COVID-19 Market Impact
- With Henry Hub prices in the $1.80-$1.90 range, there is concern that Haynesville LNG exports could experience a 20% decline in output towards 2023, according to Rystad Energy. Analysts predict only an average of 20 horizontal wells will be producing and that gross gas output at Haynesville will fall from 12.5 billion to 10 billion cubic feet per day through 2020-2022. If Henry Hub prices were in the $2.20-$2.40 range, that could account for 30 horizontal wells producing and a more stabilizing 12.5 billion cubic feet of production during that same period.
- Iran’s daily output has now dropped below 2 million bpd, as of April - or 53,000 bpd less than March production, according to OPEC (down from over 3.8 million bpd prior to US sanctions).
- The EIA adjusted its 2020 oil production outlook for the United States, which it now sees at 11.7 million bpd - 500,000 bpd less than 2019 levels. Should the forecast prove accurate, this would be the first annual production decline in the United States since 2016.
- Saudi Arabia instructed Aramco to cut another 1 million bpd of oil production in June in addition to the OPEC+ promised cuts to more quickly drawdown global inventories. Because of the additional production from Saudi Arabia in April when it was pumping as much as it could, that 1 million bpd extra cut has already been diluted.
- To the surprise of nearly no one, Iraq has failed to reach an agreement with Big Oil…
COVID-19 Market Impact
- With Henry Hub prices in the $1.80-$1.90 range, there is concern that Haynesville LNG exports could experience a 20% decline in output towards 2023, according to Rystad Energy. Analysts predict only an average of 20 horizontal wells will be producing and that gross gas output at Haynesville will fall from 12.5 billion to 10 billion cubic feet per day through 2020-2022. If Henry Hub prices were in the $2.20-$2.40 range, that could account for 30 horizontal wells producing and a more stabilizing 12.5 billion cubic feet of production during that same period.
- Iran’s daily output has now dropped below 2 million bpd, as of April - or 53,000 bpd less than March production, according to OPEC (down from over 3.8 million bpd prior to US sanctions).
- The EIA adjusted its 2020 oil production outlook for the United States, which it now sees at 11.7 million bpd - 500,000 bpd less than 2019 levels. Should the forecast prove accurate, this would be the first annual production decline in the United States since 2016.
- Saudi Arabia instructed Aramco to cut another 1 million bpd of oil production in June in addition to the OPEC+ promised cuts to more quickly drawdown global inventories. Because of the additional production from Saudi Arabia in April when it was pumping as much as it could, that 1 million bpd extra cut has already been diluted.
- To the surprise of nearly no one, Iraq has failed to reach an agreement with Big Oil that would allow it to meet its production cut commitment agreed to with OPEC+. Iraq - the most egregious production cut laggard to the previous rounds of cuts - is cutting production by 700,000. This figure is about a third less than what it agreed to cut under the deal. Iraq was only able to get Big Oil to cut 300,000 bpd, which just isn’t enough if Iraq hopes to cut the full promised amount. The deal with Big Oil was reached so that Iraq could avoid paying the major oil companies for the oil as they are contractually obligated to do. A senior official at Basra Oil Company hopes OPEC+ will be understanding of its situation.
Deals, Discovery & Development
- Somalia is planning (after stops and starts) to officially launch a 7-block auction process beginning in August. To avoid controversy, the blocks on offer are all far enough away from the disputed maritime border with Kenya. Last year, Kenya broke diplomatic relations with Somalia after a row over several oil and gas blocks. Some surveys suggested that Somalia may sit on as many as 1 billion barrels of oil and gas. In March, the oil ministry agreed on an initial road map with a Shell and ExxonMobil JV for exploration and development of offshore.
- Brazilian state-owned firm Petrobras has discovered more reserves of oil in the area of the Búzios and the Albacora field. The area, acquired at an auction held in November last year, is operated by Petrobras with a 90% stake, alongside Chinese CNOOC (5%) and CNODC (5%).
- The Trump administration has approved the $1-billion Gemini solar and battery storage project whose location will be Nevada and whose claim to fame is that it will be one of the world’s largest solar projects. The project is backed by Warren Buffett and aims to produce 690 megawatts of electricity in the Mojave desert.
Company Developments
- Chesapeake Energy said it is considering a bankruptcy court restructuring of its $9 billion debt if oil prices fail to recover. The company is considering skipping a payment of $192 million due in August. Chesapeake’s share price plunged 17% on the announcement that the firm is close to bankruptcy.
Politics, Geopolitics & Conflict
- In a major victory for that tendentious situation in which Jordan will be taking on Israeli gas, the Jordanian Constitutional Court has ruled that the natural gas deal between the two countries could not be legally canceled. The ruling follows December protests by Jordanian citizens and politicians demanding a suspension of the deal. In 2016, Jordan’s National Electric Power Company (NEPCO) signed a 15-year agreement with Noble Energy to purchase $10 billion worth of natural gas, which Jordan desperately needs but which Palestine-related politics can’t stomach.
- State-run oil firm Turkish Petroleum has applied to Libya for an exploration permit in the eastern Mediterranean. Cyprus, Egypt, and Greece have all condemned the Libyan-Turkish deal as contrary to international law.
