OIL INTELLIGENCE REPORT

 

Chart of the Week



- Oil and gas producers in the Middle East are back in vogue as the prospect of a major Russian supply disruption puts the oil market on edge. 

- Germany has been courting Qatar for energy supplies, Japan has asked the UAE to increase its exports, whilst the British Prime Minister traveled to Riyadh and Dubai asking the OPEC heavyweights to increase production. 

- In the meantime, Saudi Aramco has more than doubled its 2021 net income, coming in at $110 billion, drastically decreasing its net gearing and allowing it to issue bonus shares. 

- With windfall profits assumed to edge even higher in 2022, Saudi Aramco plans to boost its upstream capital expenditures by some $40-50 billion, fortifying its stature as the main global swing producer. 

Market Movers

- Rockcliff Energy, a US shale gas-focused exploration company, could reportedly seek 4 billion in a sale as its Haynesville production base in Texas has already moved beyond 1 billion cubic feet of production recently.

- US oil major ExxonMobil (NYSE:XOM) enhanced its Mediterranean upstream portfolio with yet another discovery in Cyprus’ offshore waters, finding another ‘high-quality’ gas reservoir in Block 10, the same block that saw the 7 bcf Glafcos discovery in 2019.  

- Italian energy major ENI (NYSE:E) recorded an important oil and gas discovery in Algeria’s Berkine basin, with the Zemlet-el-Arbi concession reportedly holding 140 million barrels of crude and unspecified amounts of natural gas.

Tuesday, March 22, 2022

The international community was swift to react to Russia’s invasion of Ukraine nearly a month ago, but Western economies are now running out of options as they look to increase the Kremlin's pain. Europe’s next round of sanctions should hit Russian oil and coal exports (gas has been conveniently left out), provided the member states can agree on a joint policy, which they currently cannot. Meanwhile, the Iranian nuclear deal appears to be stuck in limbo, hurting hopes that a new source of oil supply would soon be online. At the same time, Saudi Arabia has reemphasized the importance of the OPEC+ agreement in stabilizing the oil market, although there seems to be little appetite within the cartel to boost production beyond the current plan. 

EU Members Torn Over Further Russia Sanctions. Internal pressure has been increasing on members of the European Union as several members called for the imposition of an oil imports embargo on Russia. This initiative was quickly played down by Germany, with the country claiming that any dependence reduction should be gradual. 

Saudi Arabia Expects More Houthi Attacks. Saudi Arabia announced that it would not incur any responsibility for oil shortages in global markets, should further attacks from Houthi militias in Yemen cause damage – the latest attack on Sunday triggered a fire at a Jeddah oil storage facility. 

Oil Service Majors Shy Away from Full Russia Exit. US oilfield services firms Halliburton (NYSE:HAL) and Schlumberger (NYSE:SLB) declared they will be suspending their future Russia operations but maintaining their current portfolio in line with international laws and sanctions.

Germany Wants Qatari LNG Deal. The German government indicated that it is on the verge of cutting a long-term LNG supply deal with Qatar. This news comes on the back of Germany committing to build two new LNG terminals. Qatar stopped short of saying a deal had been finalized.

Saudi Arabia and Kuwait Agree on Joint Gas Project. Riyadh and Kuwait signed a deal to jointly develop the Durra gas field, discovered in 1960 but heretofore untapped because it lies in a contested border area. It is expected to produce 1 billion cubic feet of gas per day and 84,000 b/d of condensate at peak production rates.

Shell Tries Again with Jackdaw Field. Having seen its initial development plan for the Jackdaw field in the UK North Sea rejected last year on environmental grounds, UK oil major Shell (LON:SHEL) submitted an amended plan for the field, presumably hoping that the current gas price environment will facilitate the decision. 

Lithium Prices Are Shooting Through the Roof. Chronically low lithium inventories continue to push prices of the metal to new peaks, with battery-grade lithium carbonate already pricing around $77,000 a tonne, up 10% in March alone, meaning that last year’s fivefold appreciation is still far from over. 

Shale Lifts Argentinian Oil Production. Increasing production from Argentina’s large Vaca Muerta shale play, up at 222,000 b/d already, has nudged the Latin American country’s total oil production to an 11-year high last month, up 14% year-on-year at 570,000 b/d. 

Belgium Sours On 2025 Nuclear Decommission Deadline. Wary of high fossil fuel prices, the government of Belgium announced it would extend currently operating nuclear power plants in the country, namely Doel 4 and Tihange 3, by another 10 years so that they are not decommissioned in 2025. 

Saudi Arabia Expects Spare Output Capacity Growth by 2025. Saudi Aramco seeks to increase its spare production capacity to 13 million b/d by 2027, with growth coming primarily from the offshore fields of Marjan, Berri, and Zuluf. The expected growth of roughly 1 million b/d indicates that current hopes of more supply might be far-fetched.

Aluminum Soars on Australia’s Sanctions. The price of aluminum soared this week after Australia banned the export of alumina or aluminum ores to Russia, disrupting Rusal’s refining operations as well as sending prices to $3,520 per metric ton, only a handful dollars away from the peak reached two weeks ago.

Britain Wants to Nationalize Gazprom UK Subsidiary. The British government is reportedly considering the nationalization of Gazprom’s UK-based retail supply arm, Gazprom Marketing & Trading Retails, an entity that has been supplying roughly 20% of Britain’s commercial gas volume. 

Canada’s Rail Strike Difficult to Extinguish. The Canadian government called for a quick end to a strike at the country’s second-largest Canadian Pacific Railway (CP) as large volumes of wheat and (perhaps even more importantly) potash fertilizers risk getting stuck in the country amid soaring prices.