prepare-for-a-prolonged-period-of-high-energy-prices

Prepare For A Prolonged Period Of High Energy Prices

WTI temporarily broke the $80 mark on Friday morning as the global energy crunch continues to drive prices higher.

Friday, October 8th, 2021

The global energy crunch has been gaining momentum over this week with pricing fundamentals increasingly pointing towards a much more prolonged period of high gas and coal prices as electricity generation became a price concern across the Atlantic Basin and Asia. European gas futures have already moved beyond a crude oil equivalent of $200 per barrel, boosting gas-to-oil possibilities wherever they remain available. Coal, too, has received a massive boost as conducive gas-to-coal switching economics compel producers to produce more amid global supply tightness. The Friday trading session saw Brent futures trade around $82.5 per barrel, whilst WTI was nearing the $79 per barrel mark.

Equinox Eyes Emerging Hydrogen Market. Norway’s national oil company Equinor (NYSE:EQNR) plans to invest some $12 billion in hydrogen projects by 2035, focusing on blue hydrogen created out of natural gas as it seeks to capture at least 10% of the global hydrogen market.

Brazil Offshore Licensing Round Disappoints. Despite having 92 blocks offered in Brazil’s most recent offshore licensing round, only 5 blocks received bids and all of them were located in the country’s most-explored Santos Basin. Royal Dutch Shell (NYSE:RDS.A) was the absolute winner of the auction, snapping up four blocks outright and the fifth one jointly with Colombia’s Ecopetrol (NYSE:EC).

ADNOC Abandons Plan to Build New Ruwais Refinery. Citing worsening economic outlook as the main reason, the Emirati national oil company ADNOC dropped plans to build a new 400kbpd refinery in Ruwais, part of its ongoing drive to change its refining slate towards heavier barrels and assumed to be finished by 2026.

LUKOIL Keeps on Expanding its Caspian Assets. Russia’s largest private oil company LUKOIL (MCX:LKOH) agreed to buy Petronas’ 15.5% stake in Azerbaijan’s offshore Shah Deniz project for a total of $2.25 billion, becoming the second-largest shareholder after operator BP. The news comes only a week after LUKOIL’s entry into the SWAP field, another offshore gas project.

Vietnam Approves New LNG Terminal. The government of Vietnam approved a $2.3 billion liquefaction terminal to be built in Quang Tri province, as Vietnam is expected to start importing LNG starting next year amid surging electricity demand.

Iraq Seeks to Finalize Chevron Oil and Gas Deal Soon. The Iraqi government is confident it would sign a final agreement on four oil and gas exploration blocks in the country’s southern Nasiriyah province with US major Chevron (NYSE:CVX), with most of it tilting towards the gaseous side.

Kinder Morgan Delays Pipeline Restart Due to Flooding. Kinder Morgan (NYSE:KMI) failed to restart the 700kbpd Plantation Products pipeline, running from Louisiana to Virginia and shut last Friday following a leak, after extensive flooding in Alabama hindered access to the site of the leak.

LG Energy Lands Canadian Lithium Deal. In another proof that the future of lithium supply will lie in term deals, South Korea’s LG Energy Solution signed a 6-year contract with Canadian producer Sigma Lithium (CVE:SGML) to provide it with up to 100,000 tons per year of concentrate lithium.

Petrobras Plans 9 New Production Platforms. Brazil’s national oil company Petrobras (NYSE:PBR) intends to commission 9 new production units by 2025, with four additional FPSOs slated for the giant pre-salt field of Buzios to double production there from its current level of 580kbpd.

Vale Might Spin Off Base Metals into Separate Entity. Vale (NYSE:VALE), the world’s second-largest producer of iron ore, might spin off its copper and nickel mines in Canada, Brazil and Indonesia into a separate firm, with CEO Eduardo Bartolomeo even raising the possibility of a potential merger.

Occidental Believes in Carbon Capture and Re-establishing Dividends. Occidental CEO Vicki Hollub stated the US oil producer would seek to reestablish dividend first and then ramp up production on the back of high outright prices and Oxy sees direct carbon capture as a suitable means of doing just that, with its first 1mtpa plant coming onstream next year.

ExxonMobil New Guyana Discovery Brings Total Tally to 10 BBbls. ExxonMobil (NYSE:XOM) reported its 21st discovery on the Stabroek Block offshore Guyana as its Cataback-1 well encountered 243ft (74m) of net pay, and with this the aggregate recoverable reserves base of the acreage has already surpassed 10 billion barrels.

BP Wins Over Greenpeace in Oilfield Row. Scotland’s Court of Session ruled this week that emissions from the ultimate consumption of the oil – and not just those arising from the extraction process – should not be a criterion for granting an exploration license, maintaining BP’s (NYSE:BP) license for the Vorlich in the UK North Sea.

Mexico Readies to Ban Private Lithium Mining. Mexican President Andres Manual Lopez Obrador claimed that the Mexican government will not grant any private lithium concessions in the country even if Congress were to vote against a controversial electricity reform bill, despite wielding substantial amounts of lithium-containing clay soils.

China Urges Coal Miners to Produce as Much as They Can. Chinese authorities have ordered mining companies across Inner Mongolia and Shanxi to ramp up coal production by at least 155 million tons annually so as to alleviate the ongoing energy rationing spree across the country.

By Michael Kern for Oilprice.com

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