Geopolitics
It’s the 11th hour for a true ceasefire in Yemen now as the world waits to see what Saudi Arabia will do next and the Houthis continue to apply pressure. Most recently, the Houthis claimed to have launched drone attacks on Riyadh, though there has been no confirmation of this from Saudi Arabia. The Saudi-proposed ceasefire is really coming from Washington and is MBS’ means of partly repairing his global reputation by looking like the good guy in Yemen. There is a fair amount of motivation right now for the Saudis to pursue a ceasefire in a war that was supposed to last six weeks and is now in its sixth year with Riyadh having failed to achieve any of its objectives. Keep an eye on Marib province, where the oil is, and where the current Houthi offensive is focused.
About four-fifths of Libya’s divided institutions have now been unified, including the central bank, parliament, and energy agency, leading analysts to hedge on Libyan oil stability by the end of this year. We think this is a premature hedge at this point, with planned December elections an elephant (on steroids) in the room. Libya’s energy industry now is set to get $1.6 billion from the recently approved budget.
Less than a week after French Total SA said it would restart work at its giant LNG project in Mozambique after the government promised heightened security, a massive new push by insurgents is working to ensure that terror reigns and the project meets…
Geopolitics
It’s the 11th hour for a true ceasefire in Yemen now as the world waits to see what Saudi Arabia will do next and the Houthis continue to apply pressure. Most recently, the Houthis claimed to have launched drone attacks on Riyadh, though there has been no confirmation of this from Saudi Arabia. The Saudi-proposed ceasefire is really coming from Washington and is MBS’ means of partly repairing his global reputation by looking like the good guy in Yemen. There is a fair amount of motivation right now for the Saudis to pursue a ceasefire in a war that was supposed to last six weeks and is now in its sixth year with Riyadh having failed to achieve any of its objectives. Keep an eye on Marib province, where the oil is, and where the current Houthi offensive is focused.
About four-fifths of Libya’s divided institutions have now been unified, including the central bank, parliament, and energy agency, leading analysts to hedge on Libyan oil stability by the end of this year. We think this is a premature hedge at this point, with planned December elections an elephant (on steroids) in the room. Libya’s energy industry now is set to get $1.6 billion from the recently approved budget.
Less than a week after French Total SA said it would restart work at its giant LNG project in Mozambique after the government promised heightened security, a massive new push by insurgents is working to ensure that terror reigns and the project meets with continued delays. Late last week, an Islamic State-linked group launched an assault on Palma, less than 1km from Total’s LNG camp, leading to a panicked exodus of residents, with reports emerging that thousands are now seeking shelter within the boundaries of the LNG project. At the same time, Total has again delayed the remobilization of the project, with the message being clear that this is a target as the attack on Palma was launched immediately after Total announced it would restart.
Deals, M&A
Italian Eni and China’s Zhejiang Energy have signed an MOU for long-term LNG supply agreements and joint participation in gas and LNG projects as part of their efforts to reduce emissions by favoring gas over coal for electricity. Eni hopes to be carbon neutral by 2050.
Iraq and Total have agreed to co-develop oilfields, produce gas, and build significant infrastructure in a contract that should exceed $7 billion. The agreement will include low-carbon efforts and capturing all flaring gas, along with producing 1GW of solar energy. The contract is expected to be signed by July.
Australia’s Santos and partners have announced an FID on the $3.6-billion Barossa gas and condensate project, which triggers a $600-million investment in the Darwin LNG life extension and pipeline tie-in program. Darwin LNG can produce 3.7 MM metric tons/year of LNG. Barossa is expected to be one of the world’s lowest-cost LNG projects and is Australia’s largest oil and gas investment in almost a decade.
Iraq has approved a downward revised budget for this year based on $45 barrel oil, factoring in 3.25 million barrels of oil exported per day - a figure which includes oil exported from the semi-autonomous region of Kurdistan. Expected revenues $70 billion, while projected spending is estimated to be higher, with the shortfall covered by the difference between where oil prices were set in the budget and the true price of oil per barrel at the time of sale.
Discovery & Development
Shell and UK-based Deltic Energy will drill a well in Pensacola in the UK North Sea in May of next year. Deltic is calling the high-impact Pensacola well “transformational.” Well planning is currently underway.
The Texas Freeze shaved as much as $800 million off ExxonMobil’s Q1 earnings. Still, Exxon is expecting it to turn a profit for the first time in five quarters as higher oil and gas prices boosted earnings by $2.7 billion. Its chemical segment added $1.1 billion.
Spanish-Repsol has shut its 135,000 bpd Puertollano refinery citing the challenging economic environment in the wake of lockdowns in Europe that are crushing fuel demand. The refinery shut this week and will eventually shut down all fuels production, and will restart when market conditions improve.
Regulation
Texas legislatures are circling the wagons around the right to use natural gas in new residences and businesses. The legislatures are looking to prevent cities - like Austin - from banning natural gas in new homes and buildings, much like some California cities have done. Oklahoma and Louisiana - both significant gas producers - have already passed legislation to keep cities from banning the use of natural gas in new builds. The Texas bill will now head to the Senate.
The U.S. government has returned 18 million barrels of oil that it had been storing to the rightful owners. The federal government had stored in its SPR more than 23 million barrels of oil for nine different companies when oil demand tanked in 2020 as a side effect of the pandemic. The government charged the companies rent in the form of oil - 1.2 million barrels of oil will be kept by the government in exchange for letting the companies use its space.
The Biden Administration has proposed to dish out $16 billion in federal funds for the purposes of plugging orphan wells and cleaning up abandoned mines. The plan still requires Congressional approval. This is a significant increase in the amount of federal money that has been spent in recent years cleaning up abandoned drill sites and mines.
The White House has asked the EPA to look into how using renewable fuels to power EV charging could generate tradable credits under the current biofuels program. If it works, the EV industry could have access to a whole other source of revenue. The biofuels program already pits the oil and corn lobbies against each other. Adding a third industry - electric vehicles - to an already contentious program could further politicize the issue.
Renewable
No, Volkswagen is not changing its name to Voltswagen. According to VW, the name change press release was nothing more than an April Fools’ joke that the SEC may not find entirely funny, since Volkswagen’s stock jumped on the initial press release.
BP is entering a partnership with BMW and Daimler in their EV charging company Digital Charging Solutions, or DCS. DCS operates 228,000 charging points in 32 countries, and BP will add another 8,700 into the mix in Europe.
Chinese smartphone maker Xiaomi will set up an EV unit with an investment of $10 billion over 10 years, joining a competitive electric car market at home. The smartphone maker is joining tech giants such as Apple in targeting the vehicle industry.
