects. Note that nearly all projects that have reached FID and are set to start over the next few years already have this approval and so are safe but it could impact up to 17 proposed LNG plants. Guess who’ll be delighted at this news? Vladimir Putin and coal exporters.

• Baker Hughes sees a slowdown in US activity this year - “In North America, activity continues to lag, and we are now anticipating no meaningful recovery in activity during the first half of the year”, the CEO commented. He cited lower and volatile oil prices for the slowdown. More evidence that the US shale gravy train may be running out of steam.

• Big swings in EIA stock data - the EIA showed a huge draw in crude stocks of ~9.2 mmbbls, and a big build in gasoline stocks of 4.9 mmbbls. A reminder that the cold weather has contributed to this volatile data: domestic oil production plummeted in the big freeze while gasoline demand fell off massively as travel is reduced.

• Canadian crude rallies on imminent Trans Mountain start - the long awaited crude export pipeline from Alberta will begin filling with oil next month and load its first tanker in April. The delay to the 590 kb/d pipeline has put pressure on crude prices in Alberta as producers ramped up production before export capacity was available.

⛩️ Asia & Oceania

• Australian exploration “non existent” - the country has long been a major gas producer but its long term prospects are declining as it stifles new exploration through unfavorable regulation and the lack of acreage offerings in new licencing rounds. Go woke, go broke.

• Malaysia dishes out new production contracts - six exploration blocks and one discovered resource were awarded to several companies including to Petronas Carigali, Shell, Inpex, and others, in what has been seen as a strong vote of confidence in the country’s O&G sector.

🗿 Central & South America

• SLB recovers $560m debt from Pemex - no mean feat given Pemex’s eye watering debt levels. Pemex still owes SLB another $450m, and has total debt of ~$105bn. Pemex’s debt pile with oil service providers and private oil and gas producers may soon threaten production and investment levels in a country that’s already grappling with declining O&G output.

🌍 GEOPOLITICS & MACRO

• Iran is a “legitimate target” for Israel - said a senior Israeli minister in a combative interview with The Daily Telegraph. “They will not get away with it. The head of the snake is Tehran…We should very very clearly make sure the Iranians understand that they will not get away with using proxies against Israel and sleep good at night if we don’t sleep good at night”. This minister is expected to soon become head of the ruling Likud party. Gulp.

• More Russian energy sites getting whacked - this time it was a Rosneft-owned oil refinery in south Russia that got hit by a Ukrainian drone attack. It caused a fire that has now, sadly, been extinguished. Ukraine said it would continue to attack “facilities which are not only important for the Russian economy, but also provide fuel for the enemy troops”.

💨 CARBON, CLIMATE, & OTHER ENERGY STUFF

• Toyota chairman’s EV skepticism - the chairman of the major car manufacturer said that recent signs of slowing EV adoption proved that people are “finally seeing reality” and he predicted that EV penetration will peak at just 30%. He believes that hybrid and hydrogen vehicles will make up the rest.

• Powering up - the IEA’s 2024 electricity report dropped yesterday. Here are some highlights:

  • Most of the increase in power demand over the next few years will be met by wind and solar, with a contribution from nuclear.

  • Power demand growth unsurprisingly driven by China and the rest of Asia.

  • Europe is paying through the nose for its power compared with China and Asia.

  • Demand from data centers and AI is surging. In Ireland, by 2026, it’s estimated that data centers will constitute 1/3 of the country’s total power demand!

• Coal to gas driving US emissions reduction - US CO2 emissions declined by 1.9% in 2023, largely driven by replacing coal with natural gas in power generation, according to research firm Rhodium Group. A reminder that a coal to gas switch is the single most effective tool we have for global large scale emissions reductions.

🛢️ BOTTOM OF THE BARREL

A favourite sleight-of-hand of the wind and solar lobby is to deliberately, or ignorantly, conflate energy with electricity.

You’ll see headlines and soundbites like these all over the place:

The uninitiated reader gets the impression that “renewables” are ready and capable to displace hydrocarbons. That it’s possible to run our entire energy system on renewables.

If only the greedy fossil fuel industry would stop being so evil and get out of the way.

The reality, as you well know, is very different.

Electricity today provides just ~20% of our final energy demand. The remainder is met by burning hydrocarbons directly in engines, homes, and factories.

This means that, as it stands, wind and solar, could provide a theoretical maximum of 20% of our energy needs.

Of course, more of the energy mix is slowly getting electrified but this will take a long long time, if ever, especially for parts of the the economy like heavy transport, shipping, aviation, and heavy industry where electric energy isn’t a viable alternative.

What I’m trying to say is that wind and solar are not substitutes for hydrocarbons for the lion’s share of our energy needs.

Electricity ≠ energy.

👋 BEFORE YOU GO 

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