Unrest Within Russia Is Ramping Up

Politics, Geopolitics & Conflict

Some 700,000 men have fled Russia since the announcement of a partial mobilization on Sept 21st. Demonstrations have been taking place across the country, and mobilization centers have been attacked, including a shooting this week in which gunmen killed 11 at a military training ground in the Belgorod region. All of this continues to highlight the questions arising about Putin’s rule at home, and particularly as untrained recruits start to come home in body bags only days after being sent to Ukraine.

China’s 20th party congress saw Xi, who has been granted an unprecedented third term as China’s leader, note how China’s international power and influence have risen exponentially. He warned the congress of “worst-case scenarios” going forward and “dangerous storms”. The most immediate takeaway for oil markets was Xi’s clear adherence to a continuation of Beijing’s “zero-COVID” policy, which means more potential demand destruction ahead.

After Putin suggested that Turkey could become a “gas hub’ last week, Erdogan made the agreement official this week, with both determining that Turkey would be the “most reliable route” for gas deliveries to Europe. Again, this is meant to bypass Ukraine and comes as Europe is attempting to reduce its Russian gas usage. At the same time, Erdogan continues to successfully insert himself into the Libyan energy equation. A recent MoU between Turkey and Libya gives Turkey the right to explore for oil and gas offshore Libya. That area in question, according to Libyan officials, contains some $30 trillion in natural gas.

Sometimes sanctions on foreign countries have negative effects on US companies, such as is the case with Chevron, which has long been trying to skirt US sanctions on Venezuela’s oil industry. Now, The United States has indicated that it could allow Chevron to expand its operations in Venezuela by becoming operator over some JVs with PDVSA (which was agreed upon with PDVSA a while ago). But it is contingent on one important–and rather unlikely thing: That disputed Venezuelan leader Nicolas Maduro and opposition leader (and officially recognized President of Venezuela according to the United States) sit down for talks on holding free elections. Chevron also has requested permission to trade Venezuela crude.

Discovery & Development

Equinor has obtained a permit to drill two wildcat wells in the Norwegian North Sea in production license 554. Equinor holds 40% interest, with Var Energi and Aker BP holding 30% each. Drilling operations are expected to take 76 days.

The United States announced its first offshore wind power rights sale off California’s coast, which will take place in December. To date, all offshore development rights for wind power have been on the Atlantic side. The sale will include five lease areas totaling 373,268 acres. The projects will be the first to use floating turbines in U.S. waters. The DOI has a goal to have 30 GW of offshore wind permits by 2030, and 15 GW of floating offshore wind capacity by 2035.

CNOOC’s proved gas in place at Baodao 21-1 in the Western South China Sea has passed China’s review, which found 50 billion cubic meters of nat gas and 3 million cubic meters of condensate. The well tested at an average of 587,000 cm of nat gas per day.

Romania’s state-run gas company Romgaz is set to develop an LNG project in the Black Sea with Azerbaijan’s state-run SOCAR. The project will include an LNG plant, a regasification plant, and other facilities that will allow for transporting the gas from the Caspian Sea.

Deals, Mergers & Acquisitions

Equinor is considering snapping up oilfields in the British section of the North Sea from CNOOC, including Buzzard. The proposed deal is valued somewhere between $1.9 billion and $2.8 billion. The deal could close as early as this year.

BP has moved to acquire biogas producer Archaea Energy for $4.1 billion, including debt, as BP moves closer to renewables and away from fossil fuels. The deal is the largest of its kind within the United States. Not only is the deal BP’s largest acquisition in years, but it is also the largest renewable nat gas acquisition ever.

Although not terribly surprising, Harold Hamm has successfully reached a deal to take Continental Resources private. A private status will uncomplicate Continental’s decision-making process and break it free from the shackles of public judgment, and we could see significant investments into expansion from them.

Italian Saipem sealed a massive $4.5B deal with Qatargas for the North Field Production Sustainability Offshore Compression Complexes Project-EPC2 offshore Qatar. It is the largest single offshore contract in Saipem’s history.

Q3 Earnings Beat

Baker Hughes posted a Q3 loss after taking $230 million in restructuring and impairment charges from a recent organization that saw BH shrink its business units from four to two. Net loss was $17 million or 2 cents per share, compared with a profit of $8 million a year ago.

Australia’s Santos posted Q3 revenue of $2.2 billion, beating estimates and easily beating the $1.14 billion in revenue Santos reported in Q3 last year. The Q3 revenue is a record high for Santos, which married its production forecasts to between 103 million boe and 106 million bpd (from 102-107 million boe). Santos has benefited from the tight LNG market.