25th September 2024

Hi team - this is Both Barrels. Your daily dose of all things oil, gas, and energy, without the hot air. Here’s what hit the wires today:

• 🪄 The oil demand “fantasy”

• 💊 Chinese drugs

• 🤑 Aramco’s bond binge

• 🌪️ Here comes Helene

• ➕ plus success at Heisenberg; Chevron / Hess gets FTC OK; Nigeria’s gas export dreams; Rosebank heading to court; Total bags more Asia gas sales; and barrels more.

Let’s go.

📈 THE NUMBERS

Funny how quickly sentiment can shift in oil markets.

A bit of Chinese stimulus and a flare up in Lebanon have helped pushed oil prices back in the $70s, although the rally quickly ran out of steam.

🗞️ WELL-HEADLINES

 🗽 North America

• Canada and US negotiating over Arctic oil riches - the countries are rumoured to be starting talks to resolve a dispute over the maritime borders in the Beaufort Sea in the Arctic. Some estimates suggest the Arctic Circle holds ~90 bnboe of recoverable oil reserves.

• Here comes Helene - BP, Shell, Chevron and others have all curtailed GoM production ahead of Tropical Storm Helene’s expected landfall on Thursday. ~16% (284 k/d) of GoM oil production has been shut in so far.

• Diamondback and Kinetik pick up EPIC stake - the companies have each acquired a 27.5% stake in the 800-mile crude oil pipeline system that connects the Delaware, Midland Basin, and Eagle Ford to the Robstown Terminal near Corpus Christi.

• Chevron / Hess deal to get FTC greenlight - the US anti-trust regulator is set to approve the merger, leaving Exxon’s challenge regard preemption rights in Guyana as the final hurdle to completing mega deal.

🏰 Europe

• Rosebank in court - Equinor’s much publicized oil and gas development in the UK North Sea could have its licence revoked as a court has agreed to hear arguments brought by climate campaigners trying to block the project. Nothing would surprise me these days in the UK...

• Success for Equinor and DNO at Heisenberg - an appraisal well has confirmed ~37 mmboe of resources at the discovery in the Troll-Fram area of the Norwegian North Sea. Any other Breaking Bad fans out there will appreciate the name of this particular field.

• OKEA and Lime in Yme deal - OKEA is selling its 15% interest in the complex Norwegian offshore field to partner Lime. The Repsol operated field started producing way back in 1996 but was shut in for 20 years from 2001 due to high costs, before being restarted in 2021. Today it produces ~ 20 kboe/d.

🕌 The Middle East

• Aramco’s bond binge - after raising $6bn in July from its first bond issuance in years, Aramco is reportedly going back to the markets to raise another $3bn. Lower oil prices and a bulging budget to pay for Vision 2030 have even the stinking-rich Saudis looking for new sources of capital.

⛩️ Asia & Oceania

• Appetite for India - various IOCs and domestic E&Ps including BP, Reliance, Vedanta and ONGC among bidders in India's latest licensing round which is offering 28 onshore and offshore oil and gas blocks.

• Unlocking Azeri’s gas - as was rumoured last week, the JV partners at the ACG oilfield in Azerbaijan have reached an agreement for the development of the gas reserves at the field, which are estimated at 4 tcf.

• Excelerate and PetroVietnam partnering up on FSRUs - the partnership hopes to develop floating LNG import facilities in gas thirsty Vietnam where demand is growing 12% every year.

• Total lands more gas sales - the French major has signed a five-year extension with CNOOC for the delivery of 1.25 mtpa to China until 2034. It also announced a 6-year, 0.2 mtpa deal to supply South Korea’s HD Hyundai Chemical’s industrial operations.

🦁 Africa

• A 5,600km gas pipeline - Nigeria and Libya are in talks to build a massive gas pipeline from Nigeria up to Libya, and eventually on to Europe. The route would snake around north west Africa, rather than crossing the Sahara. Don’t hold your breath on this one, though.

🗿 Central & South America

• Constellation wins big in Brazil - the drilling contractor has won two 30-month contracts worth $1bn to provide two drillships to Petrobras for the Roncador oil field in the Campos Basin.

🌍 GEOPOLITICS & MACRO

• China’s shot in the arm - global commodity and equity markets popped after the Chinese government announced various stimulus measures to boost its slowing economy which is set to miss its 5% growth target in 2024. The key measure includes the reduction of banks’ reserve requirement ratios (i.e. how much money banks need to hold in reserve rather than put to use in the economy) by 0.5% which is expected to free up $142bn of capital. The short term impact is welcome but the scope for such moves is limited. Papering over cracks?

• OPEC’s oil demand fantasy - in its last annual World Oil Outlook, OPEC has forecast that oil demand will reach 120 mmb/d by 2050, saying that the “fantasy of phasing out oil and gas bears no relation to fact”. This growth will be driven in non-OECD countries (+28 mmb/d), while demand in OECD countries will decline (-10 mmb/d). Sure, OPEC may be a little biased, but I’d bet on this outcome over any IEA net-zero dream.

💨 CARBON, CLIMATE, & OTHER ENERGY STUFF

• Masdar’s $1.4bn buy - the UAE renewables company is buying Iberia-based renewable power developer Saeta Yield from Brookfield. Saeta owns wind and solar assets across Spain and Portugal.

• Wartsila converting Chevron LNG tankers - the work aims to switch one engine on six vessels from duel fuel to spark gas, which lowers their methane emissions.

• Another biofuel bust - Vertex Energy, a US renewable diesel manufacturer has filed for bankruptcy citing macroeconomic woes. Many companies raced into the sector, attracted by generous subsides, but demand has failed to materialize.

🛢️ BOTTOM OF THE BARREL

👋 BEFORE YOU GO 

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

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