28th January 2024

Morning crew, here’s what went down in all things oil, gas, and energy over the weekend:

• 😬 Worrying times in the Middle East

• 🧊 Power of Siberia 2 talks still frozen

• 🗮 A different type of activist investor

• ☀️ China’s mammoth solar expansion

• ➕ plus backlash to Biden’s LNG pause; more success in Namibia; Chevron’s California frustrations.

Let’s get this week started…

📈 THE NUMBERS

🗞️ WELL-HEADLINES

 🗽 North America

• Chevron warns California of “dangerous game” - the major said that its home state risks driving local gasoline prices even further above the national average with its hostile O&G policies. California drivers paid an average of $4.94 per gallon of gasoline in Q3 2023, $1.72 above the national average and the highest quarterly premium on record. Time for Chevron to move to Texas?

• Oxy / CrownRock deal catches the attention of anti-trust - the US competition regulator has launched an in-depth probe of the $12bn deal and has made a request to the companies for more info to assess whether the merger breaches anti-trusts regs. A group of senators oppose the recent deals by Exxon and Chevron and have claimed that the US O&G industry is already “too concentrated”.

• US oil rig count edges up - the count climbed by 2 to 499 last week, with all the additions coming from the Permian. The count is 110 lower than it was a year ago and has now been stable around the ~500 level for a few months.

🏰 Europe

• Delay to the Power of Siberia 2 pipeline - construction of the planned mega 50 bcmpa gas pipeline from Russia to China, which was due to start this year, may be delayed according to reports from the FT. The two countries have yet to reach an agreement on key terms for the project, and pricing in particular is a major sticking point. Russia losing its core customer in Europe has handed China a whole load of leverage which I’m sure it’s making the most of.

• Activist investors target BP, but not in the way you think - BP is being called upon to ditch parts of its clean energy strategy by activist investor Bluebell Capital Partners. The hedge fund said that BP’s plan to cut oil and gas output was “irrational” and has “depressed the value of BP’s share price”. BP is the only O&G company that still has a firm target to cut its O&G output (25% reduction by 2030). The investor also said that BP should massively scale back its investments into renewables, hydrogen, and bio-energy.

• Sanctioned Russian crude stranded off Asia - ~10 mmbbls of crude has been sitting in 14 tankers off the coast of South Korea for weeks thanks to US sanctions. It looks like the companies transporting the crude were hit with sanctions so no one wants to buy the oil from them.

🕌 The Middle East

• Qatar inks new LNG deal with Bangladesh - the deal with Excelerate Energy is for up to 1 mtpa of LNG for 15 years starting in 2026. No commercial terms were disclosed. Qatar is already the largest supplier of LNG to Bangladesh and other South Asian LNG markets.  

• Dana resumes output at Khor Mor - the gas field in Iraq Kurdistan was shut in last week following a drone attack.

🦁 Africa

• More success for Galp in Namibia - the operator announced a second “significant” oil discovery in Namibia’s emerging Orange basin with its Mopane-1X exploration well.

🌍 GEOPOLITICS & MACRO

• US troops killed by drone strike in Jordan - 3 soldiers lost their lives and 34 were injured in an attack on a military base that Biden has blamed on Iran-linked groups. The event arguably marks the most dangerous escalation since turmoil returned to the Middle East with the October 7th attacks on Israel. The US has vowed a response but Iran has denied any involvement with the attack.

• Trafi’s tanker troubles - an oil tanker chartered by Trafigura was set ablaze in the Red Sea and the crew were forced to abandon ship after a Houthi missile attack. The fire was eventually extinguished and the ship, which was carrying Russian oil products, was taken to safe harbor. Trafigura has since paused shipments through the region. Things look like they’re going to get worse in the Red Sea before they get better.

• Biden urged to reverse LNG pause - business organisations in the US, Europe, and Asia have called on Biden to unwind the moronic decision to pause LNG approvals to ensure ample global gas supply. Trump has said he will ditch the move on day 1 if he becomes president. This will become a political own goal for Biden as well as a climate one.

• Party already over in Venezuela? - the US confirmed it’s reviewing its sanctions deal with Venezuela after the Caracas government banned a key opposition candidate from taking part in this year’s presidential election. Didn’t take long for that deal to fall apart…

💨 CARBON, CLIMATE, & OTHER ENERGY STUFF

• China’s insane solar additions - China added more solar power capacity (217 GW) in 2023 than any other country has in total. In 2022, it added 87 GW. Say what you want about China, but they sure as hell know how to build things at scale. China is pursing an “all of the above” approach to energy supply.

• Filing the huge hole of lost fuel tax - if EVs become mainstream then governments will miss out on the billions in revenue they generate from fuel taxes. In 2023, the top five European economies earned more than €150 billion from fuel levies, or ~2% of their total tax collection. That’s a lot of dosh. They’ll have to find ways to make up for this: a pay-as-you-drive duty might be the best solution, writes Bloomberg.

• BP and Equinor’s offshore wind divorce - the majors have said they are going their separate ways and will no longer partner up to develop offshore wind projects in the US.

🛢️ BOTTOM OF THE BARREL

Want to wise up on the history of US LNG? Look no further than this great thread.

Crazy to think that at one point the US was expected to overtake Japan as the world largest’t LNG importer by 2015. How things change.

👋 BEFORE YOU GO 

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