Geopolitics
Afghanistan’s new Taliban cabinet will see its Interior Ministry led by Sirajuddin Haqqani, an individual who was linked to al-Qaeda and responsible for carrying out numerous terrorist attacks. Further, the new interim cabinet will include a number of Haqqani family members. These cabinet members were likely influenced by the Pakistani intelligence services. Pakistan favors a Taliban government in Afghanistan.
A dispute over the border in the Essequibo Region is still ongoing, despite a ruling by the International Court of Justice that settled things (on paper). Guyana and Venezuela both claim the territory as their own. In Venezuela, both the Maduro regime and the opposition have rejected the court ruling in a rare show of unity. Exxon’s operating interests in Guyana lie outside the disputed area.
Some media reports have suggested that Gazprom’s Nord Stream 2 will go online on October 2nd; however, it appears that it will first require German regulatory approval, a process that could take four months.
Markets
Oil production has fallen in the U.S. this week by 500,000 bpd. U.S. crude inventories continue to fall and are now 6% below the five-year average at 423.9 million barrels. While oil production and oil inventories fall, consumption is on the rise, with the latest EIA data showing that U.S. oil demand hit a record high last week, even as jet fuel demand remains sluggish. While demand concerns abound, we think there is room to…
Geopolitics
Afghanistan’s new Taliban cabinet will see its Interior Ministry led by Sirajuddin Haqqani, an individual who was linked to al-Qaeda and responsible for carrying out numerous terrorist attacks. Further, the new interim cabinet will include a number of Haqqani family members. These cabinet members were likely influenced by the Pakistani intelligence services. Pakistan favors a Taliban government in Afghanistan.
A dispute over the border in the Essequibo Region is still ongoing, despite a ruling by the International Court of Justice that settled things (on paper). Guyana and Venezuela both claim the territory as their own. In Venezuela, both the Maduro regime and the opposition have rejected the court ruling in a rare show of unity. Exxon’s operating interests in Guyana lie outside the disputed area.
Some media reports have suggested that Gazprom’s Nord Stream 2 will go online on October 2nd; however, it appears that it will first require German regulatory approval, a process that could take four months.
Markets
Oil production has fallen in the U.S. this week by 500,000 bpd. U.S. crude inventories continue to fall and are now 6% below the five-year average at 423.9 million barrels. While oil production and oil inventories fall, consumption is on the rise, with the latest EIA data showing that U.S. oil demand hit a record high last week, even as jet fuel demand remains sluggish. While demand concerns abound, we think there is room to hold onto notions of tightening supplies that could shift the market sentiment from fearful to bullish.
Deals, Discovery, and Development
Cairn Energy did not definitively say that it would put to rest its suit against India over retrospective taxes after accepting a payout of around $1 billion by the Modi government. But Cairn did say that it was prepared to drop the suit. Cairn shareholders, including BlackRock, have agreed to the settlement.
U.S. nat gas explorer/producer GeoSouthern is looking to sell GEP Haynesville LLC--part of its Haynesville acreage--for $2B. The deal is spurred on by soaring nat gas prices, which have climbed nearly 100% since the beginning of the year.
LyondellBasell will sell its crude refinery in Houston as soon as possible. The refinery is one of the largest refineries that processes heavy, high sulfur crude, processing 268,000 bpd. The refinery makes reformulated gasoline, jet fuel, and low-sulfur diesel. The refinery is valued at between $500 million and $800 million. Lyondell has said that suitable buyers most likely include large refiners, such as Valero. Lyondell purchased the refinery in 2006 from Citgo. It is not the first time Lyondell has tried to sell the refinery.
Exxon and Hess have done it again in Guyana, announcing another discovery in the Stabroek Block. It is the 20th successful discovery in the block. The Pinktail well encountered 220ft of net pay in high-quality oil-bearing sandstone reservoir. It is located 21.7 miles southeast of the Liza Phase 1 development and less than 4 miles southeast of Yellowtail 1. Some have estimated that there are already enough discoveries in Stabroek to produce more than 2 million barrels per day when all the platforms are up and running.
Saudi Aramco is reportedly looking to open the largest unconventional gas fields in Saudi Arabia to foreign investors. Jafurah gas field is estimated to hold some 200 trillion cu ft of gas. Earlier this year, Saudi Aramco said it will invest $110 billion in the development of the field. Jafurah could begin producing in 2024 with daily production seen at 2.2 billion cu ft daily, a rate to be reached by 2036. Besides gas, Jafurah could also produce around 425 million cu ft of ethane, and 550,000 bpd of gas liquids and oil condensates.
Neptune Energy Group is considering a merger with Harbour Energy that, if completed, would create one of the largest independent oil and gas companies in Europe by combining two of the largest independent energy explorers. The merged company could be valued at as much as $10 billion. Both have assets in the UK North Sea.
Regulation
Australia passed a new law to better determine whether prospective owners of purchased oil and gas assets have the means necessary to decommission the assets once they are retired. The new law also will assign liability to former owners, should the new owners be unable to pay. The legislation was passed after Australia got stuck footing the bill for the $1B decommissioning of Laminaria-Corallina oilfields in the Timor Sea. The legislation could pave the way for other countries to do the same, including Indonesia, Malaysia, Thailand, and Vietnam, which have no decommissioning rules. The new law has already dissuaded Exxon and BHP from selling their Australian assets, fearful of being stuck with decommissioning costs.
President Trump’s opening up of federal lands in the Arctic to oil development may be short-lived, with the Biden Administration mulling over a reversal of the controversial measure. The area was opened up towards the end of Trump’s presidency. The project has been on hold after a court ordered the environmental review to be rewritten.
Mexico has proposed another reduction to Pemex’s profit-sharing, which has over the last few years been reduced from 65% in 2019 to 54% this year. The proposal for 2022 in Mexico’s draft budget is 40%. The move comes after Mexico endured a year of profound hardship in 2020 with the steepest recession in nearly 90 years as GDP sank 8.5%.
More than 75% of all oil and gas production in the Gulf of Mexico remains offline in the aftermath of Ida--one of the worst storms for the oil and gas industry in nearly two decades. As of Thursday, more than 36% of all GoM rigs remain evacuated, along with nearly 13% of all platforms. 1.4 million bpd of oil production remains offline. The latest EIA report shows that for the week ending 09/03, total U.S. oil production fell by 500,000 bpd on average, to 10 million bpd.
Renewables
In an effort to decarbonize Western Australia’s largest industrial cluster, BP Australia and Macquarie Capital have agreed to study the possibility of producing green hydrogen. The study will be funded by the Western Australian government. The project would see BP convert its old Kwinana oil refinery--closed earlier this year--into a green hydrogen hub. BP is already working on plans for a renewable fuels plant that it hopes to put up at the site.
Doral Renewables LLC, a U.S.-based subsidiary of Israeli Doral Group, wouldn’t normally make our renewables list, were it not for the fact that former Mossad chief Yossi Cohen has now been named its director. Doral’s portfolio reportedly represents 3% of U.S. renewable energy goals, and it’s gaining news traction because Cohen has indicated he will invest billions of dollars.
