Is Russia Sending Enough Natural Gas To Europe?

Geopolitics

European natural gas prices started dropping this week after Russia started increasing supplies, but the market's initial optimism over more Russian gas was dulled later in the week when shipments were smaller than hoped for. Overall, the increased Russian gas flow isn't any more than it should have been at this time of year under contractual agreement. It's not enough to assure Europe that it can avert an energy crisis.

The EU is expected to hit Belarus with new sanctions as early as next week in retaliation for the ongoing migrant crisis. Reuters reported that fresh sanctions will include some 30 individuals and entities including the foreign minister and Belarusian airline Belavia. Earlier this week, the EU accused Belarus's leader Alexander Lukashenko of luring migrants with the false promise of easy entry to the EU. EU member countries Poland, Lithuania, and Latvia have all seen a surge in the number of people trying to enter their countries illegally from Belarus. At the same time, Belarus, in an act of retribution, is threatening to cut European gas supply (one of Russia's natural gas pipelines to Europe runs through Belarus).

Ahead of the resumption of nuclear talks with Iran in Vienna on November 29th, it increasingly appears likely that Iran's perception is that it has growing leverage and will bargain for maximum sanctions relief for any movement on its nuclear program.

Deals, Mergers & Acquisitions

Gambia has launched a new bidding round for Block A1 (offshore), with a four-month timeframe for submitting offers. In the Spring of 2019, BP exited this block; hence the new auction.

Noble Corp and Maersk Drilling will merge to form Noble Corporation and will close mid-year next year.

ExxonMobil plans to invest in a China petrochemical complex in the Dayawan Petrochemical Industrial Park, after making its FID. Exxon said the complex will produce performance polymers that will be used in packaging, automotive, agricultural, and consumer products for hygiene and personal care. Construction is already underway.

GE plans to split into three separate businesses: healthcare, energy, and jet-engine aviation. The energy spinoff will encompass both fossil fuels and renewable energy. GE has already cut several unrelated business segments from its lineup in recent years, and the new separation will allow each company to focus only on its core business. Each company will have its own board of directors.

Oilfield services provider Baker Hughes has signed a deal with Shell's clean energy unit to acquire renewable energy credits (RECs) for two years.

Discovery & Development

Equinor plans to invest $8.8 billion in developing the Wisting discovery - the world's northernmost oilfield, in the Arctic Barents Sea, thought to contain nearly 500 million boe. An FID is expected by the end of next year, and talk is of a potential 2028 date for going live. Equinor holds a 35% stake in Wisting, with Lundin Energy, a 10% stakeholder, set to purchase OMV's 25% stake to bring its total to 35%. Petoror holds 20%, with Japan's Idemitsu the last 10%.

ExxonMobil has discovered traces of oil off the southeast coast of Brazil in the Tita exploration block in the Santos Basin, through its 1-EMEB-2-RJS well. The oil was discovered in waters 2,644 meters deep. Exxon owns a 64% stake in the project, with QPI Brasil holding the rest.

The Kenyan government plans to raise $1 billion of debt to buy a stake in an oil project operated by British Tullow Oil. Tullow is under increasing pressure from Nairobi to develop the Turkana oil wells discovered nine years ago. The project is expected to produce up to 120,000 barrels per day once production starts. December is Tullow's deadline to present an investment plan.

Regulation

The Netherlands will become the latest country to sign a COP26 deal to stop all public international investments in coal, oil, and gas projects by the end of 2022. A total of 23 countries have already signed the deal, with the Netherlands to be the 24th.

Washington confirmed earlier this week that it will not shut down Enbridge's controversial Line 5 pipeline, which runs from Canada to Michigan. Threats of a shutdown, pursued by Michigan Governor Gretchen Whitmer, had prompted Canada to invoke a 1977 treaty with the US, which in turn set off bilateral negotiations at the federal level. Whitmer views the pipeline as a threat to the Great Lakes because part of it runs underwater under the Mackinac Strait.

This past weekend (Nov 6th) US Congress passed the $1-trillion Bipartisan Infrastructure Deal, which will rebuild roads, bridges, rails, expand access to drinking water and high-speed internet, and reduce greenhouse gas emissions in the transportation sector.