Tensions Between the West and Russia are Rising Again

Politics, Geopolitics & Conflict

- Tensions are slowly rising, and expanding further afield in relation to the Russia-Ukraine war, with a number of new developments that build on other East-West conflict developments over the past few months. France agreed (on D-Day) to give Mirage fighter jets to Ukraine by the end of the year. Four Russian warships are headed for Cuba and will dock next week in what is being interpreted as a message to Washington. One of the four warships is a nuclear-powered sub, and Moscow promptly assured that none would be armed with nuclear weapons. That preceded Washington’s move to green light Kyiv’s use of American weapons to target Russian territory across the border in what essentially looks like full-on proxy warfare. These are all dangerous steps towards a world war that could easily end up being entirely by proxy.

- Biden’s 3-phase ceasefire plan for Gaza was on the line this week at the UN, with Russia, China and Algeria indicating they were not prepared to back the proposal yet. In order to pass, the resolution needs backing from nine member countries, for starters, and zero vetoes (China, Russia, Britain, the U.S. and France all have veto power).

- Climate scientist and former Mexico City mayor Claudia Sheinbaum has won Mexico’s presidential elections, and has vowed to continue in the path of AMLO. Sheinbaum is a leftist who campaigned on a promise of more renewable energy development. She may have to tone down her climate activities in order to continue to keep the support of AMLO followers, so we expect a more cautious start to her mandate.

Discovery & Development

- A South African appeals court has temporarily reinstated Shell's offshore exploration rights along the Wild Coast, allowing oil companies another chance at public consultation. This decision reverses a previous ruling that halted exploration due to inadequate public consultation, giving the industry a much-needed boost. The ruling is significant as it reignites interest in South Africa's offshore oil potential, particularly following recent gas discoveries by TotalEnergies. However, the decision faces ongoing legal challenges from environmental groups, which could further impact the exploration timeline.

- Kazakh tycoon Yury Yepishev secured the development rights for the promising Karagan oilfield, paying approximately $5 million at a government auction. The field's location in the same province as Tengizchevroil, Kazakhstan's largest producer, raises hopes of substantial reserves in deeper formations. Despite low investor interest overall, Yepishev's Medeo Drilling Group outbid others, with additional significant bids coming from local player Asia Energy. This acquisition aligns with Yepishev's prior successes, including winning rights to other promising blocks and operating leading business contractor Unex Stroy.

- South Korean oil and gas shares surged after President Yoon Suk Yeol approved the development of a significant offshore deposit near Pohang. Korea Gas Corp. saw a record 30% increase, Posco International Corp. rose 19%, SK Gas Ltd surged nearly 7%, and SK Innovation Co. climbed more than 6%. The discovery, estimated to hold up to 14 billion barrels of oil and gas, aims to bolster South Korea's energy security amidst global market disruptions. Drilling will commence later this year, with production expected to start in seven to ten years.

- TotalEnergies plans to take a Final Investment Decision (FID) on its first offshore field development in Suriname's Block 58 later this year, with production starting in 2028. The Sapakara and Krabdagu fields, estimated to hold over 700 million barrels of recoverable resources, will employ advanced recovery techniques and seismic technology to maximize output. Staatsolie, Suriname's state-owned company, may take up to a 20% interest in the development, and an agreement for a 25-year production period has been signed. To reduce emissions, the facilities will be designed for zero routine flaring, with all associated gas reinjected.

Deals, Mergers & Acquisitions

- Devon Energy has missed out on acquiring Marathon Oil, which was instead bought by ConocoPhillips, continuing Devon's streak of unsuccessful acquisition attempts. The company has previously lost bids for CrownRock and Enerplus, both of which opted for deals with other firms. Despite these setbacks, Devon remains a potential acquirer in the ongoing oil industry consolidation, with possible targets including Ovintiv, Permian Resources, and Civitas Resources. Devon's strategic patience in not overpaying for acquisitions may benefit them as competition for remaining targets diminishes.

- Alaska’s gas line agency and Pantheon Resources have signed a gas sales precedent agreement for the Alaska LNG project, aiming to address Southcentral Alaska’s potential energy shortage by 2029. This initial phase, estimated at $11 billion, focuses on delivering North Slope gas to replace dwindling Cook Inlet supplies. Although Pantheon Resources has yet to produce the required natural gas and secure final investment decisions, this agreement sets a commercial foundation for future development. Despite historical challenges in securing private investments, this deal marks a significant step towards the long-term goal of exporting liquefied natural gas to Asian markets?

- Amidst soaring energy demands, Sinopec Oilfield Service Co. clinches a $1.1 billion deal to construct natural gas pipelines for Saudi Aramco, enhancing the Kingdom's gas distribution infrastructure. With a focus on expanding gas networks, Sinopec's venture includes building trunk lines stretching 2,630 km and 1,340 km of branch lines as part of Aramco's ambitious energy plans for Saudi Arabia. Sinopec's involvement in Saudi Aramco's Master Gas System underscores the lucrative opportunities in the Middle East's energy sector, with completion expected by May 2027. Saudi Aramco's partnerships, including the recent $3.3 billion contracts awarded to Sinopec and Tecnicas Reunidas, signal significant developments in the region's energy landscape, attracting savvy investors eyeing long-term gains.