Oil & Energy
2023, Another Strong Year For Oil Industry
Last year was a good year for the oil industry. Despite predictions of its looming demise as renewable energy leads to electrification that in turn leads to the death of oil, fossil fuels were the stars of the year, with demand for all, including coal, notably rising.
Meanwhile, opposition to Big Oil grew louder and protests turned more extreme, with activists gluing themselves to streets and buildings, and vandalizing world-famous works of art in order to raise awareness of climate change.
Oblivious to this rise in the amount of activism, Big Oil went on to rake in record profits thanks to higher prices for the commodities it produces.
According to Reuters, Big Oil majors will report combined earnings of close to $200 billion for 2022, with many of the supermajors booking record quarterly profits during the year thanks to the combination of strong demand for energy and limited supply.
The industry also had a chance to reduce debt, thanks to the strong performance of its products last year.
Per Reuters, the combined debt of Big Oil has fallen to $100 billion, which is the lowest in 15 years and down by more than 50 percent from 2020, when it reached more than $270 billion as companies borrowed to survive.
But it’s not all smooth sailing from here on out. First, there is the windfall profit tax that the EU and the UK decided to impose on energy companies in order to generate some money for its energy aid programs.
Shell said it expected the effect of the UK and EU windfall taxes will cost it $2.4 billion. It also said it may have to reconsider investment plans for the North Sea in light of that hit.
Meanwhile, despite political opposition to developing more oil and gas reserves in the UK, more than 100 bids were submitted this month for new exploration in the basin.
French TotalEnergies also said it would take a substantial hit from windfall taxes in the UK and the EU. According to the supermajor, it would come in at about $2.1 billion. As a result, the company said it will reduce its investments in the North Sea by a quarter, noting that the levy did not provide for any adjustments in case oil and gas prices fell.
Meanwhile, oil and gas prices did fall. Right now, oil is trading at around the same level it was trading a year ago and natural gas prices have fallen substantially in both Europe and the United States—its biggest supplier.
“The energy industry operates in a cyclical market and is subject to volatile commodity prices,” Jean-Luc Guiziou, TotalEnergies’ British head of exploration and production, told the FT this month.
“We believe that the government should remain open to reviewing the energy profits levy if prices reduce before 2028.”
Exxon took it a step beyond criticism, filing alawsuit against the European Union to get it to drop the windfall tax. The company argued that the tax is counterproductive, would discourage investments and undermine investor confidence.
Yet Big Oil has some big investment plans, just not for Europe. Exxon and Chevron, per Reuters, plan to spend 10 percent more this year than they did last year, to the tune of a combined $41 billion.
BP will be spending more on its U.S. shale and Gulf of Mexico operations even though European supermajors as a whole are expected to be more cautious with their money because of the windfall taxes. But they will continue spending heavily on low-carbon projects.
“The European majors appear much more attractively valued than the U.S. majors on our estimates,” HSBC said in a recent note quoted by Reuters. It is among banks that predict stronger share performance for European Big Oil majors after last year U.S. supermajors ruled the stock market.
If investment in low-carbon projects is the guarantee for stronger share performance, then HSBC is right.
Indeed, pressure is growing on the oil industry to set itself more stringent emission-reduction targets and make stronger commitments to decarbonize.
This pressure is unlikely to let up this year as governments in the EU, the UK, and the U.S. double down on their climate change plans, too.
Chances are that 2023 will be another strong year for the oil industry simply because those companies came in strong into the new year and demand for oil and gas is not expected to fall—on the contrary.
The EU will need to buy more gas to refill its storage and it will continue using oil products that it no longer buys from Russia. China is reopening and most observers expect a rebound in oil and gas demand to come sooner rather than later. Even the U.S., for all its green ambitions, is unlikely to stop being the biggest consumer of oil in months. The immediate future of Big Oil is certainly bright.
Slav reports for Oilprice.com
Oil & Energy
Agency Conducts Mega Mineral Clinic In FCT
The Nigerian Geological Survey Agency (NGSA) has concluded its mega mineral clinic to ensure that goals scored in area of geosciences data generation are digested by investors.
Director-General of the agency, Dr Abdulrazaq Garba, said this on Saturday in Abuja, at an occasion of its Mineral Promotion, Sensitisation and Dissemination (Mineral clinic), organised by the agency.
Garba said the aim of the clinic was to encourage Nigerians to take advantage of the investment opportunities offered by the geosciences data generation.
He said the programme was a milestone of the agency’s commitment to mineral promotion, sensitisation, and dissemination, which are in line with the present administration’s agenda.
He said the NGSA would go the extra mile to ensure that geoscience information on Nigeria’s mineral resources is disseminated to the public for investment purposes.
He stated further that more wealth and jobs can be created if investors take advantage of the data.
According to him, the aim of the mineral clinics is to expose investors, academia, students and stakeholders, through sensitisation and dissemination of geoscientific information on various solid mineral deposits in the country as well as respond to inquiries from the public.
“The mineral clinic is like an Open Day. In our effort to make available geosciences on a continuous basis, we will present three recent publications to the public.
“These publications are Phosphate Resources of Nigeria, Evaluation of Brine along the Benue Trough and Assessment of graphite occurrences in Saulawa Village, Birnin Gwari, Kaduna State, Northwest,” he said.
The Director-General said the agency would be more fulfilled, when people deployed the generated geosciences data available for economic transformation of the country.
He said one of the agency’s mandate was to generate geoscience data for wealth creation and national development.
“To achieve this, the over 100-year-old exploration agency stepped up exploration and assessment of projects in greenfield and brownfield, using a unified sampling and data capturing system in line with international best practices.
“The data generated by the NGSA prompted the agency to re-organise the Mineral Clinic in six geopolitical zones, which was a huge success.
“In the zones, over 400 potential investors attended the mineral clinic and over 100 samples of rocks and minerals were tested with Hand-Held XRF free of charge.
Oil & Energy
Presidential Panel Wants Stiffer Penalties For Crude Oil Thieves
The Federal Government’s Special Investigative Panel on Oil Theft/Losses has called for deliberate conversations to drive legal reforms that would provide stiffer penalties to culpable entities involved in oil theft.
Chairman of the Panel, retired Maj.-Gen. Barry Ndiomu, made the call in his address of welcome recently at a One-Day Stakeholders Conference on Oil Theft/Losses in Abuja.
Under the theme, “Protecting Petroleum Industry Assets for Improved Economy”, Ndiomu said frank discussions must be held to enable the country “crack the code” and put an end to the criminal enterprise of oil theft.
Ndiomu, who is also the Interim Administrator of the Presidential Amnesty Programme (PAP), expressed regret that the menace of oil theft has had enormous negative impact on Nigeria’s crude oil production, plunging output to a 13-year low of 800,000bpd.
He reiterated that strategic consultations have been held with state governments of the Niger Delta Region and other critical stakeholders to that effect.
“On the side of the law enforcement and security agencies, visits were made to the Chief of Army and Navel Staff, to the DG-DSS, the Attorney General of the Federation and Minister of Justice, the EFCC, among others.
“These engagements availed us information on the challenges their respective organisations faced in securing our nation’s oil assets and combating oil theft.
“These efforts provided us new knowledge and elicited honest discussion amongst Panel Members that led to some obvious conclusion signifying that theft and lose of crude oil stemmed from the twin issues of complicity and negligence,’’ Ndiomu said.
He further explained that the emergent picture suggests the existence of a sophisticated network of complicity between elements from the host communities, security agencies and industry players.
He added that they include both government and private institutions alike, as well as international collaborators.
“The conception of this conference is part of the panel’s strategy to obtain additional inputs, information and data on the subject matter. Today’s event therefore aims at consolidating on what has been achieved so far”, Ndiomu said.
The Chairman, however, advocated for application of modern technologies to protect oil assets and a review of security architecture in the region.
“This should be done with a view to stem the sophisticated network of complicity between elements from the host communities, security agencies and industry players”.
The Tide’s source reports that the event attracted officials from the Presidency, National Assembly, traditional rulers from oil communities, security, military and paramilitary, as well as other stakeholders from the oil and gas sector.
Oil & Energy
Iraq Announces Deals To Boost Oil And Gas Output
Iraq has been saying it wants to produce more oil and gas for a while now but turning stated ambitions into reality has taken a while.
This week, the country took a big step towards that reality when it signed a slew of deals with foreign companies as part of plans to boost both crude oil and natural gas production considerably.
Gas production growth appears to be especially important because right now, Iraq is heavily reliant on neighbor Iran for its gas needs, which puts it into a vulnerable position.
The government in Baghdad inked deals with one Emirati company and two Chinese ones, aiming for oil production growth of a quarter of a million barrels daily and additional natural gas output of 800 million cu ft daily.
Iraq is OPEC’s second-largest oil producer, pumping 4.5 million barrels every day. In previous years government officials had said production capacity could grow to 5 million bpd and even 6 million bpd but little has been done to advance these plans.
The reasons for that slow progress include the politically unstable situation in the country, the dynamics of the oil industry that has seen companies prioritize low-cost, fast-return projects after the last two downturns, and predictions of peak oil demand.
Several oil majors, including Exxon, left Iraq altogether in the past few years, citing the uncertain outlook for its oil industry. Yet successive governments did not give up their plans for greater oil production despite the OPEC+ output quotas, and significantly higher natural gas production.
One of the companies that will be helping Iraq advance these plans is UAE-based Crescent Petroleum. The firm signed three long-term contracts for the exploration and development of three oil and gas fields.
Two of these fields—Gilabat-Qumar and Khashim, in the province of Dyala—are expected to begin producing natural gas within 18 months at a rate of 250 million cu ft daily, Crescent Petroleum said. The third field that Crescent Petroleum will explore is in the province of Basra.
The second of Baghdad’s new oil and gas development partners, Chinese United Energy Group inked a deal with the government to develop the Sindbad oil field, also in Basra.
The third company that signed a deal with the Iraqi government was also Chinese, Geo-Jade Petroleum Co. It will develop the Huwaiza oil field and the Naft Khana field, both near the Iranian border, Reuters noted in a report on the news.
All the contracts signed this week have a duration of 20 years and should help boost Iraq’s energy security in the natural gas department, reducing its bill for gas imports from Iran at a time when its economy is struggling to remain operational.
As a result of the deals signed this week, Iraq could suspend natural gas imports in three years, according to Prime Minister Mohammed Al-Sudani. Commenting on the deals, Al-Sudani said gas imports from Iran are costing the Baghdad budget between $5.5 and $6.8 billion a year, Zawya reported.
“We have decided to enter the global gas market and we will push ahead with projects to develop our gas resources and stop gas flaring because shortages in domestic gas supply are the main cause of our electricity supply problems,” Al-Sudani said.
To further these plans, Iraq will also launch tenders for exploration blocks in the northern, western and central parts of the country in the near future, Oil Minister Hayan Abdel-Ghanisaid this week.
Oil output should also grow. According to the IMF, this year, Iraq could produce 4.6 million bpd, up from 4.4 million bpd last year, The National reported. By 2027, oil production could reach 5 million bpd, the IMF also forecast. Perhaps Iraq’s oil and gas ambitions finally have a chance of panning out.
Kennedy reports for Oilprice.com
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