25th October 2023

Hello, hello, welcome back to Both Barrels. Here’s what hit the wires today in all things oil, gas, and energy:

• 🤑 The largest O&G deals of the 21st C

• ⚡ Maslow and energy

• 🔎 Baltic mystery solved

• 🤯 A geologist’s wet dream

• ➕ plus more Trans Mountain problems, EV battery breakthrough?, Singapore’s second LNG terminal

📈 THE NUMBERS

🗞️ WELL-HEADLINES

 🗽 North America

• Yet another set back for Trans Mountain - the most cursed pipeline project in the world may run out of money before construction is finished. The Canadian government won’t invest any more into the project and so it may need to find external financing to finish the job. The long-delayed, 590 kb/d, $22bn oil pipeline is due to start operations in Q1 2024. Don’t hold your breath.

• Large draw in gasoline stocks - the API’s weekly report shows a 4.1 mmbbls fall in gasoline stocks last week. Crude inventories declined by 2.7 mmbbls.

🏰 Europe

• Baltic mystery solved - it looks like it wasn’t sabotage after all. Finland believes that its gas pipeline was damaged by the dragging anchor of a large Chinese freight ship. The broken anchor was found next to the damaged pipeline and the ship has since been spotted one anchor light. Ooops.

• Another suspicious death in Russia - the chairman of Lukoil, Russia’s second largest energy company, has died suddenly from a “heart attack”. Sure. His late predecessor supposedly fell from a window in 2022, joining a long list of Russian businessmen who’ve perished in strange circumstances since Russia’s invasion of Ukraine last year.

• EU on track for ditching Russian energy - a report by the EC has said that by 2027, the EU won’t be importing any energy from Russia. Not directly at least: it’s very likely the EU will continue to import Russian energy indirectly via third party countries, as is already happening today.

⛩️ Asia & Oceania

• CNOOC’s record high capex - the Chinese NOC clearly didn’t get the IEA’s memo about peak demand and is investing more than ever this year in new oil & gas production.

• Singapore’s second LNG import terminal - SLNG has announced plans for a second LNG facility with 5 mtpa of capacity to be up and running by 2030.

• Streamlining Chinese refineries - in an attempt to get its sprawling refinery sector under control, China is capping its total refining capacity to 1 billion tonnes per year in 2025 from ~920 mtpa today. The government will promote optimization of refineries, accelerate the closure of small and outdated plants, and restrict the building of new ones. Roughly one third of Chinese refining capacity are “teapot” refiners, i.e. small, independent facilities.

• Japan extends fuel subsidies - discounts on domestic fuel will last until at least spring as the government seeks to tackle inflation and soften the impact of high energy prices for consumers. Japan has set aside $41bn to cover these subsides in 2022 and 2023.

🦁 Africa

• Ghana, anyone? - the West African nation is on a drive to increase foreign investment into its oil sector and will soon be marketing more licences. Ghana, which is in the midst of an economic crisis with mass unemployment and high cost of living, currently produces ~ 170 kb/d of oil.

• South Sudan seeking China’s help - the government has asked CNPC to increase oil production from two of its biggest fields and has promised a licence extension. Previously, South Sudan had wanted its NOC to take over some major oil assets but it seems its priorities have shifted.

🌍 GEOPOLITICS & MACRO

• “Iranian fingerprints all over it.” - the Pentagon is blaming Iran for a spate of drone attacks on US military bases across Iraq and Syria in the past two weeks that have injured over twenty US troops. Tensions in the Middle East have been running high amid the Hamas / Israel conflict.

• World cannot ‘unplug’ from oil - speaking at Future Investment Initiative conference, Aramco and Total’s CEOs discussed the importance of continued investment into oil and gas to meet the huge needs of the developing world. They commented that affordability and security of energy are a higher priority than emissions for many consumers. Precisely, it’s Maslow’s hierarchy of needs. No one cares about climate if they can’t afford to eat or heat their homes.

💨 CARBON, CLIMATE, & OTHER ENERGY STUFF

• EV growth stalling - General Motors is abandoning its EV targets citing slowing demand; last week Tesla lost $100bn in value when CEO Elon Musk also warned about waning consumer appetite; battery maker LG’s share price fell by 9% today after it said high interest rates and slow economic growth mean “EV demand next year could be lower than expectations”.

• Battery breakthrough? - Toyota believes it has cracked two key hurdles to mass EV adoption: battery range and charging time. Toyota says its new solid state battery will offer a 745-mile range and only take 10 minutes to charge. We’ve heard many “game changing” battery claims before so the proof, as they say, will be in the pudding.

🛢️ BOTTOM OF THE BARREL

Merger mania is spreading across the oil & gas sector as IOCs with deep pockets and high share prices look to buy their way into more barrels.

Let’s take a little trip down memory lane and have a look at some of the mega deals since the turn of the century.

Forgive me, as a former oil & gas M&A advisor, this stuff gets my heart racing:

Which do you think were the most / least savvy?

Shell / BG scoops the prize for me for locking in a world class portfolio of long term LNG at a time when everyone else was panicking as the O&G market was falling off a cliff in 2014/15.

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