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Amid the unprecedented upheaval that has taken its toll on the world and, in particular the energy industry in the first half of this year, life goes on. Despite shut-ins, weak prices, huge impairments, gloomy forecasts and business challenges, life still goes on. Rigs are still running, exploration is still being conducted and projects are still being approved. The oil and gas world has weathered a huge storm, but that has not stopped it from focusing on necessary work that is vital for the future of the industry itself and the global economy. We have summarised a list of key upstream announcements and developments since April.
One of the major headlines that came out over the past three months was news that Total’s giant LNG in Mozambique has secured as much as US$16 billion in funds from various financial institutions. This is the single largest foreign direct investment project in Africa ever, matching the total current GDP of Mozambique. The speed at which Total completed financing for the US$23 billion project (which taps in the gigantic Golfinho and Atum natural gas fields) is quite remarkable, when the ExxonMobil-led Rovuma LNG next door is facing delays. In fact, the funding raised US$600 million than expected, representing the faith that the 13.1 million ton per annum project, potentially expandable to 43 mtpa, will pay off in the long run. For Total, this will be a hedge, given that its LNG efforts in Papua New Guinea are currently still stymied by a showdown against the country’s new government.
Chevron also had some major news to publish. After failing to acquire Anadarko in 2019 in a dramatic storyline against Occidental Petroleum, the US supermajor has swooped in to acquire US independent Noble Energy for some US$5 billion. The acquisition neatly replaces what the original Anadarko purchase was supposed to achieve – expand Chevron’s presence in the prolific US onshore shale basins, with Noble’s 92,000 acres in the Permian noted as being ‘largely contiguous and adjacent’ to Chevron’s current assets. Noble will also bring with it established positions in the Eagle Ford basin, significant US midstream assets and upstream assets in Israel and Equatorial Guinea, swelling Chevron’s proven oil and gas reserves by 18%. For that amount of potential, the price is a steal. With smaller shale players under pressure, expect more acquisitions of this sort to be announced by deep-pocketed bargain hunters.
Chevron wasn’t the only one to make acquisitions. ConocoPhillips splashed out US$375 million to take up land in Western Canada’s liquids-rich Montney formation, taking the Inga-Fireweed asset from Kelt Exploration. Trident Energy completed its purchase of 10 concessions in the offshore Pampo and Enchova clusters in Brazil from Petrobras. And trader Vitol announced a rara avis, a new US upstream venture called Vencer Energy, focusing on acquiring and operating mature assets in the US Lower 48 region from its base in Houston.
New discoveries have also been coming at a regular speed. Despite divesting assets, Petrobras announced two new discoveries in the offshore Buzios and Albacora pre-salt fields, with reserves of ‘excellent quality’. Eni continues its winning run in Egypt with the new Bashrush natural gas discovery in the Mediterranean Sea, while MOL made its lucky 13th discovery in Pakistan with the Mamikhel South-1 well (the tenth in the TAL Block alone) that revealed ‘significant gas and condensate reserves’. ExxonMobil has restarted two of its four drillships in Guyana and Petronas has handed out contracts in Suriname, so more discoveries are due from that part of the Caribbean. Neptune Energy hit oil at the Dugong well in the Norwegian North Sea, and China’s CNOOC announced a ‘significant discovery’ at the Huizhou 26-6 well in the Pearl River Mouth Basin – the first mid-to-large sized oil and gas field in the area.
CNOOC will be hoping the Huizhou discovery will continue its streak of recent discoveries, boosting domestic Chinese upstream output. Its Luda 21-2/16-3 asset, in the Bohai Sea’s Liaodong Bay, has just started up production, reaching a peak of 25,600 b/d in 2022. Sinopec is also marshalling resources, announcing a US$770 million plan to develop the Dingbei gas prospect in Ningxia and its 230 bcm of natural gas.
Medco reported first gas from the Meliwis field off East Java in Indonesia from an unmanned platform, while the National Iranian Oil Co shrugged off a domestic economic crisis to partner with Persia Oil and Gas Industry Development Co for US$463 million to re-develop the Yaran field in the Khuzestan Province, raising output by 40 million barrels over 10 years. And then in frozen Siberia, where Novatek is speeding ahead with LNG, Gazprom Neft and Shell have agreed to collaborate on developing the Leskinsky and Pukhutsyayakhshy blocks in the Gydan Peninsula: an unusual display of cooperation between a Russian state firm and a Western supermajor.
This is not an exhaustive list of recent developments in the upstream oil and gas corner of the universe. They are the most notable, but there are other signs that the thaw is coming and the industry can recover and begin to grow again. Covid-19 may be something that we must all learn to live with going forward, but life will always go on, and this too shall pass.
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In its January 2021 Short-Term Energy Outlook (STEO), the U.S. Energy Information Administration (EIA) expects that energy-related carbon dioxide (CO2) emissions in the United States will increase in 2021. Economic growth and the lessening of pandemic-related restrictions result in more energy consumption and associated CO2 emissions. EIA expects total energy-related CO2 emissions to increase to 4.8 billion metric tons in 2021 and 4.9 billion metric tons in 2022.
U.S. energy-related CO2 emissions fell by an estimated 11% in 2020, largely because of reduced travel and other factors that have led to less energy consumption during the COVID-19 pandemic. In the short term, EIA forecasts rising CO2 emissions as a result of economic recovery from the COVID-19 pandemic, changes in fuel mix, and greater demand for residential electricity as colder winter weather leads to more heating demand in 2021.
EIA expects petroleum to account for about 46% of total U.S. energy-related CO2 emissions in 2021 and 47% of total energy-related CO2 emissions in 2022. Most of these emissions come from the transportation sector as a result of increased travel as the economy recovers from the effects of the COVID-19 pandemic.
EIA expects natural gas, which accounted for about 36% of total energy-related CO2 emissions in 2020, to decline to about 34% of total emissions in 2021. Emissions from natural gas are declining mainly because natural gas consumption is declining as natural gas prices increase relative to coal prices. EIA expects natural gas prices to increase by 98 cents per million British thermal units (MMBtu) in 2021 while prices for coal increase by 12 cents/MMBtu. As a result, EIA forecasts that natural gas’s share of total energy-related CO2 emissions will decline to 32% in 2022 as natural gas prices rise.
Coal accounted for 19% of total U.S. energy-related CO2 emissions in 2020. EIA expects this share of total emissions to rise to 21% in 2021 and 2022 as coal becomes more economical for use in electricity generation amid higher natural gas prices.
More information on EIA’s forecasts is available in the January Short-Term Energy Outlook.
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Ratings: 7.2
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+ Meridian tuned sound
- No integrated voice assistant
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The LG XBOOM PL2 has IPX5 splash proof rating, which means it can withstand being sprayed with water but should not be submerged. We ran it under a faucet for a few seconds and the speaker kept working as it should.
The PL2 is based on version 5.0 of the Bluetooth standard and the range is quite similar to that of other speakers in the same price range. It can remain connected to more than 25 feet indoors from the audio source.
Two acquisitions in the energy sector were announced in the last week that illustrate the growing divergence in approaching the future of oil and gas between Europe and the USA. In France, Total announced that it had bought Fonroche Biogaz, the market leader in the production of renewable gas in France. In North America, ConocoPhillips completed its acquisition of Concho Resources, deepening the upstream major’s foothold into the lucrative Permian Basin and its shale riches. One is heading towards renewables, and the other is doubling down on conventional oil and gas.
What does this say about the direction of the energy industry?
Total’s move is unsurprising. Like almost all of its European peers operating in the oil and gas sector, Total has announced ambitious targets to become carbon-neutral by 2050. It is an ambition supported by the European population and pushed for by European governments, so in that sense, Total is following the wishes of its investors and stakeholders – just like BP, Shell, Repsol, Eni and others are doing. Fonroche Biogaz is therefore a canny acquisition. The company designs, builds and operates anaerobic digestion units that convert organic waste such as farming manure into biomethane to serve a gas feedstock for power generation. Fonroche Biogaz already has close to 500 GWh of installed capacity through seven power generation units with four in the pipeline. This feeds into Total’s recent moves to expand its renewable power generation capacity, with the stated intention of increasing the group’s biomethane capacity to 1.5 terawatts per hour (TWh) by 2025. Through this, Total vaults into a leading position within the renewable gas market in Europe, which is already active through affiliates such as Méthanergy, PitPoint and Clean Energy.
In parallel to this move, Total also announced that it has decided not to renew its membership in the American Petroleum Institute for 2021. Citing that it is only ‘partially aligned’ with the API on climate change issues in the past, Total has now decided that those positions have now ‘diverged’ particularly on rolling back methane emission regulations, carbon pricing and decarbonising transport. The French supermajor is not alone in its stance. BP, which has ditched the supermajor moniker in favour of turning itself into a clean energy giant, has also expressed reservations over the API’s stance over climate issues, and may very well choose to resign from the trade group as well. Other European upstream players might follow suit.
However, the core of the API will remain American energy firms. And the stance among these companies remains pro-oil and gas, despite shareholder pressure to bring climate issues and clean energy to the forefront. While the likes of ExxonMobil and Chevron have balanced significant investments into prolific shale patches in North America with public overtures to embrace renewables, no major US firm has made a public commitment to a carbon-neutral future as their European counterparts have. And so ConocoPhillips acquisition of Concho Resources, which boosts its value to some US$60 billion is not an outlier, but a preview of the ongoing consolidation happening in US shale as the free-for-all days give way to big boy acquisitions following the price-upheaval there since 2019.
That could change. In fact, it will change. The incoming Biden administration marks a significant break from the Trump administration’s embrace of oil and gas. Instead of opening of protected federal lands to exploration, especially in Alaska and sensitive coastal areas and loosening environmental regulations, the US will now pivot to putting climate change at the top of the agenda. Although political realities may water it down, the progressive faction of the Democrats are pushing for a Green New Deal embracing sustainability as the future for the US. Biden has already hinted that he may cancel the controversial and long-running Keystone XL pipeline via executive order on his first day in the office. His nominees for key positions including the Department of the Interior, Department of Energy, Environmental Protection Agency and Council on Environmental Quality suggest that there will be a major push on low-carbon and renewable initiatives, at least for the next 4 years. A pledge to reach net zero fossil fuel emissions from the power sector by 2035 has been mooted. More will come.
The landscape is changing. But the two approaches still apply, the aggressive acceleration adopted by European majors, and the slower movement favoured by US firms. Political changes in the USA might hasten the change, but it is unlikely that convergence will happen anytime soon. There is room in the world for both approaches for now, but the future seems inevitable. It just depends on how energy companies want to get there.
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