Politics, Geopolitics & Conflict
The World Cup has managed to become the staging ground for geopolitical rivalries this year, with (most recently) Iran losing to the U.S. and reports then emerging all over the media that an Iranian protester who openly celebrated the US. victory (by honking his car horn, allegedly) was shot in the head by security forces, further igniting the widespread protest movement.
Washington eased sanctions on Venezuela last weekend after the Maduro government held talks with the opposition and committed to ending a political stalemate. The easing of sanctions resulted in a green light for Chevron to resume pumping Venezuelan oil for six months. The first of that oil is expected to be exported in late December. That first shipment of crude will go to the U.S. This will have little short-term impact on crude oil inventories and the move was largely political. (We're only talking about 200,000 bpd from Chevron here after a serious ramp-up).
The world remains mystified by Beijing's draconian lockdown to contain rising COVID cases while the rest of the world has long withdrawn from the lockdown phase and it is business as usual, even though cases still exist. For comparison, should readers have forgotten about COVID in the West, on November 29th, the U.S. reported more than 47,500 new cases in a single day, with a 7-day average of just north of 40,000. On Monday, Beijing for the first time hit a level of 40,000 new daily cases. George Friedman…
Politics, Geopolitics & Conflict
The World Cup has managed to become the staging ground for geopolitical rivalries this year, with (most recently) Iran losing to the U.S. and reports then emerging all over the media that an Iranian protester who openly celebrated the US. victory (by honking his car horn, allegedly) was shot in the head by security forces, further igniting the widespread protest movement.
Washington eased sanctions on Venezuela last weekend after the Maduro government held talks with the opposition and committed to ending a political stalemate. The easing of sanctions resulted in a green light for Chevron to resume pumping Venezuelan oil for six months. The first of that oil is expected to be exported in late December. That first shipment of crude will go to the U.S. This will have little short-term impact on crude oil inventories and the move was largely political. (We're only talking about 200,000 bpd from Chevron here after a serious ramp-up).
The world remains mystified by Beijing's draconian lockdown to contain rising COVID cases while the rest of the world has long withdrawn from the lockdown phase and it is business as usual, even though cases still exist. For comparison, should readers have forgotten about COVID in the West, on November 29th, the U.S. reported more than 47,500 new cases in a single day, with a 7-day average of just north of 40,000. On Monday, Beijing for the first time hit a level of 40,000 new daily cases. George Friedman has one possible theory: Beijing is using this to assert control over areas that were already at risk of displaying unrest prior to the pandemic. In other words, population control, which is now being questioned by a restive population nationwide. If Beijing thought this would go over without any rebellion, it lost that bet, even though protests here are indeed extraordinary.
Deals, Mergers & Acquisitions
Egypt Natural Gas Holding has awarded BP two exploration blocks offshore Egypt in the Mediterranean, west of BP's North King Mariout block awarded to it in August, and north of BP's Raven field which saw first gas last year. The two new blocks cover more than 1,000 km2. BP will be the operator of the blocks, with an 82.75% interest, with Wintershall DEA holding the remainder. The awarded blocks expand BP's already significant presence in Egypt, which includes the WND gas development, the Atoll gas field development, and the 10% stake in the giant Zohr gas field.
Shell is set to snap up a 100% stake in Europe's largest renewable gas producer. Shell has agreed to purchase Denmark-based Nature Energy in a £1.66 bn deal. The company produces RNG from agricultural, industrial, and household waste. The deal is not Shell's first RNG deal, after investing in its first RNG facility in Junction City, Oregon, which manufactures RNG from cow manure.
Eni is in early-stage talks to purchase private-equity-backed Neptune Energy for $5-6 billion, although no official bid has been submitted yet. Neptune produces 130,000 boepd, 75% of which is gas. Neptune operates in Norway, Britain, Indonesia, Algeria, and the Netherlands. Neptune is owned by China Investment Corporation, the Carlyle Group, and CVC Capital Partners.
TotalEnergies said it would cut its UK investments by 25% next year in response to the windfall tax on oil and gas. Shell and Equinor have previously said they are rethinking their UK oil and gas investments as well. The UK's new windfall tax on the industry brings the overall tax rate to 75%.
Discovery & Development
The Department of the Interior has crafted the final steps necessary to hold its oil and gas lease sale off Alaska's coast, with the BOEM issuing a final notice of sale on Monday. The lease, to be held on December 30, will look to auction off nearly a million acres in Alaska's Cook Inlet. The move came only after Congress forced BOEM to hold the lease sale by the end of the year, after the administration canceled a Cook Inlet lease sale and two GOM lease sales earlier in the year, citing insufficient interest from the industry in the Cook Inlet acreage.
US-based APA Corp (which acquired Apache last year) and TotalEnergies are concluding drilling at their Awari exploration well offshore Suriname, declaring it "noncommercial". The two companies each hold a 50% interest in Block 58 where the well is located. At another appraisal well, Sapakara South-2, the JV is preparing for flow-tests with results expected in December. Apache/Total made their first discovery in Block 58 in January 2020, and they've made 5 commercial oil discoveries here since. Investors are banking heavily on Suriname following the massive finds in Guyana by Exxon-in the same basin. Suriname's state-run Staatsolie this week also announced the launch of competitive bidding for six new oil and gas exploration blocks.
Saudi Aramco has discovered two unconventional natural gas fields in Dhahran. The two fields, Awtad and AlDahna, were discovered west of the Ghawar field. Gas flowed from the first Awtad well, Awtad-108001 at a rate of 10 million standard cubic feet per day, plus 740 barrels of condensate. Gas flowed from the second well, Awtad-100921, at a rate of 16.9 million standard cubic feet per day, with 165 barrels of condensate. The AlDahna-4 well flowed at a rate of 8.1 million cubic feet per day. AlDahna-370100 flowed at 17.5 million cubic feet per day with 362 barrels of condensate.
Regulation
Nebraska and Minnesota senators introduced legislation this week that would allow for year-round and nationwide sales of E15, after getting support from the API for the first time ever. The news comes as the Biden Administration mulls a complete rewrite of its decades-old biofuels mandate. The EPA's new proposal for biofuels could lift the amount of biofuel that must be mixed into gasoline to as much as 22.8 billion gallons, up from this year's 20.87 billion gallons. But at that volume, the 15.25 billion gallons of conventional ethanol required would exceed the E10 blend well for refiners. Summertime sales of E15 are currently restricted, while E10 is sold year-round.
The U.S. SPR continues to be a source of contention. OPEC+ likely views the possibility that the United States will release more crude oil from the SPR to keep prices lower as a challenge to its mostly understood position of defending $90 oil. Meanwhile, the U.S. administration keeps talking about refilling the SPR. First at $70, now at "continued $70". The U.S. Energy Department on Thursday said it would look to pause mandatory oil reserve sales, on the grounds that it cannot sell from and refill at the same time.