26th January 2024

Have a cracking weekend everyone. Here’s what went down today in all things oil, gas, and energy, without the hot air:

• 🤖 AI’s insatiable energy appetite

• ⚠️ Tesla’s EV warning

• 🇻🇪 Venezuela sanctions deal on the rocks

• 🏋️ US economy going strong 

• ➕ plus Tellurian and Grayson Mill for sale; China pressures Iran; Chevron doubling down in Nigeria; Qatar LNG cargo delays.

Let’s take a look.

📈 THE NUMBERS

Happy days for European consumers as gas prices keep falling after a torrid few years:

🗞️ WELL-HEADLINES

 🗽 North America

• EnCap looking to sell Grayson Mill Energy - the private equity firm is rumoured to be selling the Bakken oil & gas producer, which could be worth ~$5 billion. Grayson Mill was formed in 2016 by EnCap and has grown to become one of the largest privately held energy producers in the Bakken.

• Tellurian up for the sale - the cash-strapped LNG developer has hired investment bank Lazard to explore a sale of the company. Tellurian, which ousted its founder and chairman last year, is trying to build the 27.6 mtpa Lake Charles LNG project but recently warned that it’s running out of cash. It’s shares jumped by ~15% on the possible sale news.

• Alberta pension fund considers Trans Mountain investment - the Canadian government has always planned to sell the pipeline when it’s eventually finished. However, the massive cost overruns mean that it may be difficult for the government to recoup its investment.

• Oil refiners suing over Alternative Fuel Credit dispute - refineries in Ohio and Texas say the IRS wrongly collected $456m after failing to consider their entitlement to the Alternative Fuel Mixture Credit.

🕌 The Middle East

• Pearl Petroleum’s Khor Mor gas field hit by drone - no one was injured and the damage was fairly limited at the Dana Gas-operated field. Not a great time to be an energy asset anywhere in the Middle East these days.

• Red Sea disruption delaying Qatar LNG cargoes - Qatar has notified Spanish utility Endesa that an LNG cargo will be delayed by 10-12 days. It’s a good thing this disruption is happening now when global gas markets are well supplied and able to absorb the shock, rather than during the energy crisis of 2022.

⛩️ Asia & Oceania

• Indonesia’s LNG shortfall - despite being a major LNG producer, Indonesia faces a shortfall of ~10 cargoes this year to meet its own growing demand. The shortage is due to declining domestic production, lack of gas infrastructure, and existing export commitments that mean it has to sell its LNG aboard rather than supply its local market.

• CNOOC ramping up - the Chinese state-owned giant plans to raise its O&G output to 1.95 mmb/d this year, ~5% higher than in 2023, and go on an $18bn capex spending spree. About two thirds of that production is domestic, the rest is international.

🦁 Africa

• Chevron pressing ahead in Nigeria - while other IOCs step away from Nigeria and its struggling O&G sector, Chevron is doubling down, and has announced new drilling campaigns, licence renewals, and an acquisition of a stake in block OPL 215. Chevron is the third largest producer in Nigeria.

🌍 GEOPOLITICS & MACRO

• What recession? - the US economy continues to shrug off high interest rates and grew by 3.3% (year-on-year) in Q4, exceeding expectations. “Whichever way you slice it, this report caps a year of stellar economic growth performance…The momentum of economic growth going into 2024 is looking very good”, said the head of US regional economics at Fitch Ratings in New York.

• Venezuela deal on the rocks - President Maduro has warned that the deal with the US involving free elections in return for oil & gas sanctions relief is in danger of collapse, citing “conspiracies”. Is anyone surprised? Why would a dictator like Maduro risk losing his power in an open election?

• China presses Iran for Houthi restraint - Chinese officials have told Iran to help rein in Houthi attacks on ships in the Red Sea or risk harming relationships with Beijing. China is Iran’s largest trading partner and bought over 90% of its crude exports last year. Time for Iran to choose between ideology and dollars.

💨 CARBON, CLIMATE, & OTHER ENERGY STUFF

• Tesla’s growth warning - shares of the EV poster boy fell by 12% yesterday after CEO Elon Musk warned about “notably slower” sales growth this year, despite the company having made price cuts. This is the latest in a series of ominous warnings from the EV sector that its rapid growth in recent years may already be running out of power. Until automakers can banish consumers’ concerns about range, charging infrastructure, and repair costs, EVs will struggle for that mass market adoption that has been promised.

• AI’s lifeline for coal - AI requires so much electricity that coal plants in the US are expected to remain open for longer to meet the demand. Sam Altman, CEO of OpenAI, warned about this recently: “We do need way more energy in the world than we thought we needed before…We still don’t appreciate the energy needs of this technology”. Along with a general push to "electrify everything", and a likely slowdown in wind and solar additions, it looks like the grid will need every KWh it can get its hands on.

• EU plans doubling of power generation by 2040 to hit net-zero - that’s a whole load of cables, converters, turbines, and stations. Sounds really, really expensive….

• Orsted bails on US offshore wind project - the company has become the latest offshore wind developer to shelve plans for a project in the US and seek new contracts amid rising costs. The US offshore wind industry’s plans are in tatters as it battles new economic realities.

• Funding for heavy industry emissions cuts - the US administration is awarding $254m to projects that are working to cut emissions from heavy industry such as iron, steel, and cement. Steel and cement are responsible for ~10% and ~5% of global CO2 emissions, respectively.

🛢️ BOTTOM OF THE BARREL

Those running the world are not serious people:

👋 BEFORE YOU GO 

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