Iran's Leading Nuclear Bomb Expert Assassinated

Politics, Geopolitics & Conflict

The Houthi rebels have claimed that they struck an Aramco distribution facility this week in Jeddah. Energy Ministry sources said there was a fire at the North Petroleum Products Distribution Station as a result of the attack, and satellite photos support this.

While Libya has managed to bring up its oil production to 1.25 million bpd, its troubles are not yet over. There is now an issue of the Central Bank, which has historically handled all oil revenues. However, the NOC is now alleging that the Central Bank mismanaged the oil revenues in the past. The NOC said it would no longer allow revenues to go through the Bank until transparency is improved and more information on what happened to previous oil revenues is forthcoming.

The situation in Iran and Israel is intensifying. The Israeli military is readying for a possible strike against Iran by the United States. Meanwhile, Iranian nuclear scientist Dr. Mohsen Fakhrizadeh has been assassinated in a town east of Tehran. The scientist is considered the father of Iran's nuclear bomb, and has been shrouded in secrecy for years, without even a photo of the scientist available until a couple of years ago. Few have met him, and few know what he looks like. The Iran Atomic Energy Organization Spox has denied the assassination report, saying that there has been no incident involving nuclear scientists. Meanwhile, the Iranian Revolutionary Guard has vowed to avenge his death. This story is still rapidly developing.

Covid-19 Update

Barclay's is keeping its estimate for Brent prices in 2021 at $53 a barrel, based on OPEC's discipline with the production cuts, and based on the promise of a vaccine which it expects will boost oil demand in H2. For WTI, Barclays is forecasting $50 per barrel next year.

Deals, Mergers & Acquisitions

Iraq is looking for anyone interested in paying $2 billion upfront for a year's worth of oil under a five-year supply contract as it desperately tries to shore up its finances. The terms would be for 130,000 barrels per day, with the buyer paying for a year of oil upfront. That's surprising for Iraq who hasn't employed this oil sales method in the past, but not nearly as surprising as the deadline for the transaction, which is November--far too soon for most companies to get such a sum approved. Iraq's situation is dire, and it's possible it will be unable to pay its civil servants without intervention.

Discovery & Development

Genel and Chevron have begun oil production from Iraq's Sarta 1 field. Sarta 2 is expected to start producing in January. Genel has a 30% stake in the project, while Chevron is operator.

BP and Ithaca Energy have successfully started production from its Vorlich field in the UK North Sea. It is BP's third major startup this year, and there are two more in the works to be completed before 2021 is done. BP will also look to invest more in oilfields in the Middle East, including in Iraq's giant Rumaila field, in Oman (for gas), and the UAE--even as it plans to continue ditching some assets and targeting a 40% decline in fossil fuel production within the next decade.

Regulations and Legislation

Should President-elect Joe Biden wage war on the fracking industry and oil drilling on federal lands, the API is ready for war. While Biden's team has not officially adopted a clear anti-fracking stance in the last few months, in March, during the last democratic debate, Sanders clarified his position on the subject, "I'm talking about stopping fracking, as soon as we possibly can. I'm telling the fossil fuel industry that they are going to stop destroying this planet. No maybes about it…" to which Biden responded "So am I (...) No more, no new fracking." Of course, things said on the debate stage are not always reflective of true intentions, but the API is out for blood--just in case. And we're sure the progressive lefts will try to push Biden further left on climate issues. Whether Biden, who clearly isn't as committed to the cause, and who has likely adopted the stronger fracking stance to win his party's backing, can withstand the pressure by Sanders and AOC remains to be seen. The API has said it will "use every tool at its disposal" to fight any measures to stop fracking. Biden's official promise is that he will not ban fracking.

GM is pulling its support from the Trump administration's fight against California's auto emissions regulations, reading the room ahead of the Biden administration taking office next year. GM was one of the few automakers that sided with the Trump administration against California, arguing for a single standard across the United States. But now, GM is changing its tune, saying that it will no longer side with the Trump administration in order to foster dialogue with all interested parties to set a standard that would apply to all states, confident that the parties can "find the pathway that will deliver an all-electric future."

The US Army Corps of Engineers issued a construction permit--the last of the big hurdles--for Enbridge Line 3 across northern Minnesota--a replacement line. The pipeline, after six hard-fought years, now has all the federal permits and needs and could be building as soon as December. It will be one of Minnesota's largest construction projections ever, and will span 340 miles. While there are reports that there could be appeals and injunction-seekers going forward, and that there is one more regulatory process to go through, we see no real chance here that the construction on this line will be stopped. The next steps are a permit that deals with stormwater, but Enbridge expects to clear this without complication.

Enbridge's Line 5 in Michigan is another matter. Earlier this month, Michigan Governor Whitmer and the DNR ordered the pipeline to stop all operations in 180 days, or by May 2021, through the revocation of the easement Enbridge has enjoyed since 1953. Now, Enbridge is suing Michigan to stop the order that would block the pipeline, and has asked to move the matter to a federal court. It is expected that the venue issue will be settled this year, with the legal battle set to commence after that. Enbridge has been trying to get approval to replace the twin lines that run under the Straits of Mackinac and shroud it in a tunnel for safety, well under the lakebed. The anti-pipeline sentiment in the American market is so widespread now as there seems to be no end to the objections to any pipeline project, even if it is just to make an existing line safer. Line 5 carries a half a billion barrels of oil and propane and other petroleum products every day, mostly to markets in Michigan, Ohio, and Pennsylvania. We see a possibility here for other states to object to Michigan's blocking of the line, citing Commerce Clause violations.

The Colorado Oil and Gas Conservation Commission has approved tougher setbacks that will go into effect on January 15, moving from "fostering" to "regulating in a protected manner" so the COGCC chairman said. The 2,000-foot setback rule from homes and schools is the most contentious of all the new rules--a move that will cost the state nearly $4.5 billion in lost revenues. Some of the other rules include tightening of rules on flaring and venting. This is the route California took, and Colorado will likely see similar results as to its energy future.

Renewables

Perth-based mining giant Fortescue Metals Group is the latest to jump on the renewable bandwagon, with the world's largest iron ore exporter giving an ambitious timeline of 2022 or 2023 to be producing 235GW of renewable energy (which is about 20% of what the US produces now) using wind and solar. It will also dip its toes into ammonia production and hydrogen.

Enel , Europe's largest utility, has plans to spend US$190 billion over the next ten years to become what it calls a "green super major". Its ultimate goal is to become carbon neutral in 30 years. It plans to triple its renewable energy capacity by 2030 to 120 GW.

Spain-based Repsol--the first oil major to adopt net-zero emissions targets by 2050--has hatched another ambitious plan--to put its projects into "harvest mode", focusing on those oil projects that have higher value, and focusing on projects in fewer countries. Meanwhile, it will use the cash generated from its oil business to increase its renewable capacity to 15GW. It also has a plan to produce green hydrogen, despite the naysayers that claim it is not yet cost effective.

Equinor and utility company SSE will invest $8 billion in a giant Dogger Bank wind project with an installed capacity of 2.4GW in the British section of the North Sea.