8th February 2024

If you’re reading this, it probably means you’re enjoying it…

And if you are, then I’d bet my bottom dollar someone else you know would too.

Go on, sharing is caring. Thanks. 😉

• 💸 Big Oil’s even bigger payouts

• 🔙 Europe’s great green backpedaling

• 🐔 Sweden chickens out

• 🇨🇳 Worrying deflation in China

• ➕ plus what next for Arctic LNG?; CRC and Aera merge; Germany expropriating Rosneft assets; Germany and Algeria’s gas deal; Texas hungry for power; Brazil looks to Qatar.

Let’s go.

📈 THE NUMBERS

Aaaand US natty gas falls below $2/mmBtu.

Those of us over here in Europe paying 5x more for our gas are definitely not jealous at all…

🗞️ WELL-HEADLINES

 🗽 North America

• Big Oil returning record $$$ to investors - 2023 saw more cash returned by oil majors to investors than any other year on record. Exxon, Chevron, Shell, Total, and BP spent a whopping $114bn on dividends and share repurchases last year, 10% more than 2022 and ~75% more than the average payout during the +$100/bbl years of 2011-2014.

• California Resources buys Aera Energy for $2.1bn - the combined company will become the largest producer in California with over 150 kboe/d of output. Aera was started as a JV between Exxon and Shell and was sold to IKAV for $4 billion in 2022.

• Texas hungry for power - Governor Abbot says the Lone Star State needs to grow its power supply capacity by as much as 15% every year to keep up with increasing demand from homes and businesses. Demand is rising due to Texas’ growing economy and population; a drive towards electrification; and a surge in power demand from data centers.

• Whiting refinery down for 3 weeks - having just restarted after a power outage, BP’s 435 kb/d refinery in Indiana will be shut for several weeks while it undergoes an inspection. If damage is found, the plant may be offline for longer. Local gasoline prices spiked.

• EIA confirms crude stock build - US oil inventories rose by 5.5 mmbbls last week, while gasoline inventories dipped by 3.1 mmbbls.

🏰 Europe

• Germany is expropriating Rosneft’s German assets - it’s considering nationalizing the assets, which include a majority stake in Berlin's main PCK Schwedt refinery, saying the refineries' operations are jeopardized under Russian ownership because partners would refuse to cooperate due to sanctions. Russia has effectively nationalized billions in Western O&G assets in Russia since the Ukraine war so fair game, I’d say.

• What next for Arctic LNG? - the sanctioned Russian mega project had initially been scheduled to start operations in February but is now targeting first shipments in March at the earliest. It has two problems: 1) buyers don’t want to buy for fear of US retaliation, 2) shipping companies can’t deliver the specialized icebreaker vessels that are needed to traverse the waters around Arctic LNG. Those sound like some pretty major hurdles to me…Expect more delays.

• Germany’s Algerian gas deal - after announcing plans for a large expansion of its gas power station fleet, Germany has signed a deal with Algeria for the delivery of pipeline gas. It’s the first time these two countries have reached a gas supply agreement and marks another step in Europe’s mammoth gas pivot away from Russia.

• Some earnings highlights: AkerBP misses forecasts but raises dividend and capex plans; DNO reports Q4 production rebound.

🗿 Central & South America

• Brazil looks to Qatar for gas - Petrobras’s CEO said the company is looking to sign a long-term LNG supply deal with Qatar to help reduce it’s reliance on pricier LNG imports. Just as the US reins in its LNG plans, it seems Qatar is signing deals with the whole world.

🌍 GEOPOLITICS & MACRO

• Sweden chickens out of Nord Stream call - after leading the investigation into the pipeline sabotage, Sweden has finished its work without drawing any conclusions, saying it lacked jurisdiction in the case and has handed evidence over to German investigators. How predictably boring.

• China under pressure as prices fall at fastest pace in 14 years - deflation is running at its fastest rate since the great financial crisis in a worrying indicator about the strength of the world’s second largest economy. The problem with deflation is not only that it signifies lackluster demand, but also encourage consumers to hold off spending, slowing economic growth, reducing incomes and threatening recession. Plenty of work to be done to steady China’s economic ship.

💨 CARBON, CLIMATE, & OTHER ENERGY STUFF

• The great green European backpedaling - at first it came in drips, now the flood gates are opening as politicians around Europe scramble to respond to the popular backlash against expensive net-zero policy: the UK’s Labour Party (likely the ruling party by the end of this year) has abandoned a £28bn annual green spending pledge. And the EU has scrapped planned environmental agricultural restrictions such as halving the use of pesticides, which had drawn huge protests from farmers around Europe. More of this to come, I’m sure.

• S&P downgrades Orsted - after the wind developer’s torrid market update yesterday, ratings agency S&P has downgraded the company’s credit rating to BBB.  

I would add “to have the same function AND more anxiety around charging”

🛢️ BOTTOM OF THE BARREL

Love these depictions of baseload vs intermittent energy supply.

The red spikes are wind power generation and the blue is nuclear power generation.

You don’t need to be an expert in power grids to realize which is a better bet for supporting a modern economy…

👋 BEFORE YOU GO 

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