Politics, Geopolitics & Conflict
There has been little movement in Libya since the cancellation at the 11th hour of elections scheduled for December 24th. Damage to a pipeline this week took another 200,000 bpd offline, but the NOC said on Thursday that repairs had been completed and it was expected to be back online by Friday. That outage came on top of the major outage at Sharara, Libya’s largest oilfield, which was shut down in a spat between the Petroleum Facilities Guards (PFG) and the National Oil Company right before Christmas. That takes an estimated 350,000 bpd offline. Right now, there is an eerily calm tension on the ground as various factions strategize. Libya is now producing around 700,000 bpd–the lowest in more than a year–despite its ambitions to produce more oil. The production outage is due to repair work on a pipeline.
The Islamic State has again found a way to get its hands on Syrian oil, which the U.S. is no longer protecting. Instead, the oilfields in eastern Syrian are protected nominally by the SDF (a Kurdish militant group whose existence and support in Syria largely depends on ISIS remaining a threat). After a series of attacks directed at oilfields, reports are now emerging that the Islamic State has implemented an organized crime “protection” racket that will net it 20% of oil proceeds. The SDF is allowing this (and gets its share as well). Syrian media reported that the largest US base in eastern Syria,…
Politics, Geopolitics & Conflict
There has been little movement in Libya since the cancellation at the 11th hour of elections scheduled for December 24th. Damage to a pipeline this week took another 200,000 bpd offline, but the NOC said on Thursday that repairs had been completed and it was expected to be back online by Friday. That outage came on top of the major outage at Sharara, Libya’s largest oilfield, which was shut down in a spat between the Petroleum Facilities Guards (PFG) and the National Oil Company right before Christmas. That takes an estimated 350,000 bpd offline. Right now, there is an eerily calm tension on the ground as various factions strategize. Libya is now producing around 700,000 bpd–the lowest in more than a year–despite its ambitions to produce more oil. The production outage is due to repair work on a pipeline.
The Islamic State has again found a way to get its hands on Syrian oil, which the U.S. is no longer protecting. Instead, the oilfields in eastern Syrian are protected nominally by the SDF (a Kurdish militant group whose existence and support in Syria largely depends on ISIS remaining a threat). After a series of attacks directed at oilfields, reports are now emerging that the Islamic State has implemented an organized crime “protection” racket that will net it 20% of oil proceeds. The SDF is allowing this (and gets its share as well). Syrian media reported that the largest US base in eastern Syria, in the Omar oil field in the province of Deir ez-Zor, was targeted with missile and artillery attacks. No casualties were reported. In December, US forces said they shot down a small drone that was believed to be threatening a U.S. outpost in southern Syria. Earlier this week, Iraqi media reported drone attacks on the Ain al-Assad base in Iraq’s Anbar province.
While the world’s attention has now moved away from the neverending conflict in Yemen, a small victory for southern separatist forces has reportedly wrestled control of an oilfield in western Shabwa from the Iranian-backed Houthis.
At least one person was killed and several injured in an attack by an armed gang against Haiti’s Prime Minister Ariel Henry. The media reported that the assassination attempt was carried out by a group of mercenaries. Prime Minister Henry and his entourage were leaving a church in the city of Gonaives after a mass to commemorate the 218th anniversary of independence. The security situation in the country has deteriorated since the assassination of President Jovenel Moise last July.
Sudanese Prime Minister Abdalla Hamdok resigned after thousands of citizens protested his recent deal to share power with the army. The military staged a coup, ousting Hamdok in October, only to see Hamdok reinstated a month later after making a deal with the military. In his resignation letter, Hamdok said he failed to find a compromise between the ruling generals and the pro-democracy movement. His decision to resign leaves the army in full control.
Markets
Kazakhstan’s turmoil was the main contributor to Thursday’s spike in oil prices that sent WTI to just under $80 and Brent to over $82.
Higher oil and gas prices catapulted Exxon into its fourth quarterly profit in a row–and helped the oil major return to an annual profit for 2021, even after booking some large one-time charges. Exxon booked a gain of $1.9 billion in operating profits. The profits were largely on the back of oil and gas production, and not from refining and chemicals divisions, which were essentially flat or lower. The results are markedly different from Exxon’s 2020 loss of $22.4 billion as oil prices crashed and refining margins fell.
Inflation is rampant in Istanbul–the most in at least ten years. Erdogan raised Turkey’s electricity and natural gas prices for 2022, and petrol prices were also raised. Electricity prices were raised as much as 125% for high-demand commercial users and 50% for lower-demand households. Natural gas prices increased 25% for residential and 50% for industrial users.
OPEC+ has agreed to another output hike of 400,000 bpd starting in February, as generally expected. The meeting was quick and relatively uneventful aside from the expected output hike. OPEC+ has failed to meet its new quota in any recent month, still underproducing as a whole. Some suggest OPEC+’s spare capacity isn’t what it’s made out to be. Either way, the group continues to lag behind the new quotas each month. All eyes are now on the murky oil demand outlook, as the market worries that demand could soon outstrip supply.
Deals & Development
US Dominion Energy completed a deal this week to sell its Wyoming-Utah Questar Pipeline business for $1.975 billion to Southwest Gas Holdings Inc. The deal also means Southwest will absorb $430 million in Questar’s existing debt. Dominion, for its part, will instead focus on its clean energy portfolio (including a new wind farm) and utility customers.
In one of the more bizarre deals of the week, Sri Lanka will settle its oil debt to Iran in tea. That’s $5 million in tea, for starters, for a debt that is over $250 million. That’s what happens when sanctions bite and other channels of payment are closed.
Russian private company Lukoil has clinched a deal with state-run Gazprom Neft that will see Lukoil acquire a 50% stake in Meretoyakhaneftegaz LLC (a subsidiary of Gazprom Neft) for nearly $700 million. This deal is part of a larger JV deal between the two for the development of a major oil and gas project in the Yamal-Nenets Autonomous District.
ExxonMobil has made two oil discoveries at wells located in the Stabroek block offshore Guyana. According to the company, these discoveries will add to the previously announced recoverable resource estimate for the block, of 10 billion oil-equivalent barrels.
Regulation
Within the next two years, Mexico will stop exporting crude oil altogether as part of President Obrador’s plan to boost domestic supplies and reduce dependence on imported fuels. This year, Mexico plans to reduce oil exports by more than 50%, followed by a similar reduction in 2023. That’s a major about-face for a country that is the third-largest oil exporter in the Americas, after the United States and Canada. The problem for Mexico is that fuel demand has risen and domestic oil production has failed to keep pace. The country also suffers from a lack of refining capacity, which the Mexican president plans to address through the construction of a new $12-billion refinery. Most oil from Mexico makes its way to North American and China. Gulf Coast refiners will feel this most, after already losing their source of heavy oil, Venezuela.
Exxon was granted another batch–2 million barrels–of oil from the USSPR. Exxon must return the amount between 2022 and 2024. This brings Exxon’s total SPR take to 6.8 million barrels from the SPR.
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The EU plans to allow gas and nuclear to be labeled as “green” investments. The block is expected to propose rules later this month deciding whether gas and nuclear projects will be included in the EU "sustainable finance taxonomy." The proposal argues that gas and nuclear are key to helping transition to cleaner power. However, several member countries such as Germany are opposing it and calling it dangerous. For its part, Germany is planning to switch off its remaining three nuclear power plants by the decade. On the other side, France, which is Europe’s biggest producer of nuclear power, has supported the plans to consider nuclear energy climate-friendly.
Ukraine, a net gas importer, will tap private gas producers who will sell 20% of their production on Ukraine’s exchange to help stave off blackouts and winter gas shortages.
A judge ordered Shell to halt offshore seismic survey on South Africa’s Wild Coast, citing environmental and constitutional issues. The date for the full hearing has not yet been set. The judge ruled that Shell had failed to meaningfully consult with communities and individuals who would be impacted by the seismic survey. Shell had received the go-ahead on December 3 for a different court for the seismic survey.
OPEC has named Kuwaiti oil exec Haitham al-Ghais as its new Secretary-General. al-Ghais will take over OPEC leadership in August from Nigeria’s Barkindo. The appointment has sparked much speculation considering that Kuwait may be at its peak oil production. Estimates vary on Kuwait’s production capacity, with some saying 3 million bpd and others estimating closer to 2.5 million bpd. Kuwait is already producing 2.531 million bpd. The speculation, based on that, is that the new OPEC secretary-general might not favor quota hikes.
Renewables
China will slash new energy vehicles (NEV) subsidies (in place since 2010) by 30% and withdraw them altogether at the end of the year. China has set a target for plug-in hybrids and hydrogen fuel cell vehicles to make up 20% of auto sales by 2025. Last year, more than 2.7 million passenger plug-in cars were sold.
Israel's Defense Ministry has partnered with local renewables developer Energix Renewable Energies Ltd for the installation of up to 41 wind turbines in the northern Golan Heights. The project will supply clean energy to tens of thousands of homes in Israel. The project is highly controversial, however, with strong opposition coming from Syrians living in the Golan Heights. In early 2019, the Trump administration recognized Israel’s hold on Golan Heights, prompting international criticism.
Chinese Huaneng Power International (HPI) has finished the world’s largest floating PV project, featuring a 320MW facility in Dezhou, Shandong province. The floating solar park is part of a larger renewable energy project that also incorporates a 100-MW wind farm.
