– OPEC has once again revised downward its estimate for global oil demand growth for 2019. In its fourth downward revision in five months, OPEC now estimates that demand for oil will grow by 980,000 bpd – a 40,000 barrel adjustment. Its projections for 2020 remain unchanged at 1.08 million bpd. OPEC blames souring demand growth prospects on US/China trade uncertainties along with other uncertainties such as Brexit.
– The US Energy Department estimates that Canada will account for nearly 25% of all new crude oil supplied globally through 2050, despite Alberta’s forced production cuts to reduce the record high price spread between WCS and WTI. Canada is still struggling with takeaway capacity, which has limited exports and depressed prices. It is also struggling with anti-oil sentiment outside of oil-rich Alberta and infighting among provinces. Canada is home to the world’s third-largest proven crude oil reserves.
– With the attacks on Saudi Arabia’s oil infrastructure two weeks cold, money managers are cutting their future positions on oil to levels seen prior to the attack. The greater fear now, it would seem, is oil demand destruction due to the China-US trade war and worsening economic outlook, though the prospect of a total disintegration of the situation in Iraq may help balance this out.
Deals, Mergers & Acquisitions
– Brazil’s Thursday auction was successful, with heavy hitters awarded contracts worth more than $2 billion in signing bonuses–a record for Brazil. Winning bidders include the likes of BP, Chevron, ExxonMobil, Petrobras, Petronas, Repsol, Shell, and Total. Overall, 12 of the 36 offshore blocks up for grabs were awarded. What’s more, 11 companies bid in the auction, and 10 of those 11 actually were awarded blocks. The most expensive block went to a consortium of QPI Brasil, Petronas, and Total, which bid $1.05 billion for a block in the Campos Basin–a record signing bonus in the history of Brazil oil auctions. Brazil has two more auctions to go, with the Transfer of Rights auction scheduled for November.
– Saudi Aramco may give final approval for its IPO as soon as next week. Aramco’s board is scheduled to meet on October 17 to discuss the outcome of its roadshow that ends this week. Then October 20 is the date that Aramco will supposedly declare, officially, its intention to list its shares (locally). Aramco’s prospectus will be made available by the end of October. Aramco’s investment bankers are expected to have a valuation figure as early as this week, but expectations are that this won’t be the $2 trillion that MbS has been hopeful for. Instead, a $1.5 trillion valuation is far more likely.
– ExxonMobil is considering the sale of its Malaysian upstream offshore assets for up to $3 billion, as part of its global divestiture plan. Exxon plans to sell about $15 billion in non-strategic assets in the next two years. Two weeks ago, it sold its Norwegian oil and gas assets to Var Energi AS for $4.5 billion.
– Occidental Petroleum, who is expected to announce its Q3 results on Monday, is holding off on plans to sell part ownership in pipeline operator Western Midstream Partners until next year, after it failed to receive any worthy offers. Western Midstream came as part of Occidental’s $38-billion Anadarko acquisition earlier this year, which came along with some assets it’s not interested in. Midstream hasn’t had a great Q2 or Q3l, and its lower value failed to woo what Occidental assessed to be reasonable offers. So for now, this will continue to weigh on Occidental’s balance sheet. OXY plans to offload $10 billion in assets in total.
– Germany’s PNE AG has agreed to a takeover offer from Morgan Stanley Infrastructure (MSIP), which values the wind energy project developer at $330 million. However, some shareholders of PNE are criticizing the move claiming that undervalues the company. Australia’s Macquarie, Swedish private equity firm EQT and Canadian energy group Oryx were also interested in investing in the PNE.
– Swedish automaker Volvo and its Chinese parent company Geely will merge their existing combustion engine operations into a stand-alone business, freeing up Volvo to focus on its all-electric vehicles. The company expects fully electric vehicles will account for half of all its sales by 2025, while the other half will be hybrids. The merger is not yet finalized and is contingent on union negotiations as well as regulatory and board approvals.
Discovery & Development
– PG&E has started shutting off power to nearly 800,000 California residents as it seeks to prevent its electric lines from sparking more wildfires. PG&E is already in dire straits since being forced into bankruptcy when it had to settle claims stemming from wildfires in 2017 and 2018. It lost control this week over its bankruptcy recovery plan, and projections are that its liability could reach $25 billion.
– ExxonMobil is moving forward quickly with its ~$24B Rovuma LNG project in Mozambique–the largest private investment in Africa ever. The giant has now awarded a $13B contract to Japanese JGC, Fluor Corp, and TechnipFMC to develop the project. The FID is expected next year, with production set to begin in 2025. This is just one in a string of mega-deals signed over the past few years by Mozambique. Exxon has already secured purchase commitments and the government has approved sales and purchase agreements. Rovuma has an expected output of 15.2 million tons of LNG per year. Mozambique is set to hold presidential and legislative elections next week, just two months after a peace deal was brokered between two of the largest political parties in the country. All together, Mozambique is set to attract gas investments of $50 billion–more than four times its GDP. Incumbent President Nyusi has campaigned heavily on his promise to develop Mozambique’s massive gas reserves.
– Dyson has scrapped its electric car project, determining that it is not economically viable. The fully electric luxury SUV was supposed to be market-ready in 2021. It did try to sell the project to another suitor who could pick up the development ball, but it was unable to seal a deal. Dyson may be scrapping the EV, but it will press on with the development of solid state batteries and some other technologies that it was planning to use in its EV.
– On October 29-30, South Sudan will auction off licenses to develop eight oil fields. The country made a small oil discovery in Northern Upper Nile State a couple of months ago, and the newly independent country is now producing 178,000 barrels per day (bpd) with the government’s aim to increase it to 200,000 bpd within the next two years, and eventually 350,000 bpd. International oil companies may be slow to invest, though, due to protests that have shed light on a “kleptocracy” and an industry that is fueling corruption and conflict.
– Senegal delayed the launch of an oil and gas licensing round that was originally set to take place earlier this week. The licensing round will now be held on November 4, as contract documents still need to be finalized. The country’s reputation has been damaged recently by allegations that President Macky Sall’s brother was involved in fraud related to two offshore gas blocks being developed by BP. Senegal is expecting all of its offshore O&G projects to come online sometime between 2022 and 2026. Together with Mauritania, Senegal has found reserves worth a billion barrels of oil and 40 trillion cubic feet of gas in shared fields.
– Norway’s Equinor will invest $550m on the development of the 88MW Hywind Tampen floating offshore wind farm, which would provide 35% of the power required by five oil and gas platforms in Norway’s part of the North Sea. It is expected to come online in 2022.
Politics, Geopolitics & Conflict
– Dozens of civilians and Syrian Kurd fighters (allies until this week of the US) have been killed in northern Syria as Turkish military forces launched an incursion. They were given the green light by a phone call with Trump just prior, in which the Turkish president was informed that the US would be stepping aside and ultimately withdrawing from the region. The Turks were told not to invade unilaterally, but it was made clear that US forces would simply step aside, which they have done. The invasion is now in full force and Syrian Kurd fighters, who control the bulk of Syria’s oil and who have been the front line in the fight against ISIS, are now being overpowered by the Turks. The abandonment will largely mean returning the onshore oil to Assad (and the Russians, by default) and another victory for Iran in the region, while the Israelis (another Syrian Kurd ally) watch their security situation crumble.
– The situation in Iraq–the key flashpoint of all Middle East tensions right now – is spiraling out of control, with key Shi’ite power brokers such as Moqtada Al-Sadr now breaking ranks and definitively siding with protests that have taken on an anti-Iranian bent. Another civil war here will necessarily draw in external firepower, but in the current atmosphere in which Washington appears to be divesting itself of any military interest in the Middle East, Iran stands to reign supreme (with Russia and China ready to pick up the lucrative pieces).
– Venezuelan authorities have arrested the top management of PDVSA and China’s CNPC oil-blending joint venture, PetroSinovensa as part of a corruption probe. PetroSinovensa’s production was halted earlier this month due to lack of storage and tankers to ship it to China, but now the blending operation has been restarted, producing 105,000 barrels of Merey crude daily.
– Venezuela has entered the next phase of its collapse, with fuel smuggling reaching new heights, stalling ambulances in their tracks due to a lack of fuel. Smugglers are taking advantage of the higher fuel costs in Colombia, leaving a shortage within their own country. Venezuela’s short-term prospects are worsening, with a new wave of shippers shunning vessels that have traveled to Venezuela in recent months to avoid violating sanctions. Unipec, Trafigura, Equinor, and Exxon have all barred tankers that have associations with Venezuela, a move that is affecting about 250 tankers. The move is also increasing freight rates that were already high due to the US sanctions on China’s COSCO.
– Fourteen out of the 43 oil tankers owned by Chinese Cosco Shipping Tanker have now shut off their ship-tracking transponders since the US imposed sanctions for allegedly shipping Iranian crude.
Legislation & Regulations
– Venezuela’s opposition lawmaker and chief of the National Assembly energy committee, Elias Matta, has introduced a law to boost private investment in the oil sector that will address issues dating back to the Chavez administration that have limited the profitability of companies. The proposed changes would allow private companies to hold majority stakes in joint ventures with state oil company PDVSA, with the ability to directly export crude. However, even if the proposal were approved by congress it would have little impact as President Nicolas Maduro considers the body’s rulings as illegitimate.
This post was originally posted on OilPrice.com Daily News Update – View Original Article