Category: Nieuws

The oil and gas industry went on a $250 billion buying spree in 2023, taking advantage of companies’ high stock prices to secure lower-cost reserves and prepare for the next upheaval in an industry likely to undergo more consolidation.

A surge in oil demand as world economies shook off the pandemic downturn has stoked acquirers’ enthusiasm. Exxon Mobil, Chevron Corp and Occidental Petroleum made acquisitions worth a total of $135 billion in 2023. ConocoPhillips completed two big deals in the last two years.

The grand prize in this dealmaking is the largest U.S. shale-oil field, the Permian Basin in west Texas and New Mexico. The four companies are now positioned to control about 58% of future production there.

Each aims to pump at least 1 million barrels per day (bpd) from the oilfield, which is expected to produce 7 million bpd by the end of 2027.

And more transactions are on the horizon. Three-quarters of energy executives polled in December by the Federal Reserve Bank of Dallas expected more oil deals worth $50 billion or more to pop up in the next two years.

Endeavor Energy Partners, the largest privately held Permian shale producer, is exploring a sale that could further concentrate U.S. shale oil output.

“Consolidation is actively changing the landscape,” said Ryan Duman, director of Americas upstream research at energy consultancy Wood Mackenzie. “A select few companies will determine whether (production) growth will be strong, more stable or somewhere in between.”

The consolidation will have spillover effects on oilfield servicers and pipeline operators. The companies that provide drilling, hydraulic fracturing and sand and transport oil and gas to market are entering an era of fewer customers wielding more power over pricing.

“Consolidation is good for producers but doesn’t help service companies at all. It will squeeze their margins as existing contracts are renegotiated,” said an executive with a U.S. oil producer who declined to be identified because he was not authorized to speak publicly.

Pipeline operators face their own consolidation wave with fewer new oil and gas pipes being approved and built, said Rob Wilson of pipeline experts East Daley Analytics.

Expansions to existing lines out of the Permian Basin will provide some relief, but by mid-2025 pipeline capacity from the Permian will be 90% full, estimates East Daley.

Hanging on to Cash
The latest acquisitions illustrate oil companies’ quest for untapped and lower-cost oil and gas reserves.

Among the major deals of 2023 was Exxon’s $59.5 billion bid for Pioneer Natural Resources and purchase of Denbury Inc for $4.9 billion. Chevron offered $53 billion for Hess and bought oil rival PDC Energy for $6.2 billion. Occidental will pay $12 billion for CrownRock.

Helped by their strong share prices, most of the year’s major acquisitions were stock swaps, not the big cash outlays that would jeopardize buyers’ balance sheets if oil prices were to fall as they did in 2016 and 2020. Exxon, for example, is sitting on about $33 billion in cash, more than six times the amount it held four years ago.

Andre Gan, a partner at Wong & Partners law firm and an M&A expert, said fossil fuels were attracting new investment again.

Rising interest rates in 2023 made paying for acquisitions with stock more attractive to investors than funding new renewable energy projects with cash. Offshore wind projects in the U.S. and France were canceled due to increasing interest rates and supply chain costs.

Producers have also recognized that the U.S. move toward renewable fuels, electric vehicles and greater energy efficiency will cut fossil fuel consumption and squeeze companies with high production costs.

Oil demand globally rose about 2.3 million barrels per day (mbpd) in each of the last two years, to 101.7 mbpd. That increase tightened global stocks, helping bolster prices as OPEC and allies kept output constrained.

Wood Mackenzie expects oil output to rise an average of about 250,000 bpd annually over the next five years, half the level of the prior five years as big oil companies focus on boosting cash flow rather than production. Growing slowly helps companies with untapped reserves control expenses and boost margins.

Consolidation has prompted U.S. antitrust regulators to ask Exxon and Chevron for additional information on their purchases, pushing back deal closings. Both predict they will receive approval, pointing to the size of U.S. oil market and aggressive small rivals as signs that competition will remain robust.

The emergence of fewer, bigger oil producers focused on extending the longevity of their fossil fuel businesses may put the companies in greater tension with governments prioritizing a shift to clean energy sources.

Meanwhile, global oil prices are expected to be largely stable in 2024 after averaging about $83 per barrel in 2023, down from $99 in 2022. Analysts see oil in 2024 trading between $70 per barrel and $90, above the $64 a barrel average in 2019.

Reuters, Gary Mcwilliams, January 4, 2024

Low-emissions ammonia presents an opportunity for Australia to build a parallel export business mirroring the early rise of the liquefied natural gas (LNG) sector.

Similarly to what LNG did in the past, low-emissions ammonia allows Australia to supply a new, decarbonising energy source to critical export markets in Asia, who already have a well-established strategic relationship with Australia and see the country as a preferred supplier.

Australia is already the largest LNG supplier in the world with 87.6 million tonnes per annum of export capacity, supporting export revenue of $92.8 billion in 2022. The country already boasts the necessary infrastructure, relationships, technical expertise and political support.

Many companies are looking at electrolysis-based hydrogen and ammonia projects, but these face cost, schedule, and technology challenges. Companies recognising the early-mover potential for low-emissions ammonia from gas with carbon capture and storage (CCS) include Woodside (pursuing a project near Perth) and Mitsui and Wesfarmers (pursuing a project in the mid-west).

One company that recognised this opportunity early and has made significant progress is ASX-listed Hexagon Energy Materials though its WAH2 low-emissions ammonia project in the Pilbara region of Western Australia.

The WAH2 project aims to convert natural gas into ammonia using proven technology, capture the associated CO2 for sequestration at a nearby third-party facility, and export the product via existing facilities at the nearby Port of Dampier.

Hexagon describes WAH2 as one of only five proposed low-emissions ammonia export projects in Australia that use natural gas feedstock and CCS – and the only one that has the advantages of access to an existing deepwater port and multiple, mature CCS projects nearby.

The company is working towards entry into front-end engineering and design (FEED) in mid-2024 and project sanction in 2025. First production is anticipated in 2028, in good time to contribute to 2030 decarbonisation targets.

Australian Resource and Management, January 3, 2024

In its ‘Short-Term Energy Outlook’, the US Energy Information Administration (EIA) forecasts the lowest annual petroleum consumption in Japan in 2024 since at least 1980, in part due to its ageing and declining population. Japan’s reduced consumption is already affecting its refining industry.

Japanese refiner ENEOS permanently closed a 120 000 bpd refinery in western Japan in mid-October 2023, and another company, Idemitsu Kosan, plans to close a 120 000 bpd refinery in March 2024. These closures represent 7% of the country’s refinery capacity.

The EIA forecasts consumption of petroleum products in Japan will decline by 3% between 2023 and 2024 to 3.3 million bpd. Japan’s petroleum consumption declined by an average 2% per year through 2022 from its peak of 5.7 million bpd in 1996, largely because of demographic and economic changes. The oil intensity of Japan’s economy, measured as barrels of oil consumed per US$1000 of GDP, has been declining.

Japan’s population peaked in 2009, and the country has seen some of the slowest economic growth among OECD countries since then. In addition, the share of Japan’s population aged 65 and older was 30% as of 2022, compared with 21% in the EU, 17% in the US, and 14% in China, according to the World Bank.

Japan’s refineries were built mainly to serve its domestic fuel needs, and the country has trouble competing in international markets. These refineries are smaller and less complex than newer refineries in Asia, including those in China, South Korea, and India. Complexity refers to a refinery’s secondary processing capacity, such as hydrocracking and coking, which upgrades low-value heavy fuel oil into valuable transportation fuels. More complex refineries can produce more high-value products from the crude oil they process.

Less complex refiners, like those in Japan, also process lighter and sweeter grades of crude oil, which are more expensive than heavier and more sour grades. Higher yields of lower-value products, combined with using more expensive crude oils, makes refiners in Japan less profitable and less competitive in world markets. Complex refinery margins in Asia can be 30% – 50% higher than simple refinery margins.

In the EIA’s recent ‘International Energy Outlook’, it projects Japan’s petroleum consumption will continue to decline beyond 2024, suggesting that refiners in Japan will face additional competitive pressures.

MRC Hub, January 2, 2024

QatarEnergy has entered a five-year crude oil supply agreement with Shell International Eastern Trading Company, Singapore (Shell).

The deal, commencing in January 2024, involves the annual supply of up to 18 million barrels of Qatar Land and Qatar Marine crude oils to Shell.

The agreement builds on QatarEnergy’s long-standing strategic partnership with Shell. The oil and gas companies have several shared investments in the energy industry both in Qatar and across the globe.
These joint ventures include QatarEnergy liquified natural gas (LNG) projects, the Pearl GTL Plant, and various other collaborative investments.

QatarEnergy president and CEO Saad Sherida Al-Kaabi said: “We are delighted to sign our first ever five-year crude sales agreement. This agreement further strengthens QatarEnergy’s relationship with Shell, which is not only a reliable crude oil off-taker, but also a major customer and a strategic partner of QatarEnergy.

“We look forward to building on our historic relationship and hope we achieve greater success with Shell.”

In October this year, the Qatar government-backed company signed long-term LNG supply deals with Shell in the Netherlands.

Starting in 2026, QatarEnergy will deliver up to 3.5 million tonnes per annum of LNG to the Gate LNG terminal in the Port of Rotterdam for a period of 27 years. The Middle East energy major has signed similar LNG supply deals with several oil and gas companies.

Some of these include China Petrochemical Corporation, France’s TotalEnergies, Italy-based Eni.

Rigzone, Rocky Teodoro January 02, 2024

Throngs of consultants wearing Western attire have become a common sight in the lobbies of Riyadh’s plushest hotels as Crown Prince Mohammed Bin Salman embarks on a multi-trillion dollar plan to wean Saudi Arabia off oil. In recent months they’ve been joined by another cohort of besuited individuals: fund managers, keen to get an early foothold in the next big emerging-market growth story.

The kingdom, which only joined the MSCI Emerging Markets index in 2019, has historically attracted very little from the billions of dollars that stock investors allocate to global stock markets. Fund managers were put off by the lack of liquidity in the Tadawul All Share Index, which limits full foreigner ownership, and by the nation’s over-reliance on fossil fuels.

Now, with Russia sanctioned out of the benchmark index and China losing its allure due to an economic slowdown, some investors are starting to view Saudi Arabia in a new light, attracted by a steady stream of reforms designed to encourage more foreign investment and the vast sums being thrown at MBS’s Vision 2030 transition plan. The increased interest has helped the Tadawul rally more than 11% this year, more than double the return of the MSCI benchmark.

“Saudi Arabia now feels like China in the noughties,” said Fergus Argyle, who helped launch a new emerging-markets fund for EFG New Capital two years ago that has an 8% allocation to the Saudi stock index.

Argyle says Saudi Arabia is still “very underrepresented” in investor portfolios even after the Tadawul index attracted net foreign inflows of over $3 billion this year. That’s a fraction of the $24 billion that poured in when the index joined the MSCI benchmark four years ago, but analysts say the volume will grow as reforms get under way.

The Saudi bourse is the biggest and most liquid in the Middle East and is home to the world’s largest oil producer – Saudi Aramco – after it raised almost $30 billion in a 2019 share sale. Over the past few years the exchange, traditionally dominated by banks and petrochemicals firms, has added large healthcare, retail and power companies. Low-cost airline Flynas is weighing a listing as soon as next year. The Tadawul trades at 12-month forward price-to-earnings ratio of 17.5 times, giving it a premium of over 50% to the MSCI Emerging Markets Index.

Saudi’s weighting in the MSCI Emerging Markets index has climbed to nearly 4.1% from about 1.5% when it was originally included in the benchmark as foreign interest grows and Saudi encourages more companies to go public. Saudi companies have raised $11.5 billion from listings since the start of 2022 at a time when initial public offerings have slowed elsewhere.

Passive investors could deliver inflows of $7.3 billion if Saudi Arabia lifts the level of maximum allowed foreign ownership to 100% from just under half currently for most stocks, according to Elia Alchaar, associate analyst at Arqaam Capital. That could also lead to a “substantial increase” in its weight on emerging-market indexes, he said.

Rising interest in Saudi Arabia mirrors the decline in foreign participation in the Chinese market. While India has emerged as one major beneficiary of the shift, Russia’s absence from the index means investors don’t have many other alternatives. The choice will become even more limited if South Korea is upgraded to developed-market indexes, which could happen at some point next year.

“We do see Asian institutional investors showing more interest in seeing and meeting companies from the Middle East because as an EM fund, you have to look at diversifying your investments,” said Harish Raman, Head of Asia ECM Syndicate at Citigroup Inc. “Latin America is relatively less interesting for Asian investors but they are seriously considering the Middle East.”

Political Risk
It’s not always easy to make an inroad though. The market is still geared toward locals and many of this year’s IPOs, including MBC Group’s $222 million listing and ADES Holding Co.’s $1.2 billion float, have been heavily oversubscribed.

“A number of the stocks that have IPOed have not been sold at all to foreign investors,” said Dominic Bokor-Ingram, a fund manager at Fiera Capital, whose bullish stance on Saudi helped him outperform 99% of peers this year. “There are three or four IPOs that we’ve been involved in in Saudi where we’ve been the only foreign investor.”

Geopolitical uncertainty is another potential challenge. The gruesome murder of Saudi dissident journalist Jamal Khashoggi in 2018 overshadowed the the Tadawul index’s promotion to the emerging-market benchmark. Now it’s the Israel-Hamas war that’s causing jitters. The index erased all of its 2023 gains in October as the fallout rippled across the Middle East, before rebounding as investors judged that the conflict would probably remain contained.

There are 147 emerging-market funds with over $127 billion of assets under management that have never invested in Saudi Arabia, according to Copley Funds Research. But in a sign portfolio managers are following up research trips with higher allocations, the portions of active EM funds investing in the kingdom has more than doubled since the start of the year, the research shows.

Daniel Difrancesco, a US-based portfolio manager and analyst at BNP Paribas Asset Management, recently visited Riyadh to meet with some listed Saudi companies and is now considering increasing his investments.

“We are currently underweight, but continue to identify opportunities to deploy capital,” Difrancesco said. “Visiting the country to meet with local business managers and witness the social and economic transformation that is underway has made us more constructive on the return potential for Saudi equities.”

Bloomberg, Farah Elbahrawy, December 26, 2023

An auction for drilling rights in the Gulf of Mexico, spearheaded by the Biden administration, has successfully concluded, generating US$382 million in revenues.

Oil firms such as Shell PLC (LSE:SHEL, NYSE:SHEL), Hess Corp. (NYSE:HES), BP PLC (LSE:BP.) and Chevron Corporation (NYSE:CVX) joined 22 other participants in an auction for secured offshore acreage; in what is expected to be the last auction until 2025.

These sales marked the highest total from a federal offshore oil and gas lease sale since 2015.

Anadarko, the US oil group, secured the highest bid, over US$25 million, for a block in the deepwater Mississippi Canyon area.

This auction is likely the final opportunity for oil and gas firms to bid on Gulf of Mexico acreage until 2025, due to the administration’s five-year schedule, which features a historically low number of planned lease auctions.

Industry advocates emphasised the Gulf of Mexico’s economic importance and urged Congress to mandate more leasing.

However, environmental groups criticised the prioritisation of profits over environmental concerns.

Over 72.7 million acres on the Outer Continental Shelf were part of the sale, including 6 million acres initially intended for withdrawal to protect the habitat of the Rice’s whale.

Proactive Investors, Leo Greco, December 21, 2023

The Port of Antwerp-Bruges and the Perbadanan Kemajuan Negeri Perak (PKNP), a state development agency in Malaysia, have forged a strategic cooperation to develop the Port of Lumut.

According to the Port of Antwerp-Bruges, the European Commission has awarded a €1.9 million ($2 million) grant for feasibility studies, recognising the port’s potential as a logistics and industrial hub. For the Port of Antwerp-Bruges, this is the first major project in Southeast Asia.

Malaysia lies in a major international shipping lane between the Strait of Malacca and the South China Sea.

Lumut, in Perak state, is a small port between Kuala Lumpur in the south and Penang in the north. The Port of Antwerp Bruges feels that the port has good potential as a logistical and industrial hub.

Port of Antwerp Bruges International (PoABI), a subsidiary of the Port of Antwerp-Bruges, provides advice, management solutions, investment projects, and training to international ports and terminals. PoABI and PKNP established a development business as part of the Port of Lumut development.

This organisation brings together PKNP’s local experience and network with PoABI’s worldwide competence in project management, port administration, and training to enable the establishment and operation of the Lumut Maritime Industrial Cluster (LUMIC).

The strategic partnership intends to transform Lumut into a world-class marine centre and a driving force for Perak’s economy.

Kristof Waterschoot, Managing Director PoABI, said: “The official establishment of this development company underlines our commitment to the development of LUMIC.

“Together with our partner PKNP, we are ready to create a sustainable industrial cluster, which will not only boost the local economy, but also contribute to the broader vision of progress and innovation for the state of Perak in Malaysia.”

After similar projects in Duqm and Namibia, this is PoABI’s first major project in Southeast Asia.

Given its strategic position and international investors’ strong belief in Malaysia as the future hub of the logistics chain, the European Union has approved a grant of €1.9 million ($2 million).

This grant will be used to conduct multiple feasibility studies. Four Malaysia investigations are reportedly ongoing, providing the framework for a focused approach in 2024.

In the following year, PoABI noted that efforts will be focused on Lumut and if this port can serve as a gateway to Europe. This will concentrate on the proposed master plan for LUMIC.

In November, the Port of Antwerp-Bruges chosen Milence, a joint venture between Daimler Truck, Volvo Group, and the TRATON GROUP, to develop two charging hubs at the Truck Parking Goordijk and Ketenis.

Port Technology, Dom Magli, December 21, 2023

French energy giant TotalEnergies is ready to invest $6 billion (5.5 billion euro) over several years in Nigeria’s oil and energy industry, especially in gas and offshore projects.

Nigeria, Africa’s top economy and major oil producer, is looking to bring in more foreign investment since President Bola Ahmed Tinubu came to office in May with a set of economic reforms.

The OPEC member has seen its crude output on the decline in recent years due to widespread theft from pipelines and attacks and high operating costs and bureaucracy deterring on-shore investors.

Total’s announcement follows a similar pledge from Shell earlier this month looking at $6 billion in offshore, gas and liquefied gas projects.

Tinubu meet with CEO of Total Energies Worldwide Patrick Pouyanne for talks in the capital Abuja on Monday.

“We are committed to removing all cobwebs and anti-investment impediments in the oil and gas industry. We have a clear path that we are committed to pursuing. We are ready to work with you,” Tinubu said after meeting the Total team.

Nigeria a Key Market
According to the presidency statement, Pouyanne told Tinubu that Nigeria was “very important” for Total Energies, accounting for eight to 10 percent of the company’s worldwide total production.

“We are ready to invest $6 billion in the coming years. We are looking extensively at more deepwater production and gas production opportunities across the terrain,” he said.

“Everything is here. We just need to conclude with the tweaks and changes necessary to unlock the outstanding potential in both oil and gas.”

A new Nigeria law, the Petroleum Industry Act, passed in 2021 after years of debate and delays aimed to bring more foreign investment in the oil sector with amendments to regulations, royalties and taxes.

RFI, December 19, 2023

Britain’s Energy Security Secretary, Claire Coutinho, announced on Thursday backing 11 projects to produce green hydrogen, as part of the government’s 2 billion pound ($2.5 billion) funding to be committed over the next 15 years.

The 11 successful projects, with capacity totalling 125 megawatts (MW), were selected to be offered contracts under the government’s first hydrogen allocation round (HAR1), launched in July 2022.

Britain has a target to reach net zero emissions by 2050 and green hydrogen, made by using renewable energy to split water, is seen as one of the key sectors that will help achieve this target and provide cleaner fuel for energy intensive industries and transport.

“Hydrogen presents a massive economic opportunity for the UK, unlocking over 12,000 jobs and up to 11 billion pounds of investment by 2030,” Coutinho said.

“Today’s announcement represents the largest number of commercial scale green hydrogen production projects announced at once anywhere in Europe,” she added.

In return for the government support, the successful projects will invest over 400 million pounds in the next three years, generating more than 700 jobs in local communities across the UK and delivering 125 MW of new hydrogen for businesses.

The 11 projects have been agreed at a weighted average strike price of 241 pounds per megawatt hour (MWh).

Energy Intelligence, Jason Eden, December 15 2023