Politics, Geopolitics & Conflict
- Natural gas continues to be a major diplomatic tool in the Middle East region, as new gas giant Israel prepares to sit down with Lebanon for a US-mediated meeting to discuss maritime borders that have a direct link to the Mediterranean offshore oil and gas riches. Should Lebanon ever resolve its domestic political issues to the point where it can truly begin offshore exploration, having a maritime deal with Israel after decades of conflict will be perhaps the biggest vote of confidence for investors.
- After withdrawing an exploration vessel from offshore Cyprus last week, in a move that Turkey attempted to pass off as “diplomatic” but was likely related to exploration failure, Ankara has deployed another vessel - this time in Greece’s territorial waters in what is being viewed as a direct provocation. The Turkish seismic survey vessel has been deployed off the coast of Turkey near the Greek island of Kastellorizo.
- Angola’s state-run oil giant Sonangol, long a den of corruption that siphoned an estimated $14 billion out of state coffers, is now being considered for listing on a stock exchange upon completion of restructuring. If that happens, Sonangol would likely be listed in New York, London, or China. Angolan authorities have hinted that some 30% of the company could be offered in a listing as soon as 2022.
- Philippines President Rodrigo Duterte has lifted the moratorium on oil and…
Politics, Geopolitics & Conflict
- Natural gas continues to be a major diplomatic tool in the Middle East region, as new gas giant Israel prepares to sit down with Lebanon for a US-mediated meeting to discuss maritime borders that have a direct link to the Mediterranean offshore oil and gas riches. Should Lebanon ever resolve its domestic political issues to the point where it can truly begin offshore exploration, having a maritime deal with Israel after decades of conflict will be perhaps the biggest vote of confidence for investors.
- After withdrawing an exploration vessel from offshore Cyprus last week, in a move that Turkey attempted to pass off as “diplomatic” but was likely related to exploration failure, Ankara has deployed another vessel - this time in Greece’s territorial waters in what is being viewed as a direct provocation. The Turkish seismic survey vessel has been deployed off the coast of Turkey near the Greek island of Kastellorizo.
- Angola’s state-run oil giant Sonangol, long a den of corruption that siphoned an estimated $14 billion out of state coffers, is now being considered for listing on a stock exchange upon completion of restructuring. If that happens, Sonangol would likely be listed in New York, London, or China. Angolan authorities have hinted that some 30% of the company could be offered in a listing as soon as 2022.
- Philippines President Rodrigo Duterte has lifted the moratorium on oil and gas exploration in the West Philippine Sea. The moratorium on all exploration and drilling activities was imposed in 2014 by the previous administration due to geopolitical tensions between the Philippines and China.
COVID Market Update
The oil markets are still focused on demand, but this week shows that oil prices are becoming a bit more resistant to projections of lower demand. OPEC’s MOMR this week showed that the cartel is predicting lower oil demand than it had projected last month, and the IEA is now saying that oil demand won’t return to pre-pandemic levels until 2023 - and that’s only if the pandemic is brought under control sometime next year.
And despite additional coronavirus lockdowns instituted in Europe this week, oil prices have remained in a tight band near the $40 mark for WTI, and near $43 for Brent.
- After a 7-month break, Alberta will once again offer land for sale to oil and gas companies by the end of this year. Typically, Alberta holds its auctions two times each month. Alberta has cited growing interest from oil and gas companies for leases in the area as a reason for resuming the auctions. The only question that remains is whether - at this point - Alberta gets the price it needs for these leases.
- The Bureau of Ocean Energy Management has scheduled for November 18th the auction of all available areas in the Gulf of Mexico, the federal government's first offshore lease sale since March. BOEM will offer 78 million acres offshore Texas, Louisiana, Mississippi, and Alabama for oil and gas development.
Deals, Mergers & Acquisitions
After a muted third quarter, the M&A acquisition landscape might finally be heating up, suggesting that oil and gas companies have seen the writing on the coronavirus wall--it’s time to consolidate and trim more fat than laying off a handful of employees can accomplish. There are deals to be made, and the haves are now taking advantage of the have-nots.
- On that front, this week we saw ConocoPhillips eye juicy Permian player Concho resources, which has a market cap of nearly $9 billion. Conoco is hoping for a good deal on this one, in line with the great deal that Chevron got with Noble. For now, it’s just talk and speculation, but if a deal does go through, it would make Conoco one of the largest E&P players in the world, capable of producing 1.3 million boepd.
- BP will ship natural gas from Azerbaijan to Europe by the end of 2020, despite the trouble in the region between Armenia and Azerbaijan over Nagorno Karabakh. The pipeline in which BP is a shareholder, the Trans Adriatic Pipeline (TAP), exports gas from Azerbaijan’s offshore Shah Deniz field and should be ready by November.
- Iraq is mulling the creation of a new company that will handle all oil operations in the Kurdistan region. The Iraqi government and the Kurdistan Region Government (KRG) have been in a bitter battle over oil in the region. If successful, the new entity would have control over the region that has been self-regulating for years, and as such, the country would be better equipped to control oil production and exports. The long-running dispute, however, suggests that any agreement between the two will not be easy or straightforward. We’ve heard all of this before and a deal could remain elusive.
- Saudi Aramco is considering the sale of a $10-billion stake in its pipeline business. The potential deal, which Aramco calls ‘Project Seek’, is being kicked around by Blackrock, Brookfield, and others, although nothing is certain. The deal could be critical for Aramco--and Saudi Arabia--which are struggling in the new lower oil price environment they helped to create. Aramco must not only plug its budget gaps--left gaping by low oil prices--but also must soon pay out $75 billion in dividends.
- Saido Aramco and ADNOC have reaffirmed their commitment to invest in a $44 billion, 60 million tonnes refinery-turned-petrochemical complex in India with BPCL and HPCL The parties to the project are still working through some issues involving land acquisition. For Aramco and ADNOC, it would shore up new outlets for their crude, with Aramco supplying a half a million barrels per day to the refinery once complete.
Discovery & Development
- China’s Sinopec added to its proven shale gas reserves this week at the Fuling gas field in the Sichuan Basin. The Fuling block now has 793 billion cubic meters and is China’s first large commercial shale gas project.
- Turkey is set to announce that it found new gas reserves off the Black Sea with the Turkish drillship Fatih, adding to Turkey’s 320 billion cubic meters of natural gas reserves in the Sakarya Gas Field (also in the Black Sea). Turkey also has the drillship Kanuni exploring the Black Sea.
- Brazil’s Petrobras has plans to drill three more pre-salt, high-impact wells in 2021 and 2022, in the Yba, Vaz Lobo, and Monai prospects in the Campos and Espirito Santo basins. Equinor is a partner in the prospects, and Exxon is a partner in the Yba prospect. BP is a partner in Vaz Lobo, and Total is a partner in Monai. Petrobras recently discovered hydrocarbons in the Naru well in the Campos basin, also in partnership with Equinor and Exxon.
Regulations and Legislation
- Kazakhstan has once again banned the export of LPG to members of the Commonwealth of Independent States for three years. The ban is being imposed to prevent fallout from the discrepancy for LPG prices domestically vs. LPG prices outside Kazakhstan and to prevent the illegal import of LPG.
- The European Union is mulling over a set of new natural gas standards that would seek to limit methane emissions. Any standards that the EU puts on natural gas would affect its natural gas suppliers--and the EU is a major importer of natural gas from Russia and Norway.
Renewables
- Enel Green Power North America, a subsidiary of Enel, has entered the construction phase of its 284MW Azure Sky solar and storage project in Texas. Once complete, the massive project will have 700,000 PV panels capable of generating a total of 586GWh of energy each year. The Home Depot has signed on to purchase 75MW of power from the project, enough to power 150 of its stores.
- The UAE’s ADNOC is looking to branch out into clean energy, specifically, hydrogen as a side hustle, but maintains its goal of increasing oil production capacity to 5 million barrels per day within the next decade, from its 4 million barrels per day now.
- In an effort to follow through with its commitment to remove by 2050 as much C02 as it has emitted since 1975, Microsoft has signed an MOU to investigate using a carbon dioxide storage facility.
