25th October 2024

Let’s wrap this week up. Here’s all you need to know today in oil, gas, and energy:

• 👋 Quitting Cali

• ⏸️ Shale gas takes a breather

• 🪦 RIP UKCS

• 🤝 Transocean and Seadrill merger

• ➕ plus Eni sells $3bn biofuels stake; Asia’s ageing rigs; Johan Sverdrup hitting its peak; European gas prices creeping up; Wood lands Singapore LNG contract; another renewables vanity project; and barrels more.

Have a good one. See you Monday.

📈 THE NUMBERS

European gas prices hit their highest level this year thanks to an outage in Norway, delays in LNG supply from the US, and a way-to-fast approaching winter.

Europeans pay about 5x more for their gas than their American friends across the pond…

🗞️ WELL-HEADLINES

 🗽 North America

• Quitting Cali - Valero has become the latest in a long list of energy companies considering leaving California due to hostile anti-O&G regulation. Valero owns two refineries in the state with total capacity of ~240 kb/d but is weighing up a sale. P66 last week also announced it was closing a large refinery. And Californians wonder why their energy is so expensive…

• US shale gas’ first decline in 25 years - after non-stop growth for a quarter of a century, US shale gas output is going to record an annual decline in 2024, according to the EIA. Rock bottom gas prices have forced drillers to rein in activity, especially in the Haynesville and Utica shales.

• That’s it for new Permian crude pipelines? - the CEOs of Enterprise and Plains All American Pipeline both commented that new crude export pipelines from the Permian are unlikely to be built as US shale oil growth slows. Focus will instead be on optimizing and expanding existing lines, they said.

• Strathcona's CEO retires - Rob Morgan will be replaced by David Roosth, previously a MD at Waterous Energy Fund.

• Exxon and Qatar get 3yr Golden Pass extension - regulators granted the JV the extra time to complete construction of the LNG terminal in Texas after one of its key contractors went bust.

• US crude stocks jump - crude inventories rose by 5.5 mmbbls last week, higher than expectations of a 1.6 mmbbls build. Meanwhile, gasoline stocks were up by 0.9 mmbbls.

🏰 Europe

• UKCS woes deepen - Harbour is reportedly selling its UK portfolio amid impending UK tax changes that are set to hammer the O&G sector. Meanwhile, a Wood Mac report has estimated the taxes will result in £10bn of reserves being left in the ground, and Vallourec is closing its Aberdeen office. The UK is committing economic suicide in homage to net zero.

• Transocean and Seadrill mulling merger - the two offshore drilling rig providers are rumored to be joining forces. Both have seen large declines in their share prices this year despite signs that offshore activity is picking up after years in the doldrums.

• Norway’s giant reaching peak - the mega Johan Sverdrup oilfield hit record output of 756 kb/d in September (~7% of Europe’s entire daily oil demand), but is expected to begin declining next year.

• Some Q3 earnings highlights - Eni beats estimates and ups buybacks; Equinor misses estimates on lower prices and volumes; Saipem doubles profits and raises outlook; TechnipFMC order book reaches record high.

🕌 The Middle East

• Aramco nearing $1.3bn CCS decision - the Saudi giant is set to announce a contractor for the huge 9 mtpa CCS project at Jubail. Saudi is aiming to hit net-zero Scope 1 and 2 emissions by 2050.

⛩️ Asia & Oceania

• Wood lands Singapore LNG FEED contract - the new facility, which will be Singapore’s second, will have an FSRU with total capacity of 5 mtpa. The island city state relies on gas for 95% of its power generation and has no domestic production.

• Asia’s ageing rigs - experts are sounding the alarm that there will soon be a shortage of jack-ups in the region as the aging fleet is scrapped without being replaced by new rigs.

• Beach fires up Thylacine West gas project - the offshore Australia project is the largest ever offshore drilling and development campaign in the Otway basin.

• Dyna-Mac accepts Hanwha offer - the deal, which has finally been reached after several back and forth offers, values the FPSO manufacturer at ~$800m.

🦁 Africa

• All eyes on Namibia - Galp is set to start drilling at its offshore Mopane discovery which is estimated to hold a whopping 10 bnbbls of oil. Namibia is fast become the offshore sector’s next big thing.

• South Sudan restores crude exports - its sole pipeline export route through its northern neighbour, Sudan, was damaged by civil war fighting.

🗿 Central & South America

• Looks like they’ve taken an early weekend down in Latam.

🌍 GEOPOLITICS & MACRO

• ~$75/bbl in 2025? - oil price forecasts are a mugs game but can be useful gauge of sentiment. The EIA sees WTI averaging a very specific $73.13/bbl in 2025. Goldman Sachs agrees and predicts $76/bbl next year with downwards pressure of ample spare capacity being offset by the risk of possible disruption to Iranian supply - “we don’t think that a 2025 supply glut is a done deal”.

• US and Israel holding peace talks in Qatar - the countries have sent their top diplomats to try and thrash out an agreement to end the Israeli offensive in Gaza. The hope is that the recent killing of the Hamas boss might clear a path for an agreement. This is the 11th time the US secretary of state has visited the Middle East since the war in Gaza broke out a year ago.

💨 CARBON, CLIMATE, & OTHER ENERGY STUFF

• Eni offloads $3bn biofuel / mobility stake - PE firm KKR acquired a 25% interest in Enilive, Eni’s biofuel and mobility business. Eni said the deal was part of its 'satellite' strategy to bring in co-investors to growth businesses. Enilive’s business includes making fuel from vegetable oil.

• Another renewables vanity project - Singapore has given approval for SunCable, a proposed $24bn project to import solar power from Australia via a ~4,000km subsea cable. The project is aiming to be up and running around 2035 but I’d bet it never happens once everyone involved realizes the true costs and just how unnecessary it is.

🛢️ BOTTOM OF THE BARREL

This will not end well for the UK…

And to finish the week off on a lighter note

👋 BEFORE YOU GO

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

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