Energy Sector

[Viking]

Just another strange day in oil markets…
————

OPEC+ Is Now Almost 3 Million Bpd Behind Its Production Target

- https://oilprice.com/Energy/Crude-Oil/OPEC-Is-Now-Almost-3-Million-Bpd-Behind-Its-Production-Target.html

 

The gap between overall quota and actual oil production from the OPEC+ members has been growing for more than a year, with many producers unable to raise production due to capacity and/or investment constraints, while the alliance has added more barrels to its monthly oil production target. Moreover, production in Russia, albeit stabilized at a level from February, just before the invasion of Ukraine, hasn’t increased as it should have been under the OPEC+ agreement.

 

But while the Saudis have been raising production in recent months, Russia has not. In addition, many OPEC+ members, especially OPEC’s African producers Nigeria and Angola, have been significantly lagging behind their respective quotas.

—————
Saudi Minister Says OPEC+ Could Cut Production At Any Time

- https://oilprice.com/Energy/Energy-General/Saudi-Minister-Says-OPEC-Could-Cut-Production-At-Any-Time.html

 

Citing “disconnect” in the oil futures market, Saudi Energy Minister Prince Abdulaziz bin Salman dangled the threat of potential OPEC+ production cuts that could come at any time. 
 

In an interview with Bloomberg on Monday, the Saudi energy minister said that “extreme volatility” was “undermining the market’s essential function of efficient price discovery”, in turn rendering it impossible for physical users to manage the costs of hedging or navigate the inherent risk. 

“This vicious circle is amplified by the flow of unsubstantiated stories about demand destruction, recurring news about the return of large volumes of supply, and ambiguity and uncertainty about the potential impacts of price caps, embargoes, and sanctions,” the Prince told Bloomberg. 

 

Without sufficient liquidity, he said, there is a high level of disconnect, which means the “markets can’t reflect the realities of the physical fundamentals in a meaningful way…”. 

 

The Prince described the markets as being in a state of “schizophrenia” and creating a “yo-yo” market that has lent a false sense of security. 

 

 

[Sweet]

3 hours ago, pcech said:

Yes. I do not want to go into deep ideological discussions, but simply, I do not support the view that there is just black & white and books claiming so are not worth reading in my opinion.

 

That’s a false framing though.

 

You can be pro-west and also believe the world is not black or white.

 

Many books are critical of the West and our governments.

 

Good luck criticising Putin or Xi in their respective countries.

 

 

[Phoenix01]

Viking- Thanks for sharing.

It looks like the Iran deal will allow OPEC+ to increase their output quickly.  Should find out more later this week.

The release of the US’s strategic petroleum reserves at about 1 million bpd ends in mid-October; Iran’s 100 million barrels of stored crude and condensate could effectively replace that for three months. By next year, 1-1.2 million bpd of Iranian supply would return to the market.

[Sweet]

Anas Alhajji said that nearly all of Irans stored ‘oil’ was actually condensate that few actually want.  The market is short heavy crude, the light stuff not so much.

[Phoenix01]

Looks like OPEC+ will cut supply if the Iran deal gets ratified.  The price of crude is reacting to the announcement and is up over $3 today.

[Paarslaars]

https://www.fxstreet.com/economic-calendar/event/bcf389bd-5fe2-4bd1-b1e0-d0b3910ba944

 

Edited August 24, 2022 by Paarslaars

[Ulti]

https://oilprice.com/Energy/Natural-Gas/Canada-Set-To-Miss-Out-On-A-Massive-LNG-Opportunity.html

 

It seems like this is a fluff piece but what do I know ...hopefully someone can enlighten me...I thought that the western Transmountain line was going to offer

export opportunity to Asia and indirectly free up more gas from the US to go to

Europe....as well as directly export to US lng facilities.

https://www.capp.ca/explore/oil-and-natural-gas-pipelines/

 According to this website , the industry agrees with missed opportunities and lng .

 

 

 

 

 

 

 

[mcliu]

https://www.reuters.com/markets/europe/forget-showering-its-eat-or-heat-shocked-europeans-hit-by-energy-crisis-2022-08-26/

Stagflation

[gokou3]

5 hours ago, Ulti said:

https://oilprice.com/Energy/Natural-Gas/Canada-Set-To-Miss-Out-On-A-Massive-LNG-Opportunity.html

 

It seems like this is a fluff piece but what do I know ...hopefully someone can enlighten me...I thought that the western Transmountain line was going to offer

export opportunity to Asia and indirectly free up more gas from the US to go to

Europe....as well as directly export to US lng facilities.

https://www.capp.ca/explore/oil-and-natural-gas-pipelines/

 According to this website , the industry agrees with missed opportunities and lng .

 

 

 

 

 

 

 

Transmountain (TMX) is for crude oil.  Coastal Gaslink is for NG transport from Alberta to LNG Canada plant in Kitimat, scheduled to come online in 2025.  2Bcf/d, a good start but far from potential production capability.

 

All going from memory so may be off.

[SharperDingaan]

On 8/26/2022 at 7:52 AM, Ulti said:

https://oilprice.com/Energy/Natural-Gas/Canada-Set-To-Miss-Out-On-A-Massive-LNG-Opportunity.html

 

The reality is that Canadian o/g is two separate industries - west coast and east coast.  Near term European NGL exports are dependent upon 2-3 existing East Coast facilities being repurposed, and processing gas from Hibernia. The gas and provincial political wills are there, the problem is the economics. 

 

The best solution is at least two long term high capacity purpose built LNG facilities, inclusive of loading facility LNG storage, insulated piping, and expanded docking. A serious dollar commitment, and a minimum 3-5 year build ... after which no local producers will be able to compete against the very low per unit throughput costs. But there will be no build  without the 20-30 yr take-or-pay contracts from European governments (Germany, France, UK, etc.), to finance it against.

 

The immediate problem is that a repurposed facility has maybe 5 years to recover its costs and make a profit before it becomes a stranded asset. And because the priority is rapid delivery - not efficiency, it is going to be a high cost facility guaranteed to strand. Long term NGL delivery .... dependent upon how this is addressed. 

 

The longer term problem is that while two purpose built facilities are required for security purposes, there isn't the long term gas to supply two facilities. It needs a supporting gas pipeline taking either US East Coast gas, or Western Canadian gas. Lot of issues around this  but not insurmountable.

 

No matter what, long term Province of Newfoundland debt continues to pay a higher coupon, but becomes a lot less risky over time. Europe eventually gets NGL/Hydrogen diversification, but it takes a while.

 

SD

 

 

 

Edited August 27, 2022 by SharperDingaan

[meiroy]

Pardon if this was covered on another thread, but those of you who live in Europe or have families there, how will you cope with the coming energy crisis in winter?

[ValueHippie]

41 minutes ago, meiroy said:

Pardon if this was covered on another thread, but those of you who live in Europe or have families there, how will you cope with the coming energy crisis in winter?

There are some european gas stocks that trade as less than one time earnings with good management. I just buy more of those

[lnofeisone]

4 hours ago, ValueHippie said:

There are some european gas stocks that trade as less than one time earnings with good management. I just buy more of those

Can you share any names in the E&P space? I spent a little time looking at the names but shelved it as I'm too heavy in energy as is. Few that I was looking at were EnBW in Germany and CEZ in Czech republic and Mol Magyar in Hungary. My thinking Eastern European cos are probably better from regulatory perspective (though VET is already doing some of this) but haven't fully developed my thinking here.

[Paarslaars]

6 hours ago, meiroy said:

Pardon if this was covered on another thread, but those of you who live in Europe or have families there, how will you cope with the coming energy crisis in winter?

 

Goverments here are securing energy so for the middle class it will just be a higher energy bill.

I'm assuming goverments will also intervene for the lower class as the total bill is increasing substantially and some might not be able to afford it. Here in Belgium they have already cut the tax on gas from 21% to 9% until the end of the year and will likely continue this.

Edited August 28, 2022 by Paarslaars

[Ulti]

22 hours ago, SharperDingaan said:

The gas and provincial political wills are there, the problem is the economics. 

Thanks SD... I listened to a podcast interview with Trent Boehm a Canadian energy investment banker for many decades and he talks similar to you....capital discipline, lack of investment etc.  A silly question, but if Canadian o&g company's are restricted concerning exports, how will these companies continue to maximize returns? How much o\g is Canada currently exporting ? Is production still primarily for local consumption ? This is why I invested in VET;because of the European exposure currently in their portfolio.

https://podcasts.apple.com/us/podcast/95-trent-boehm-stifel-firstenergy-why-its-the-golden/id1493491566?i=1000577378902

[petec]

22 hours ago, SharperDingaan said:

 

The reality is that Canadian o/g is two separate industries - west coast and east coast.  Near term European NGL exports are dependent upon 2-3 existing East Coast facilities being repurposed, and processing gas from Hibernia. The gas and provincial political wills are there, the problem is the economics. 

 

The best solution is at least two long term high capacity purpose built LNG facilities, inclusive of loading facility LNG storage, insulated piping, and expanded docking. A serious dollar commitment, and a minimum 3-5 year build ... after which no local producers will be able to compete against the very low per unit throughput costs. But there will be no build  without the 20-30 yr take-or-pay contracts from European governments (Germany, France, UK, etc.), to finance it against.

 

The immediate problem is that a repurposed facility has maybe 5 years to recover its costs and make a profit before it becomes a stranded asset. And because the priority is rapid delivery - not efficiency, it is going to be a high cost facility guaranteed to strand. Long term NGL delivery .... dependent upon how this is addressed. 

 

The longer term problem is that while two purpose built facilities are required for security purposes, there isn't the long term gas to supply two facilities. It needs a supporting gas pipeline taking either US East Coast gas, or Western Canadian gas. Lot of issues around this  but not insurmountable.

 

No matter what, long term Province of Newfoundland debt continues to pay a higher coupon, but becomes a lot less risky over time. Europe eventually gets NGL/Hydrogen diversification, but it takes a while.

 

SD

 

 

 

Do you mean NGL or LNG? I thought the debate was about LNG but you mention both?

[Viking]

I think it is very unlikely we get any new mega oil/gas projects going in Canada that require federal approval (like new pipelines/LNG facilities). And this includes some provinces like BC (my understanding is they are not even approving new drilling permits let alone considering any new mega projects). 

Now the energy situation could get much worse (i.e. oil and nat gas prices could spike higher and stay very high for years). Perhaps attitudes towards fossil fuels will change. And then perhaps governments will start to change their energy policies. But i think this is highly unlikely in Canada in the near term.
—————

The main reason i see little change coming in Canada is the policy focus today is on Canada hitting its climate change commitments. The focus is not on helping the world hit its commitments. To hit its climate change commitments Canada will need to shrink its oil and gas production (given what we know today about the path the government wants to take). This will result in much higher coal use in the rest of the world (the non-West world prioritizes cheap energy over climate change). So Canada will hit its commitments and the world will be worse off. Because Canada could ramp production of nat gas - which is viewed as a much better transition fuel than coal - at the cost of Canada not hitting its climate change commitments.
 

It just looks to me like government energy policy (pretty much everywhere) is completely messed up. And i will freely admit i am not an expert on this topic. 

[ValueHippie]

4 hours ago, lnofeisone said:

Can you share any names in the E&P space? I spent a little time looking at the names but shelved it as I'm too heavy in energy as is. Few that I was looking at were EnBW in Germany and CEZ in Czech republic and Mol Magyar in Hungary. My thinking Eastern European cos are probably better from regulatory perspective (though VET is already doing some of this) but haven't fully developed my thinking here.

I own quite a lot of Kistos and some Serica.

[Spekulatius]

13 hours ago, meiroy said:

Pardon if this was covered on another thread, but those of you who live in Europe or have families there, how will you cope with the coming energy crisis in winter?

My brother lives in Germany,  but his house can be heated with oil, so not that big of an issue. He also has a solar roof, which helps with the electricity bill.

 

I have heard that heat pump systems sell like hotcakes. That’s another way to reduce energy costs, but only for single family homes.

Edited August 28, 2022 by Spekulatius

[SharperDingaan]

8 hours ago, petec said:

Do you mean NGL or LNG? I thought the debate was about LNG but you mention both?

 

My bad, this should have been LNG.

 

The additional technical problem is Germanys preference for green hydrogen, and the shipborne transportation of that hydrogen; in the short term it can be done in liquified form, but in the long term it really needs to be in a hydride of some type that is heated to release its hydrogen. These ships explode ... and they take most of a city with them, hydrogen stored in a hydride is multiple times 'safer'.

 

There is evidence (Qatar) that Germany/Europe is balking at long term take-or-pay contracts. Our own view is that ultimately it will not go ahead unless it is for LNG, and that it is at least 5 years away. And it'll get done, primarily to diversify the developing German/European reliance on ME supply.

 

SD

[petec]

2 hours ago, SharperDingaan said:

 

My bad, this should have been LNG.

 

The additional technical problem is Germanys preference for green hydrogen, and the shipborne transportation of that hydrogen; in the short term it can be done in liquified form, but in the long term it really needs to be in a hydride of some type that is heated to release its hydrogen. These ships explode ... and they take most of a city with them, hydrogen stored in a hydride is multiple times 'safer'.

 

There is evidence (Qatar) that Germany/Europe is balking at long term take-or-pay contracts. Our own view is that ultimately it will not go ahead unless it is for LNG, and that it is at least 5 years away. And it'll get done, primarily to diversify the developing German/European reliance on ME supply.

 

SD

Thanks. What’s your view on whether more capacity (after LNG Canada phase 1) gets built on the West Coast to serve Asia?

[Paarslaars]

14 hours ago, ValueHippie said:

I own quite a lot of Kistos and some Serica.

Kistos looks interesting. I can't find earnings for Q1&Q2 on their website, only full year 2021, do they not report this?

The fact that we already have record high gas prices in the summer makes for a very interesting winter to come.  

Edited August 29, 2022 by Paarslaars

[Paarslaars]

11 hours ago, Spekulatius said:

My brother lives in Germany,  but his house can be heated with oil, so not that big of an issue. He also has a solar roof, which helps with the electricity bill.

 

I have heard that heat pump systems sell like hotcakes. That’s another way to reduce energy costs, but only for single family homes.

 

Yeah solar panels + heat pumps are popular here. You already need a well insulated house for this to be economically attractive though, even at these gas prices. It's quite an investment cost.

 

Additionally, I like to add that here in Belgium roughly 10% of the population gets what is know as the 'social price'. Which is about 0.03€/kwh for gas and 0.25€/kwh for electricity. For these people, the solar panel + heat pump system is simple not lucrative due to the relative cheap prices & big gap between gas & electricity.

Edited August 29, 2022 by Paarslaars

[bizaro86]

45 minutes ago, Paarslaars said:

 

Yeah solar panels + heat pumps are popular here. You already need a well insulated house for this to be economically attractive though, even at these gas prices. It's quite an investment cost.

 

Additionally, I like to add that here in Belgium roughly 10% of the population gets what is know as the 'social price'. Which is about 3€/kwh for gas and 15€/kwh for electricity. For these people, the solar panel + heat pump system is simple not lucrative due to the relative cheap prices & big gap between gas & electricity.

Is there a decimal missing on that electricity price somewhere? Surely it isn't 15.00E per kWh? Ie, is it actually 0.15Euro or 1.50Euro per kWh?

 

I pay $0.059 CAD per kWh...

[Paarslaars]

Yeah that should be cents not € my bad, I'll correct it.

It was also 0.25€ for electricity, not 0.15€.

 

Still a lot more than Canada I see but Belgium is #8 if I'm correct in high electricity prices.

Edited August 29, 2022 by Paarslaars