Price Cap Politics
There is a notion making the rounds among Middle Eastern analysts that the region is uneasy about the G7 price cap because it's an energy weapon that the West could turn on OPEC members with which the West has precarious relations. The jury still seems to be out as to whether this new oil price weapon will fail (largely depending on China and India) or whether it represents a future threat to Middle Eastern and African OPEC members.
By Tuesday, Turkey said it had resolved the bottleneck of oil tankers waiting to pass through its straits due to insurance issues related to the newly implemented price cap on Russian oil and various sanctions. Some 20 vessels had been stalled at the Bosphorus and Dardanelle straits. On Monday, four were allowed through, and on Tuesday, Turkish media reported only 8 tankers waiting to pass at the Bosphorus and another 6 waiting to schedule at Dardanelle. Wait times have been cut in half from last week.
??EU energy ministers on Tuesday failed to reach a deal on a price cap on Russian natural gas during an extraordinary meeting. EU countries are extremely divided on a cap, and in those cases where they agree on a cap, cannot agree on a price. The next meeting is now set for December 19th.
As the price cap takes hold and with the EU ban on Russian seaborne crude underway since December 5th, Germany is eyeing a potential deal with Kazakhstan to feed German refineries. Kazakhstan could pipe up to 5 million tons…
Price Cap Politics
There is a notion making the rounds among Middle Eastern analysts that the region is uneasy about the G7 price cap because it's an energy weapon that the West could turn on OPEC members with which the West has precarious relations. The jury still seems to be out as to whether this new oil price weapon will fail (largely depending on China and India) or whether it represents a future threat to Middle Eastern and African OPEC members.
By Tuesday, Turkey said it had resolved the bottleneck of oil tankers waiting to pass through its straits due to insurance issues related to the newly implemented price cap on Russian oil and various sanctions. Some 20 vessels had been stalled at the Bosphorus and Dardanelle straits. On Monday, four were allowed through, and on Tuesday, Turkish media reported only 8 tankers waiting to pass at the Bosphorus and another 6 waiting to schedule at Dardanelle. Wait times have been cut in half from last week.
??EU energy ministers on Tuesday failed to reach a deal on a price cap on Russian natural gas during an extraordinary meeting. EU countries are extremely divided on a cap, and in those cases where they agree on a cap, cannot agree on a price. The next meeting is now set for December 19th.
As the price cap takes hold and with the EU ban on Russian seaborne crude underway since December 5th, Germany is eyeing a potential deal with Kazakhstan to feed German refineries. Kazakhstan could pipe up to 5 million tons of crude a year to Europe. No deal has been made yet.
Politics, Geopolitics & Conflict
Investors in Brazil's energy sector are running scared after Congress passed a law easing the restrictions on politicians working for state-run firms, including national oil company Petrobras. The law opens the door for massive corruption and arbitrariness and has led to a plunging of Petrobras shares this week along with an overall market route as investors run for the exit. Petrobras saw its market cap shed a shocking $5.6 billion in a single day, Wednesday.
Washington is rumored to be considering sending the Patriot missile battery to Ukraine. This would be the most advanced weapons sent to Ukraine, and from Moscow's perspective, it would mean that the U.S. has become a player in the war in Ukraine and is threatening consequences. No official decision by Washington has been announced, the leaked "rumors" could be meant to push the Kremlin's buttons and test the waters for a response.
Technical talks began this week between Iraqi leaders and the heads of the Kurdistan Region of Iraq (KRI), with the new tamed atmosphere suggesting that there may be a path to bilateral resolution of Baghdad's issue with Kurdish oil production and exports, and its unilateral contracts with producers and traders. After months of legal intensification, with the long-awaited naming of a new government in Baghdad, fears among foreign firms operating in KRG seem to have subsided significantly.
Due to Turkey's interventions once again targeting Kurdish forces, the situation in Syria is intensifying, with Ankara opening up pockets of opportunity for the Islamic State to re-emerge. Over the weekend, U.S. forces said they had killed two Islamic State "officials" in eastern Syria. The Kurdish-led Syrian Democratic Forces (SDF) assisted in the operation, yet are simultaneously being targeted by Turkish forces. At the same time, Turkey's Erdogan is calling on Russia to "clear" Kurdish forces from the border area in northern Syria. Turkey has been warned that its actions will create a vacuum for IS to launch new attacks-a prophecy that is already becoming true.
Reports last week of a missing Chechen dissident believed to be dead in Sweden remain shrouded in mystery, with a German court now saying the blogger is alive to their knowledge. The dissident was feared to be among those Russian figures targeted for assassination as a traitor. The German court, which heard the dissident's testimony in a case in which the details are not available, concedes that it last saw the dissident when he appeared on November 8th.
Iran on Monday executed by hanging a second prisoner in connection with the protests and the death of two paramilitary force members. The prisoner was hanged from a crane as a warning to protesters. Human rights groups and activists say that at least a dozen people have been sentenced to death in closed-door hearings since the protests and that over 480 people have been killed since the protests started in September, while as many as 18,000 have been arrested as Tehran attempts to contain the unrest.
Peru has now declared a state of emergency amid violent protests. Following a coup late last week in which he was overthrown, ousted Peruvian president Pedro Castillo, from behind bars, is criticizing his successor-Dina Boluarte-as "usurper" and right-wing "coup-mongered". The coup took place after Castillo attempted to sidestep Congress and rule by decree to avoid impeachment (his third). Violent protests have continued since Castillo was overthrown, leading to the armed forces assuming control of key infrastructure.
Russia has created a site in the Baltic Sea that will allow ship-to-ship transfers of refined fuels. This will allow smaller tankers to unload their fuels to larger ones, which can carry them longer distances (beyond Europe) as the tanker market grows ever tighter due to sanctions.
Discovery & Development
Russia's LNG giant Novatek has returned disappointing results at its wildcat well on the Bukharinsky block on the Gydan Peninsula in West Siberia, with exploration turning up far less natural gas than initially anticipated. The wildcat discovery was for 52 billion cubic meters of recoverable natural gas and only 15 million barrels of liquid hydrocarbons. The block was estimated originally to hold up to 1.2 trillion cubic meters of gas and some 550 million barrels of condensate and oil. This is in the Yamal-Nenets region and is part of the Arctic LNG 1 project. Overall, 2022 output for Russia's Yamal LNG is set to come in at 21 million tonnes; however, for 2023 production is set to drop slightly.
French energy giant TotalEnergies will begin drilling for oil and gas offshore Lebanon in Block 9 by next year. TotalEnergies owns a 60% working interest in the block, with Italian Eni holding 40%. Drilling is made possible following an October deal between Israel and Lebanon regarding maritime border demarcation in the Mediterranean.
Nearly twenty years in the offing, Iran's South Pars Phase 11 offshore gas project is now reportedly on track to produce its first gas in February next year, with the pipeline now finished. Phase 11 will include two production platforms with 15 wells each, producing 2 billion cubic feet of gas per day and 80,000 barrels of LNG. According to Petropars, the developer, three years after beginning production, Phase 11 will suffer a major reduction in pressure which will require another stage of the Phase 11 development to maintain. The developer refers to the project as the most complex in the South Pars gas field.
Despite FERC's lengthy list of requests for documentation, FreeportLNG is still planning on an initial restart by the end of the year, they told us. This would be the third time the restart date has been pushed back.
Erdogan has announced a ~$12 billion onshore oil discovery for Turkey in the Shirnak province, where Turkey produces some 5,000 bpd right now in four wells. The new discovery, according to Erdogan, is 150 million barrels of net oil reserves. Turkey is eyeing an increase in output to 100,000 bpd in 2023. Currently, Turkey's state-owned Turkish Petroleum is producing around 65,000 bpd.
Deals, Mergers & Acquisitions
Buffett's energy darling Occidental is backing NET Power, which announced this week it will list in New York in a SPAC deal valued at $1.5 billion. NET is a "new" energy producer spinning natural gas as a cleaner bridge fuel and operating projects to capture and store carbon dioxide. The SPAC deal is a merger with Rice Acquisition Corp II, a black-check company.