Politics, Geopolitics & Conflict
- The Houthi attacks on merchant vessels in the Red Sea have continued throughout the week, and the U.S. announcement of the deployment of an international task force has done nothing to shake Houthi determination. Like Venezuela’s Maduro, this is all about leverage over a Saudi-Iranian diplomatic rapprochement that has left the Houthis without full control of Yemen. In terms of energy, tankers are being rerouted, which is disruptive; however, the general consensus among analysts is that it should not fundamentally be threatening supply. The Red Sea task force does pose problems for the Saudis due to Iran’s serious opposition to a U.S.-led international task force in a region it dominates. Saudi condoning of this risks the Saudi-Iran detente, which is exactly what the Houthis are gunning for. The Saudis are preparing for two potential outcomes at the same time: monetary and other aid appeasement for the Houthis to avoid a war (with some help from Iran talking them down, which means not condoning the U.S. actions; or fighting a war against the Houthis (again). It’s a tricky balance for Riyadh. The Houthi is reaping some rewards, as well, including an increase in support for the group at home in Yemen and within the region to some extent because they are now seen as a definitive part of the Axis of Resistance. They are also winning over more recruits and getting stronger by the day, and they have an arsenal they haven’t fully tapped…
Politics, Geopolitics & Conflict
- The Houthi attacks on merchant vessels in the Red Sea have continued throughout the week, and the U.S. announcement of the deployment of an international task force has done nothing to shake Houthi determination. Like Venezuela’s Maduro, this is all about leverage over a Saudi-Iranian diplomatic rapprochement that has left the Houthis without full control of Yemen. In terms of energy, tankers are being rerouted, which is disruptive; however, the general consensus among analysts is that it should not fundamentally be threatening supply. The Red Sea task force does pose problems for the Saudis due to Iran’s serious opposition to a U.S.-led international task force in a region it dominates. Saudi condoning of this risks the Saudi-Iran detente, which is exactly what the Houthis are gunning for. The Saudis are preparing for two potential outcomes at the same time: monetary and other aid appeasement for the Houthis to avoid a war (with some help from Iran talking them down, which means not condoning the U.S. actions; or fighting a war against the Houthis (again). It’s a tricky balance for Riyadh. The Houthi is reaping some rewards, as well, including an increase in support for the group at home in Yemen and within the region to some extent because they are now seen as a definitive part of the Axis of Resistance. They are also winning over more recruits and getting stronger by the day, and they have an arsenal they haven’t fully tapped into yet.
- It also looks likely that the Saudis will benefit from the chaos in the Middle East in at least one aspect: The Biden administration is preparing to go through with a weapons sale to Riyadh. The administration is trying to push the deal through quickly before there is time to counter it. The Statement Department brought the deal up with Congress on December 4, right before Christmas break.
- Bulgarian Parliament this week ratified legislation blocking the export of fuel produced from Russian oil beginning on January 1. The legislation also bans the processing of Russian oil at the country’s only oil refinery, which is controlled by Russian Lukoil, as of March 2024. Bulgaria, which traditionally has very close relations with Russia, was one of the EU countries exempted from sanctions on Russian oil imports last year.
- Newly elected Argentine President Javier Milei is moving quickly to cut the red tape on exploration and development of the country’s vast battery metal reserves (lithium and copper) to spur investment. This week, Milei announced a string of measures to deregulate industries, with a key focus on mining companies. The measures still have to get through Congress, where the president’s party represents a minority.
Markets
-Qatar has lowered its oil price assumption that it uses in its budget to $60 per barrel and is expecting revenues to decrease 11.4% on those lower oil prices. Total annual revenue is now expected to be $55.49 billion. Qatar used $65 in 2023.
-Angola is quitting OPEC, citing little to no benefit from its membership. Angola will likely produce just over 1 million bpd with or without OPEC, so its impact will be limited in the immediate term. But it is certainly the first unmistakable sign that the cartel has cracks; on its way out the door, Angola was bold enough to express its frustration with the group, saying that when its contributions and ideas fail to have an effect, it is best to get out. This confirms what many in the industry have known for a while–there is likely dissension in the OPEC ranks. And now other members who we already know have expressed displeasure with OPEC and its struggle to keep oil prices high at great risk to its smaller members could follow suit–members like the UAE.
Deals, Mergers & Acquisitions
- Mexican billionaire Carlos Slim’s familiar firm Control Empresarial de Capitales is snapping up shares in Talos Energy and Harbour Energy PLC, about $327 million since October. His Grupo Carso SAB had already bought a minority position in Talos back in September, which allowed it to enter Mexico’s Zama field–a field in which Harbour Energy owns a stake also.
- QatarEnergy said it expected to imminently agree to several long-term LNG supply deals in Asia and Europe–the latter of which is still looking to replace Russian pipeline gas.
- Canada’s Brookfield is looking to sell off some renewable assets of its subsidiary Saeta Yield worth $1.64B, including debt. The assets are expected to include wind and photovoltaic plants in Spain and Portugal.
- Egypt and Saudi Arabia’s Acwa power company have signed a $4B deal for a green hydrogen project. The project is expected to have a production capacity of 600,000 tons of green ammonia annually. A work plan will be drawn up to develop Phase 1 of the project.
- ADNOC signed a 15-year agreement to supply 1 million metric tons of LNG to China’s ENN Natural Gas, mostly from ADNOC’s Ruwais LNG project that is currently in development. Deliveries are expected in 2028, when that project is expected to begin commercial operations. The agreement is subject to FID, regulatory approvals, and reaching a sale and purchase agreement.
- Tokyo Gas Co’s subsidiary, Tokyo Gas America Ltd, will purchase Rockcliff Energy II LLC for $2.7B. The purchase will give Tokyo Gas a larger US shale gas presence. The deal is scheduled to close on December 29.
Discovery & Development
- Shell and Equinor gave the green light to the 90,000 bpd oil and gas platform in the GoM known as Sparta. No investment cost was shared. Shell holds a 51% stake in Sparta and is operator, with Equinor holding the rest. The project was formerly known as North Platte and was operated by TotalEnergies.
- Mubadala Energy has made a discovery from its South Andaman I license in its Layaran-1 well offshore North Sumatra. Layaran-1 is the first well in a series of four planned wells. Mubadala Energy is operator with an 80% stake, with Harbor Energy holding 20%.
- Lukoil will invest $73 million to increase production capacity and develop oil reserves in the West Esh El Mallaha oilfield in Egypt. Lukoil is trying to extend by five years its current 25-year contract that it previously signed with Egypt.
