Can Germany Solve The Nord Stream 2 Dispute?

Politics, Geopolitics & Conflict

- Mali, one of the most tantalizing gold venues in Africa, is also the riskiest, and investors in mining operations in Mali are now finding that out in the aftermath of a military coup d’etat that ousted President Ibrahim Boubacar Keita after months of protests. The last coup was in 2012, and it led to years of bloodshed with both Touareg rebels and Islamic jihadist groups (Ansar Dine and AQIM) fighting the Malian army in the north. Keita could not secure the country. Nor could his predecessor. The brief flirtation with nominal security was but a mere illusion. For gold mining companies, it’s bad for Barrick and AngloGold Ashanti, but good for everyone else who’s not in Mali.

- For what it’s worth at this stage in the game, the U.S. will form a coalition to prevent Russia’s Nord Stream 2 pipeline from reaching completion, Pompeo said this week. Citing security concerns for Europe as it would need to rely heavily on Russia for its imported gas, the coalition would work to prevent this reliance. It is unclear what additional steps the coalition could take to prevent the gas pipeline’s completion, which is already over 90% complete. It is also unclear how big this coalition would be, as clearly Poland and Ukraine will not be enough (both will be bypassed and lose money because of Nordstream). Russian media is happy to report that the Germans are so desperate for Russian money that they are offering to invest one billion euros in U.S. LNG in return for Washington lifting sanctions against Nord Stream. The deal, according to German media, is that Berlin would invest in the construction of two LNG terminals in Germany to receive American natural gas. It’s a deal that will speak Trump’s language. Keep a close eye on this one.

- U.S. oil major Chevron has asked its employees to remove WeChat from their work phones in an effort to comply with the Trump Administration’s executive order to ban the Chinese app citing security risks. Chevron threatened to disconnect work handsets from the company’s network if the app was not deleted within days.

- PDVSA has started to load an Iranian vessel with its heavy crude with the intent to export in a defiant move contrary to U.S. sanctions on both countries.

- Protesters in Iraq have managed to shut down an oil company - Dhi Qar - in southern Iraq this week, adding to Iraq’s woes amid low oil prices, the coronavirus, and general unrest. Dhi Qar is state-owned and operates the Nasiriyah and Subba fields. Shutting down these fields does not have any major impact on oil flow for exports but is intended to put pressure on the Iraqi government.

- The Islamic Revolution Guards Corps (IRGC) of Iran opened this week a new naval base in a coastal town along the world’s most important oil chokepoint, the Strait of Hormuz in what will be viewed as a direct provocation of the United States.

Deals, Mergers & Acquisitions

- Occidental has opted to pay its dividends on preferred shares in cash instead of stock options to Berkshire Hathaway, after earlier the oil company paid it in stock options amid the uncertainties of the pandemic - and perhaps more importantly, to save on cash as it drowned in debt following the Anadarko purchase. Berkshire bought $10B in preferred Oxy stock last August. The dividend payout is $2K per share for preferred shares. The fact that the dividends are being paid in cash once again may signal that Oxy sees better financial positioning ahead.

- ExxonMobil is drawing interest from potential purchases of its North Sea assets as the oil giant attempts to bail on all its assets in the UK’s North Sea. Interested bidders include the likes of Sinopec, Kuwait Foreign Petroleum Exploration Co, Tailwind Energy, NEO Energy, Siccar Point Energy, Viaro Energy, and EnQuest. Up for grabs are Exxon’s stake in 15 fields that are expected to produce 37,000 boepd for Exxon, and its stakes in pipeline infrastructure and two exploration areas.

Regulations & Legislation

- Trump’s grandiose American Oil Independence agenda is now squarely in the rear-view in the runup to the November election. Last week, it was the Administration’s implementation of a drilling moratorium in several states, followed by a splurge of denials for small refiners looking for retroactive waivers for blending ethanol. This week, Trump added another state to its drilling moratorium, which runs through 2032 - North Carolina. The surprise drilling ban takes a lot of coastal areas off the table for oil and gas drilling, and is likely reflective of what the Administration perceives is voter preference for a mix between fossil fuels and tourism.

- California has banned the sale of new gasoline cars after 2035, courtesy of Governor Gavin Newsome. California is the largest car market in America, and it is the first state to implement a full ban. California’s EV sales now account for just 8% of all new vehicles sold, using data from the first half of the year.

- Rumors this week surfaced that Iraq would ask OPEC to allow it to increase its oil exports. This, just one month into Iraq’s final full compliance with its production quotas. Iraq’s oil ministry has denied the claim.

- Tesla is suing the Trump Administration over tariffs on computer chips and other parts it imports from China. The company has sued in the U.S. Court of International Trade in New York, seeking an order that declares Trump's tariffs against China unlawful. It is also seeking a refund, with interest, of tariffs it has already paid. Hundreds of companies filed a similar lawsuit, including automakers Ford, Mercedes-Benz, and Volvo.

Renewable Energy, ESG

- Dutch asset manager Robeco is the latest to cut its exposure to fossil fuels. Robeco announced this week that it will scrap investments in oil sands, Arctic drilling, and thermal coal from its mutual funds. It intends to complete the exclusion by the end of this year.

- One of the world’s largest makers of coal-fired power plants – GE - will no longer make coal-fueled power plants. The move will likely have a ripple effect on plant closures and mass layoffs. That GE has seen the writing on the wall with coal power is particularly noteworthy. Just a few years ago, GE spent nearly $10 billion on Alstom - a coal-fueled turbine maker. This move is akin to GE ripping off the band-aid of that egregious error.

- Morgan Stanley will target net-zero financed emissions within 30 years, making it the first major U.S. bank to do so. It will cut back lending and underwriting for carbon-intensive industries. Its plan has been criticized for lacking specificity, and for following $91 billion in fossil fuel investments in the three years between 2016 and 2019.

- Australia plans to invest over $13 billion in low emission technologies through 2030. According to the government’s estimates, this investment is set to drive at least $36 billion of new investments over the next decade