30th January 2024

Hello, hello. I bring you your daily dose of all things oil, gas, and energy, without the hot air:

• 🇸🇦 Saudi slashes capacity target

• 🚨 MORE delays at Trans Mountain

• ⚖️ US’s Middle East balancing act

• 😊 Energy is life

• ➕ plus FPSOs getting more expensive; the hydro heavyweights; unlocking the Falklands

Let’s take a look…

📈 THE NUMBERS

🗞️ WELL-HEADLINES

 🗽 North America

• More delays at Trans Mountain, yes really - this project is cursed. No doubt. Just as everyone thought the long-delayed, over-budget, nightmare project was finally about to start, the developer revealed several more months of delays due to technical complications. Q2 2024 is now the earliest expected start date…

• Buyers circling Oxy assets - the company is preparing to divest $4.5-6bn in US O&G assets to help finance its recent $12bn acquisition of CrownRock which added a whole load of debt to Oxy’s balance sheet. Some assets that may be up for sale include the company’s Rockies assets in the Powder River Basin of Wyoming and the DJ Basin of Colorado.

🏰 Europe

• Waldorf plans sale of North Sea stakes - the North Sea indy is looking to divest from the Scott and Telford fields, but is also interested in making acquisitions of a “large portfolio” in the UK to help utilise ~$900m of tax losses. Waldorf did a series of deals to build up its production position, including Cairn Energy, MOL and Endeavour.

🕌 The Middle East

• Saudi axes capacity expansion plans - Aramco has received an order from Saudi’s energy ministry to maintain total crude productive capacity at 12 mmb/d, and not increase it to 13 mmb/d, as has long been the plan. The question is why? Well, sitting on unused spare capacity is expensive and perhaps the Saudi state would rather Aramco pay dividends to the treasury than spend a lot of capex increasing spare capacity. Or maybe Saudi has revised down its future demand estimates?

• ADNOC signs LNG deal with India’s GAIL - the 10 year agreement involves 0.5 mtpa of LNG. India’s gas demand is expected to triple by 2030, according to the country’s oil minister, so it’s scouring the world to secure supplies.

⛩️ Asia & Oceania

• Inpex offloading stake in Russian oil project - it’s selling its minority stake in the INK-ZAPD JV in Siberia to Itochu. No consideration or motives behind the deal were disclosed.

🗿 Central & South America

• Finally some progress in the Falklands? - the first ever offshore O&G project in the Falklands Islands may soon become a reality as the new operator of the Sea Lion project progresses with a revised and more moderate development plan. The North Falkland Basin has estimated resources of ~800 mmbbls that have yet to be tapped into.

🌍 GEOPOLITICS & MACRO

• The US weighs tricky response - following the death of 3 US soldiers in an attack on a US base in Jordan, the US has the complex task of responding. Its retaliation must project power and exact a cost on those responsible, but not escalate tensions too much with Iran. Meanwhile, Iran is trying to distance itself from the attack and has urged diplomacy. US Secretary of State said the situation was “incredibly volatile”…

• Japan’s US LNG concern - the country’s industry minister has voiced his worries about the impact that Biden’s LNG approval suspension will have on future supplies. Resource-poor Japan is the world’s second largest LNG importer and entirely dependent on imports for its energy need.

• FPSO costs are climbing - a surge in labour and material costs are pushing up construction prices of Floating Production Storage and Offloading (FPSO) vessels, according to Rystad. This upwards trajectory is expected to persist for several years. Demand for FPSO’s is rising, especially in Brazil, which is responsible for a third of global demand.

💨 CARBON, CLIMATE, & OTHER ENERGY STUFF

• Canada grappling with hydro shortage - the country is the world’s second largest hydro power generator (after China), with hydro usually providing ~60% of its electricity supply. However, western provinces are being forced to import power from the US after a being hit by the worst drought in years.

• Turkey to take coal top spot in Europe - the country is on track to overtake Germany to become the largest coal-fired power generator on the continent after expensive natural gas and rampant inflation have pushed the country towards cheaper coal. Another reminder of the importance of keeping gas prices low to phase out coal.

🛢️ BOTTOM OF THE BARREL

The amount of energy available to you determines your quality of life.

More energy means more work done on your behalf by machines and robots.

It means cheaper goods. It means cheaper services. It means freedom of time and endless possibilities for work and pleasure.

The secret to human flourishing is unlocking more energy.

Energy is life

The first major step shift in global progress came when energy from hydrocarbons was unleashed in the middle of the 19th Century.

This wave of energy enabled the mechanization of farm and factory work, freeing people up to pursue more intellectual pursuits and careers that hadn’t previously existed. Economic and social progress exploded.

With engines replacing people, it’s no coincidence that slavery was abolished at the same time as coal use was taking off.

When will we enjoy a second transformation? What will it look like?

I don’t know.

But what I do know is that it will be underpinned by a radical advance in how we harness energy.

👋 BEFORE YOU GO 

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