In addition to the Wednesday boost from a Phase 1 US-China trade deal that would ostensibly see China import tons of US LNG and coal, oil prices got a boost Thursday from the Senate’s approval of the US-Mexico-Canada trade agreement, with Mexico and Canada being the top two targets for US petroleum exports.
However, by Friday morning, oil was removing those gains in part on sluggish Chinese economic growth and data showing Chinese economic growth near a 30-year low.
Austerity is coming: The EIA is predicting a 50%+ deceleration of US oil output growth in 2021 due to an uptick in capital discipline for shale producers. For 2020, output growth is set to be just over 1 million barrels per day. For 2021, output growth is expected to be 400,000 bpd.
BlackRock says it will be refocusing on companies that adequately address climate change, which the media is taking to mean a divestment in fossil fuels and thermal coal. BlackRock has major holdings in oil producers, including BP, Shell and ExxonMobil. Specifically, the fund said it would be focusing on sustainability as well as launching new investment products that screen fossil fuels.
Discovery and development
Israel has officially started exporting natural gas to Egypt under a $15-billion/15-year deal in what is largely considered a landmark deal between the two. The gas from Israel’s Leviathan and Tamar offshore gas fields will flow to Egypt, where it will be liquefied and re-exported.
Equinor is breathing new life into its Statfjord fields. It will now not decommission Statfjord A in 2022 as planned but will extend the life of the field to 2027. Statfjord B and C will be extended beyond 2035. Overall, 100 new wells will be drilled in the area through 2030.
Total has plans to drill the world’s deepest offshore well, by water depth, in Angola with a Maersk drillship. The well will be drilled in 3,628 meters of water, surpassing the current record-holder – the Raya-1 well in Uruguay at a depth of 3,400 meters.
Write-downs, impairments and more
More bad news for Tullow Oil as the company is expected to take a $1.5-billion charge when it reports it’s 2019 results in impairments and exploration write-offs. That includes the slashing of reserves at its key field in Ghana, and disappointing exploration results in Guyana.
The US’ largest natural gas driller, Pittsburgh-based EQT has taken a $1.8-billion impairment for Q4 2019 in a massive asset write-down for a very troubled sector.
Three years after Oklahoma-based oilfield services company Horizontal Well Drillers landed a $1-billion-plus deal with Venezuela’s PDVSA to drill 191 wells in the country’s Orinoco Belt, the company is closing its Oklahoma offices.
The big three service providers, Schlumberger, Baker Hughes, and Halliburton have all announced that they are selling assets. The three have 26% of the oilfield services market, and the assets they have planned to sell, which includes Halliburton’s pipeline and process services business, total $800 million.
Deals, mergers and acquisitions
Norway’s authorities have awarded a total of 69 offshore blocks to 28 oil and gas companies to explore for petroleum in mature areas in the North Sea, the Norwegian Sea and the Barents Sea. A total of 33 oil companies had applied for licenses. The winners include Equinor, Aker BP, Shell, ConocoPhillips, Lundin, Suncor, Total, Vår Energi, and Wintershall Dea.
Mexico’s President Andrés Manuel López Obrador closed the door to oil auctions this year. He said that just 10,000 barrels per day of the country’s oil production came from international oil companies even though the previous government awarded 110 contracts. President Obrador also announced that the authorities will review some government wind and solar contracts to determine if private companies are improperly subsidized.
Politics, geopolitics and conflict
Russian President Putin’s approval ratings are not what he’d like them to be, and in expert Putin fashion, his answer to the specter of waning power is to use a heavy hand to push through reforms that would weaken a future president and strengthen a future prime minister (he’s done this before, in the reverse). That was Tuesday. On Wednesday, the entire government resigned, and on Thursday, Russia had a new Prime Minister, Mikhail Mishustin, a former federal tax service chief with whom few are even familiar.
Iranian former crown prince Reza Pahlavi – the son of the shah who fled in 1979 and a figure who has not been in Iran since then – is now emerging in the spotlight in the US, calling for regime change and choosing very receptive conservatives in DC as his primary audience for gaining US support to bring down the government in Tehran. Pahlavi is not in a position to represent the Iranian people at large, but for the first time clearly sees an opportunity in local unrest, which he is hoping to further foment from afar, with US support.
The US-Iran conflict isn’t likely to move oil in the near future – at least not long term – and particularly not when the Iraqi PM already seems to be walking back parliament’s decision to kick out US troops. And particularly not when US troops have relaunched joint operations with the Iraqis in the interim as a bulwark against ISIS, which was just itching to take advantage of the geopolitical vacuum.
Belarus has thrown another punch at Russia in the middle of a diplomatic dispute over negotiations for a new deal on the transport of Russian oil through the territory of Belarus. Authorities in Minsk have signed a decree introducing a 50% tax on profits of companies transiting for crude oil and petroleum products via Belarusian territory. Belarus is heavily reliant on Russia for fuel and funding and is a key transit route for Russian energy supplies to Europe. Earlier this month, Russia temporarily halted oil supplies to Belarus amid a tariff disagreement.
As Syria’s Assad accuses the US of plundering the country’s oil, Kurdish sources are reporting a convoy of 75 US military trucks crossing the border from Iraq and heading to US positions in the oil-bearing eastern province of Deir Ezzor and the northeastern province of Hasakah, where Washington has vowed to “protect” the oil, ostensibly from ISIS.