Geopolitics ExxonMobil and Qatar Petroleum are several weeks away from a resumption of exploratory drilling offshore Cyprus, while French Total SA and Italian Eni are set to resume drilling in the same area in H1 2022. This drilling update coming from the Cypriot government prompted a retaliatory statement from Turkey, with Ankara - which contests waters in the area that overlap its continental shelf and fall offshore Turkish Cyprus - saying it would not be deterred from drilling nearby in contested waters. Statements like this will make investors in these Western drillers nervous, given a prior incident in 2018 when Turkish warships impeded Eni’s drillship from exploring. Following a historically shocking detente between Israel and the UAE last year, and the signing of agreements for major energy deals shortly afterward, one of the biggest Israeli-UAE deals is now being questioned. This week, Israel’s energy minister called for the cancellation of his country’s oil pipeline deal with UAE investors, citing environmental concerns. This reflects the uneasiness, particularly within Israel, and the political backlash is now being felt, which in turn could upset diplomatic progress. In retaliation for Poland’s harboring of “dissidents”, Belarus restricted flows through a Russian oil pipeline to Poland. There is also speculation that Belarus is “weaponizing” migrants positioned on the border attempting to enter…
Geopolitics
ExxonMobil and Qatar Petroleum are several weeks away from a resumption of exploratory drilling offshore Cyprus, while French Total SA and Italian Eni are set to resume drilling in the same area in H1 2022. This drilling update coming from the Cypriot government prompted a retaliatory statement from Turkey, with Ankara - which contests waters in the area that overlap its continental shelf and fall offshore Turkish Cyprus - saying it would not be deterred from drilling nearby in contested waters. Statements like this will make investors in these Western drillers nervous, given a prior incident in 2018 when Turkish warships impeded Eni’s drillship from exploring.
Following a historically shocking detente between Israel and the UAE last year, and the signing of agreements for major energy deals shortly afterward, one of the biggest Israeli-UAE deals is now being questioned. This week, Israel’s energy minister called for the cancellation of his country’s oil pipeline deal with UAE investors, citing environmental concerns. This reflects the uneasiness, particularly within Israel, and the political backlash is now being felt, which in turn could upset diplomatic progress.
In retaliation for Poland’s harboring of “dissidents”, Belarus restricted flows through a Russian oil pipeline to Poland. There is also speculation that Belarus is “weaponizing” migrants positioned on the border attempting to enter Poland--the goal being to provoke an armed conflict.
Markets
Europe’s energy crisis is worsening. Germany has suspended the certification process for the Russian pipeline that could bring relief, and analysts are heralding rolling blackouts this winter should it be colder than normal. Meanwhile, the contract for gas in the Netherlands--a benchmark for Europe--has risen 60% so far in November. LNG prices are on their way to reaching record highs as well. China is claiming that its energy crisis that resulted in blackouts last month is now easing, with its increased coal production. U.S. gasoline prices are also still high, with crude oil inventories there falling. President Biden, in an attempt to bring gasoline prices down American drivers, has asked big oil-consuming countries--including China--to release oil from their reserves in a coordinated effort to bring down the price of crude oil. All signs point to lingering high prices for the winter season, with OPEC cautioning that the market will return to oversupply in 2022.
Amid rising inflation and dwindling forex reserves, Sri Lanka has closed its only oil refinery, capable of refining 50,000 bpd. Sri Lanka will leave the refinery closed for about 50 days while it focuses on bringing in food and medicine. The energy ministry assured the people that the closure would not result in a fuel shortage because they will instead import refined products.
Petroperu has evacuated workers from one of its oil stations in the Amazon after an indigenous community has threatened to take it over. The company operates an oil pipeline there that brings oil to the coast--but no oil has been transported since October due to indigenous protests.
Deals & Discoveries
Woodside Petroleum is selling a 49% non-operating interest in its Pluto Train 2 JV to Global Infrastructure Partners. PT2 is part of Woodside’s Scarborough offshore development, with plans for a new LNG train that will be built at the existing Pluto LNG onshore site. First cargo is expected to ship in 2026. The deal is subject to FID for PT2 and Scarborough, which is expected next month. Woodside will retain the 51% interest.
Chile is proposing a fantastical project where it would export solar energy to China by a massive 15,000 km submarine cable that could cost as much as $23 billion to build. On top of that, Chile would need to add solar plants to expand its 3,106MW of existing capacity. The project would draw on Chile’s vast solar abilities of its Atacama Desert--the region with the highest solar radiation in the world. It would also capitalize on the fact that when it is day in Chile it is night in Asia, and when it is summer in one place it is winter in the other.
After successfully listing on the Abu Dhabi Exchange, ADNOC has awarded $6 billion in contracts for drilling equipment and services as it attempts to increase its oil production capacity to 5 million bpd by 2030 and increase its natural gas output. The contracts are for wellheads and related components and more.
Regulation
Shocked at Shell’s plan to exit the Netherlands, the Dutch government will review tax changes for oil and gas companies to entice it to stick around. The government is considering scrapping a 15% withholding tax, but such a bold move may not get the needed support to pull it off. It is unclear whether this would keep Shell there.
The BOEM’s drilling rights auction was a hit, generating $191 million in high bids, with Chevron and Anadarko being the biggest spenders. While U.S. oil and gas companies have shown themselves to be careful with spending even as oil prices have climbed, this sale has shown that lower carbon footprint prospects are still attractive, even in these uncertain times. The lease sale was held after a court injunction against President Biden’s suspension of oil and gas lease sales.
At the same time, the Biden Administration has banned new oil and gas leases on federal lands in New Mexico on the objection of Native American tribes who claim that drilling is encroaching on sacred and cultural sites. The DoI will review a rule banning new oil and gas developments within 10 miles of the Chaco Culture National Historical Park over the next 20 years. New mineral leases in that area will also be banned.
Renewables
Shell acquired from Simply Blue Group a 51% stake in a floating wind farm project in Ireland that will generate 1.35 GW of electricity capacity. The price was not disclosed. The project is designed to power more than a million homes.
The U.S. is set to install a record level of solar and wind capacity next year, including up to 44GW of solar capacity, 27 GW of wind capacity, and 8 GW of battery storage capacity. Solar is now potentially on track to account for 20% of all US electricity generation by 2050--up from 3% in 2020.
Munich-based solar car company Sono Motors has made its IPO debut on Nasdaq, following another green automobile IPO last week, Rivian. Sono (SEV) listed 10 million shares at $15 each. Sono’s plan is to introduce a budget-minded electric vehicle called Sion, designed for urban commutes. Deliveries are expected in 2023. Sono said the vehicles could travel 10 miles per day from sunlight, while its 35 kW battery would be good for 160 miles.
