25th September 2023

Happy Monday Both Barrels crew. Trust you had a good one.

Here’s what hit the wires over the weekend:

• 👎 G7’s Russia oil price cap ain’t working

• 🤡 EU’s gas madness

• ☭ Comrade Macron

• 🧱 Lego’s oil-free hopes meet reality

Let’s dive in…

📈 THE NUMBERS

Volatility in European gas prices continues with TTF jumping 7% as traders weigh up the risk of supply shortages.

🗞️ WELL-HEADLINES

 🗽 North America

• Regs threaten domestic production - a group of US energy groups have urged the government to ease regulations for O&G leasing on public lands. “Overreaching land management regulations place our domestic energy supply at risk…oil and natural gas production on public lands is a crucial part of the nation’s program for energy security and economic strength”, they said.

• US rig count still falling - the number of oil rigs in the US fell by 8 last week to 507, hitting a new 18-month low. Gas rigs fell by 3. Despite high oil prices, the rig count is still a way off previous peaks as producers focus on cost discipline rather than output growth.

🏰 Europe

• G7’s Russia oil price cap flops - in a surprise to almost noone, three-quarters of Russian seaborne crude exports dodged the G7 price cap in August, selling near market prices. With rising oil prices and this evasion of the cap, Moscow is cashing in.

• EU hooked on US LNG - EU’s top energy official has said that the EU will be dependent on US LNG for decades to come. She’s right, and it’s madness. Europe has an abundance of natural gas but refuses to give fracking a go, discourages new investment, and has shut down the mega Groningen field. Instead, Europe will import gas and make everyone else richer, but at least it will be better for the environment, right?…Right?

• Command and control in France - President Macron will be asking O&G companies to sell diesel and gasoline to consumers at cost price to help dampen rising prices. Emmanuel, the cure to high prices is high prices. If you want lower prices, encourage more supply, don’t take away the suppliers’ profits.

• Total leaving Laggan - the major is looking to sell its remaining interest in the Greater Laggan Area in the UK North Sea.

• Russia adjusts fuel export ban - high sulphur diesel and heavy oil for bunkering will be excluded from the restriction. The ban on all types of gasoline and high-quality diesel remains in place.

🕌 The Middle East

• Heydays in Abu Dhabi - EPC activity in Abu Dhabi has hit record highs as ADNOC makes the most of high oil prices and pushes ahead with plans to expand its oil production capacity to 5 mmb/d by 2027, from ~4.5 mmb/d today.

• Qatari gas selling like hot cakes - Qatar is having no trouble locking in long term LNG contracts for its North Field expansion, according to its energy minister. The country is raising its LNG production capacity from 77 mtpa currently to 126 mtpa by 2027. It’s gonna be a good few decades for gas producers.

⛩️ Asia

• New oil in the South China Sea - South Korea’s SK Innovation and CNOOC have started production from an offshore field in the contentious South China Sea. The Lufeng field is due to hit peak production of ~30 kb/d. There’s an estimated 20 bnbbls of oil and 350 tcf in the South China Sea, about one-fifth of which lies in disputed areas.

📍Everywhere else

• The West leaves, China steps in - China is providing the financing for an oil pipeline from Uganda to the coast of Tanzania coast after Western banks pulled out due to environmental pressure. I’m sure it’s much better for the environment that the pipeline is now under Chinese rather than Western control…

• Egypt launches latest bidding round - 23 exploration blocks are on offer in the Western Desert, the Eastern Desert, the Gulf of Suez, and the Red Sea.

🌍 GEOPOLITICS & MACRO 

• Au revoir, Niger - France has had thousands of troops in the country to help combat jihadists in the Sahel region but is leaving Niger following a military coup earlier this year. It’s the latest step in a trend of France reducing its presence in former African colonies after it also withdrew from Mali and Burkino Faso in recent years.

• JPM calls crude at $150 - a senior analyst at JP Morgan has warned that oil could hit $150/bbl by 2026 due to a lack of investment in new supply. “Put your seatbelts on. It’s going to be a very volatile supercycle”, he said. Over here we think ample OPEC+ spare capacity will be enough to meet demand for the next few years, but agree that the market is certainly vulnerable.

💨 CARBON, CLIMATE, & OTHER ENERGY STUFF

• Lego can’t kick crude - everyone’s favorite toy-maker is abandoning its high profile efforts to make oil-free bricks after realizing that the alternative recycled resin actually has higher carbon emissions. It tells you how good a product oil is if we can’t even replace it in small plastic toys.

• “Green” energy’s dirty origins - a new study published in the scientific journal Science has warned about the millions of people that are exposed to toxic mining waste, and the risks posed by ramping up mining for minerals needed in the energy transition.
  

🛢️ BOTTOM OF THE BARREL

👋 BEFORE YOU GO 

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