30th October 2024

Alright, alright. Here’s everything you need to know today in all things oil, gas, and energy:

• 🇺🇸 The election and oil

• 💸 How not to spend $85 trillion

• 🔥 “We will monetize every molecule”

• 🛍️ Colonial for sale

• ➕ plus VW paying the price, LNG tanker rates are sinking; Equinor bags EQT assets; Wood’s 1m hour Saudi gig; Vantage goes public; more bad news for hydrogen; India’s rocketing gas demand; and plenty more.

Let’s go…

📈 THE NUMBERS

After the rout earlier in the week, oil prices have regained some stability today.

🗞️ WELL-HEADLINES

 🗽 North America

• Colonial Pipeline for sale? - the operator of the largest US fuel pipeline system is considering selling itself in a deal that could be worth $10bn. Colonial, which covers more than 5,500 miles from Houston to New Jersey, is currently backed by investors including PE firm KKR and pension fund CDPQ.

• Equinor snaps up more EQT assets - it’s paying $1.25bn for EQT’s remaining non-operated interest in the Northern Marcellus gas units. Earlier this year Equinor got into the asset with a swap deal with EQT and this latest deal gives it EQT’s remaining interest.

• Happy days for US drivers - the average US price of gasoline is set to fall below $3/gallon for the first time since 2021, weighed down by low seasonal demand and international crude prices. A helping hand for Harris…

• Quantum raises $10bn for energy investments - the PE firm invests across the entire energy value chain, including in O&G, midstream, and power generation, with most going to O&G.

• “Encouraging result” at Who Dat South - LLOG said the exploration well in the US GoM, 11km south of the Who Dat FPSO, “significantly exceeded our pre drill prognosis”.

• Drop by drop - the US gov’t is looking to purchase an additional 3 mmbbls of crude for the much depleted SPR (Biden drained ~300 mmbbls between 2022-24), taking its total purchases over the past year to ~60 mmbbls.

🏰 Europe

• Vantage goes public - the drilling company has listed on the Oslo Stock exchange with a market cap of $350m. Vantage is the third driller to list in Norway this year, a rare market where investors understand the oilfield services sector.

• Total hits pay at Harald - the French major has discovered 48 meters of net gas at its Harald field, in the Danish North Sea.

• Some Q3 earnings highlights - BP profits at 4-year lows on weaker refining margins and oil trading results; outages hit OMV’s performance; AkerBP misses but posts strong outlook.

• Shutdown at Triton - Serica’s Triton FPSO in the UK North Sea will be shut down for at least 2 weeks due to a problem with a gas compressor.

🕌 The Middle East

• Aramco committed to 12.3 mmb/d capacity - speaking at a conference, Saudi’s Energy Minister struck a defiant tone: "We will monetize every molecule of energy this land has, period…We are committed to maintaining 12.3 mmb/d of crude capacity and we are proud of that…We are not ashamed of our record when it comes to emissions,” Love to hear it.

• Wood lands Saudi mega contract - the seven year contract for various onshore gas projects in Saudi Arabia will take ~1 million engineering hours to execute and involve 400 employees at its peak. The value of the contract was kept under wraps.

⛩️ Asia & Oceania

• India’s gas demand is rocketing - Rystad expects demand in the world’s most populous country to reach 114 bcmpa in 15 years, from ~65 bcmpa today. The growth is fueled by economic development, population growth, and a push to reduce coal consumption.

🦁 Africa

• Troubles at Dangote - the owner of Nigeria’s new flagship refinery has held an emergency meeting with the country’s president over problems with crude supply to the facility. Dangote has a capacity of 650 kb/d and will meet all of Nigeria’s petroleum products demand, and some, but not if it can’t get enough crude!

🗿 Central & South America

• New Fortress’ Fast LNG at full tilt - the new FLNG offshore Mexico is now producing at max capacity of 1.4 mtpa.

🌍 GEOPOLITICS & MACRO

• LNG tanker rates are sinking - a surge in newbuild tankers and a delay in new LNG capacity have caused a glut in the LNG tanker market, pushing rates down to their lowest levels since 2019 for this time of the year, and ~80% lower than a year ago.

• Volkswagen paying the price - Europe’s biggest car manufacturer is shutting at least three factories in Germany and cutting tens of thousands of jobs as it struggles to compete on the international stage. Germany’s famous industrial heartlands are being decimated by its self-destructive energy policy. When will they wake up?

• Saudi looking closer to home - the kingdom’s vast sovereign wealth fund, PIF, is pivoting to more domestic investments. For years it’s been on an international spending spree, including pumping $45bn into Softbank, $20bn into Blackstone, acquiring Newcastle FC, and bankrolling LIV golf. The party isn’t over though: it will still allocate ~20% of its investments abroad, down from ~30% currently.

• North Korean troops heading to Ukraine - NATO has confirmed North Korean soldiers are in Russia, near the Ukraine border. A sign of desperation from Putin or evidence that his military strategy is settling in for the long run?

💨 CARBON, CLIMATE, & OTHER ENERGY STUFF

• $3.5 trillion a year for the energy transition - this is what a new Wood Mackenzie report estimates is needed to hit net-zero by 2050. That’s trillion with a “T” every year, ~$85 trillion in total, or about $10k for every man woman and child on earth. Think of all the hospitals, schools, and roads that could be built with that. All the forests that could be planted and the mouths that could be fed.

• Orsted’s $2.2bn UK offshore wind farm down - it has sold a 12.45% stake in its four operational offshore wind farms (Hornsea 1, Hornsea 2, Walney Extension and Burbo Bank Extension) in the UK to Brookfield.

• Masdar kicks hydrogen down the road - the UAE low carbon energy giant has pushed back its 1 mpta green hydrogen production target from 2030 to sometime in the next decade. Hydrogen is having a crisis of confidence with companies around the world scaling back plans due to high costs and demand uncertainty.

• Qatar takes 50% stake in big Iraqi solar project - Total will retain the remaining 50% interest in the 1.25 GW project that will involve 2 million solar panels and is due on online between 2025-2027. The value was undisclosed.

🛢️ BOTTOM OF THE BARREL

You might have heard about this little vote that’s going on in the US next week…

Well what does it all mean for oil and gas?

No much, really.

Market forces have always been stronger than political ones in the land of the free.

Gyrations of global commodity prices will have a far greater impact than policy changes on decisions made in Houston boardrooms.

Barring some radical anti O&G policy (which Harris has u-turned on), the US energy monolith will power on past 5th November with a cursory shrug.

Counterintuitively, Trump may actually be marginally negative for US E&Ps. He’ll cut expensive red tape and open up more land for drilling, both of which should support supply and push oil prices down.

Good news for consumers. Bad news for producers, whose fortunes tend to be made or lost on the basis of oil prices more so than volumes.

There is one area where the next Commander-in-Chief could move the needle, though: tolerance of Iranian exports.

Since 2020, the White House has turned a blind eye to an increase of ~1 mmb/d of “sanctioned” Iranian barrels reaching oil markets. Why? To keep crude prices lower and voters at home happy.

These volumes could fall away quickly if the next president decides to not be so lenient, with an ensuing impact on global crude prices.

Predicting anything in this business is tough. But one thing’s for sure, it certainty won’t be boring.

👋 BEFORE YOU GO

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

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