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Energized! #032: IMO 2020 Spotlight Issue

Friday, November 15th, 2019

Hello all,

Happy Friday and welcome to Energized, your weekly look into the geopolitics, news, and happenings of energy markets.

Before diving into this week’s content, we’d like to remind you to join our Energized LinkedIn Group. We will be releasing frequent news and snippets of Energized newsletters through the group. We hope to see you there. Also, if you haven’t already, visit our website to gain access to our free Oil 101 introductory course, our popular series of mobile-ready videos describing “How the industry works.” Ready for more? Check out our in-depth Oil 201 course which covers exploration, drilling, production, well completions, and refining. If your company or group is interested in Oil 101, let’s talk. We license our courses for use as internal training for sales, IT and operations teams. Think you know someone who would enjoy this newsletter? Pass it on! They can subscribe and access our Energized archives here.

Now, onto this week’s spotlight issue, “IMO 2020 Regulation”

Energized!

Curated weekly oil and gas newsletter

IMO 2020 Spotlight Issue

With only six weeks left in the year, you’re probably thinking about the holidays and what the new year, and new decade will bring. Equally important (half kidding) is IMO 2020, the International Maritime Organization’s long-anticipated regulatory reduction in sulfur emissions that goes into effect January 1st, 2020. IMO 2020 affects multiple industries and will hopefully lead to a more sulfur-free world, but it won’t be easy.

Background:

Bunker Oil, Sulfer Oxide, HSFO, LSFO, VLSFO, ULSD, and Scrubbers

+ Sulfur 2020 – cutting sulfur oxide emissions – International Maritime Organization

IMO 2020 affects mainly the shipping industry by reducing the amount of sulfur oxide that ships can emit. Commerical ships mainly use bunker oil as their fuel source. “Bunker oil for ships is heavy fuel oil, derived as a residue from crude oil distillation. Crude oil contains sulfur which, following combustion in the engine, ends up in ship emissions. Sulfur oxides (SO_x) are known to be harmful to human health, causing respiratory symptoms and lung disease. In the atmosphere, SO_x can lead to acid rain, which can harm crops, forests and aquatic species, and contributes to the acidification of the oceans.”

According to Seahawk Investments, “The global fuel sulfur cap is part of the IMO’s response to heightened environmental concerns, contributed in part by harmful emissions from ships.”

Fuel oil is the heaviest product that can be obtained from crude oil, heavier than gasoline or naphtha. It has a long hydrocarbon chain and is used primarily as heavy fuel for marine vessels. If containing a lot of sulfur, as is often the case, it is known as high sulfur fuel oil (HSFO). Refineries produce many distillates, with fuel oil often being the residue during distillation. When a marine vessel is refueling, the process is known as “bunkering”, hence the term “bunker oil”. So in this context, fuel oil, heavy oil, marine oil, and bunker oil, are all the same thing.

For a while now, the marine industry has been striving for lower sulfur emissions. Therefore, the switch from a maximum sulfur content of 3.5% to 0.5% will not be as severe as it looks. Ultra-low sulfur diesel (ULSD) has been the industry standard diesel fuel for the marine and locomotive industries since 2006. It contains a negligible amount of sulfur and can be combined with higher sulfur fuel oils, reducing the sulfur concentration via blending. The blended result is usually called very low sulfur fuel oil (VLSFO). According to Stillwater Associates, “A simple sulfur balance suggests that blends between 80 and 85 percent ULSD will meet the 0.5% specification, and the most common proxy for VLSFO price in the future is five parts ULSD price and one part HSFO.”

Unlike VLSFO, Low sulfur fuel oil (LSFO) is typically more of a standalone commodity, not the result of blending diesel and high sulfur fuel oil. Last month, LSFO futures began trading on the Singapore-based Asia Pacific Exchange (APEX).

The takeaway here is that ships have several options to get to the new 0.5% spec, including blending HSFO and ULSD to get VLSFO, or using LSFO, standalone diesel, natural gas, or liquefied natural gas (LNG). Another way is using scrubbers, which are onboard systems that spray alkaline water into the vessel’s exhaust to remove sulfur oxide. The point being, while there are multiple ways to comply with IMO 2020, there’s no way around avoiding costs, much of which will be passed along to the consumer.

	Current Industry Specs	IMO Specs
Maximum Sulphur Content	3.5%	0.5%
API Gravity	11.3	17-25
Density	991	952-904
Barrels/Metric Ton	6.35	6.6-6.96

Data derived from argusmedia.com based on ISO data

API gravity is simply a measure of how heavy or light a petroleum liquid is compared to water. An API gravity above 10 suggests the fluid will float on water, whereas an API gravity of fewer than 10 means it will sink. As you can see in the above table, the API gravity of heavier sulfur-containing bunker fuel is barely above the API of 10, meaning it will just be able to float on water. The API of 0.5% sulfur-containing fuel is much lighter at 17-25.

Overall Impact/ Impact on the Shipping Industry

+ Just how disruptive will IMO 2020 be? – BCG publications

Clearly, sulfur’s got to go. But what are the steps to getting there?

“Precisely how great the disruption proves to be—and, critically, how long it lasts—will be influenced by several factors, including the speed at which refiners can produce compliant fuel and the specific strategies that shippers employ to meet the challenge.”

“We have modeled a wide variety of scenarios and can imagine a disruption lasting anywhere from one year to more than five years, generating significant costs for many businesses. ”

So if costs are high, is there a chance certain fleets or ports won’t comply?

“The degree of compliance among shippers seems likely to be high. Shippers will certainly have incentive to comply. Major ports, as well as insurers, will demand that ships use compliant fuel. The shipping industry is also relatively consolidated, which limits the number and percentage of ships in the global fleet owned by rogue operators that might be inclined to ignore the mandate.”

That’s good news coming from the BCG report, which continually stresses that preparations for IMO 2020 regulation have been occurring for some time now. But couldn’t ships just bunker with LSFO and then switch to HSFO at sea to save costs?

“In late 2018, the IMO approved a so-called carriage ban that prohibits the transportation of noncompliant fuel by ships that lack scrubbers (technology that removes polluting sulfur emissions from ship exhaust). This regulation, which is scheduled to take effect in March 2020, reduces the likelihood of ships switching fuels at sea.”

So basically, install scrubbers or use compliant fuel. Clearly, IMO has thought this through, making it a real pain for shipping companies to get around the new regulation. As we will discuss in the Argus report later, the demand for HSFO, which has 3.5% sulfur content, will decrease and the demand for VLSFO will increase. The current consumption of HSFO, which represents the vast majority of marine fuel currently sold, is nearly 4 million barrels per day.

So the switch will happen because IMO has made it difficult for ships to dodge regulations, but what are the costs?

“Choosing to fuel vessels with increasingly expensive VLSFO would cost the shipping industry dearly—an additional $60 billion in 2020 over current fuel costs, according to one estimate.”

$60 billion in one year is no small amount. The costs will be largely incurred from the need for refiners to increase the production of VLSFO and diesel to produce enough <0.5% sulfur blends. Additionally, engines that use diesel or a blend of diesel and natural gas provide a worry-free alternative for shippers who were already looking for an upgrade anyway. Marine diesel is an established fuel that “poses no compatibility risk” since it contains such negligible quantities of sulfur.

LNG is another “worry-free” alternative. That being said, “the high cost of engine and infrastructure conversion and the logistics of onboard storage (LNG tanks take up considerable space) will likely dissuade a critical mass of shipping companies from pursuing it, at least in the near term. (Over the longer term, as the global fleet of vessels turns over, LNG could become increasingly popular as a fuel, especially if the pressure to reduce emissions intensifies.)”

“Scrubbers could be yet another viable choice for some shippers. But scrubbers are expensive—retrofitting a vessel requires an investment of $2 million to $3 million—and installation can take up to six months. Scrubber installation is also hindered by shortages of skilled craftsmen and necessary raw materials, such as high-quality steel and chrome alloys. In addition, the open-loop scrubbers now being installed could prove to be a short-lived option, given environmental concerns about putting sulfur directly into the water.”

“Regardless of what path shippers ultimately choose, they will try to pass along their costs to customers. How successfully they will be able to do so remains to be seen.”

The main point from IMO 2020 regulation, it seems, is that it will be expensive for shippers, whether they choose the VLSFO, LSFO, diesel, dual fuel (diesel and natural gas), or LNG route, and those costs will pass along to their customers in a way that remains to be seen.

+ Uncertainty shrouds IMO 2020’s impact – Forbes

This Forbes article continues the discussion on the costs falling on the consumer. “The consumer will pay for the change in a number of ways, as this legislation alters the relative values of all refined products. It is likely the cost of air travel will increase, as will road freight costs.”

+ IMO 2020 and effects on the shipping industry – Seahawk Investments

“The new regulation will have big impacts on the shipping industry’s operating costs, global freight rates, global fuel supply and demand, and more.”

The article notes that VLSFO is a primary solution for small and medium-sized vessels, and “as the marine sector accounts for about half of the global fuel oil consumption, this drastic shift will initially challenge the supply side for VLSFO.”

Scrubbers

The article notes that scrubbers, due to their high initial cost but long-term benefits, will be the primary solution for large vessels.

“According to IHS Markit research, on-board ship scrubbers will be the primary path for large ship. The cost of installing scrubber is between $2 mln and $6 mln for each ship. The upfront cost is high, but it will be paid off in long term. However, other than the high upfront cost of installing scrubbers, there are other challenges for shipowners, as reported by Noah T. Jaffe of ReedSmith: (i) scrubber technology is new and unproven, (ii) further environmental regulations may render this approach unviable – for example, some countries have banned the use of open-loop scrubbers (e.g., China, Singapore and Fujairah), and (iii) the availability of HSFO in small or distant ports is uncertain as refineries will reduce their production of such fuels and global supply is expected to shrink. The current rate of scrubber installations is at low level, but improving. As of the beginning of July 2019, only 4% of all vessels are scrubber-fitted and ready to be in operation. This figure is expected to rise to 11% and 15% by the end of 2019 and 2020, respectively.”

LNG-powered ships

“Another possible solution to meet IMO 2020 is the use of LNG-fueled vessels.”

“As of February 2019, there were 143 LNG-powered ships in operation and a further 135 on order. Analysts predict 300 (lowered from 400 to 600) LNG-fueled ships, compared with 2,000 ships with scrubbers, by 2020.”

“In summer 2018, top carriers such as Maersk, CMA, CGM, and MSC announced to add bunker charges to compensate for the unexpected increase of bunker costs. For this purpose, a bunker adjustment factor (BAF) tariff was created to recover fuel-related costs.”

Implications of IMO 2020

“The significant increase in operating costs will lead to an increase in freight costs worldwide. In precise terms, an Asia to North Europe round trip could cost an additional $1 mln [million] after the new regulation takes effect.”

Increased bunker prices will likely result in slower shipping speeds, at least in the short-term. “As fuel consumption increases with the speed of a ship, the average speed of ocean-going vessels has come down by 15-25% over the last decade.”

Impact on the Traders: Markets, Pricing, Key Takeaways

+ IMO 2020: navigating varying specifications and arbitrage – Argus Media

Singapore is the largest bunker fuel oil importer in the world, obtaining nearly a quarter of its high sulfur fuel oil from Russia. A drop in imports to Singapore from Russia will be something to watch in 2020. For context, Russia exported 244,000 barrels per day of HSFO to Singapore in the first half of 2019. Argus notes that including transshipments from the Netherlands would increase the total to 296,000 barrels of HSFO per day. With the Russian surplus of fuel oil looming in 2020, it’s likely the country will have to use the fuel as a feedstock for various industrial applications or as a fuel source in power generation. The natural gas that would have been used for power generation could then be exported.

Argus notes that Singapore is also importing more diesel in response to IMO 2020 regulation, most notably from South Korea, China, and India.

One of the most interesting points from the Argus webinar is the increase in the storage of LSFO in hubs like Singapore, the USGC/Carribean, USEC, USWC, NW Europe, Mediterranean, and the UAE. Much of these exports of LSFO are coming from West Africa, which began ramping up exports in anticipation for IMO 2020 starting in July of this year. Argus expects heavy competition in the coming years between American, European, and Southasian importers for West African exports of LSFO.

Countries like Brazil, who can export LSFO with a maximum sulfur content of 0.8%, can still compete in the market by blending down their fuel oils to lower sulfur levels.

In terms of other fuels, Argus notes that the U.S. is “long diesel”, with over 75% of diesel exports going to Latin America, followed by 17% to Western Europe, and 7% going to other sources.

21% of total U.S. diesel exports go to Mexico. Argus expects Mexico to be even more reliant on clean fuel imports such as diesel in the coming years. This is because Mexico’s fuel oil has a whopping 4% sulfur concentration, heavily missing the mark from IMO 2020 requirements. “Pemex is expected to drop its refinery utilization rate in 2020 to reduce this high sulfur fuel oil output,” said Argus. “Mexico is expected to become even more reliant on the U.S. Gulf Coast for clean petroleum products such as diesel.”

Pricing

It’s not even 2020 yet but already the difference between LSFO and HSFO has been bouncing around between $10-$30 per barrel, depending on the region. Prices for LSFO are lower in the U.S. for example due to the abundance of clean fuels like diesel. The difference between LFSO and HSFO is actually the lowest in Fujairah [major port in the UAE located on the Gulf of Oman] and Singapore due to the present need for HSFO bunker fuel and the lack of availability of HSFO compared to other regions. Argus expects that gap to remain narrow for the rest of 2019 then, as expected, widen in 2020. The gap between LSFO and HSFO is quite high in Northwest Europe and the U.S. since there isn’t really a need to bunker HSFO and availability is much higher compared to Fujairah and Singapore.

Is response to the rise of 0.5% sulfur fuel oil demand, Argus is launching 24-month rolling price curves for key regions around the world. So far, Argus has 0.5% curves for New York, USGC, NW Europe, Zhoushan [major Chinese port located on the East China Sea], and Singapore. The different curves will give the industry a sense of the arbitrage between places such as Singapore, likely trading above the United States for example. The Argus Marine Fuels Forward Curves service “enables industry participants to measure risk, improve mark-t0-market accounting, calculate profits/losses, and properly valuate assets.”

Key Takeaways

Argus’ key takeaways are as follows

“US Gulf 0.5% sulfur typical density will settle and the market will remain barrel-denominated”
“Russia’s huge HSFO surplus in 2020; demand for W African LSFO up”
“Latin America’s dependence on the US for diesel to increase”
“Diverging 0.5% sulfur forward curves signaling NW Europe to US Gulf arbitrage”
“CME and APEX list futures settling on Argus-assessed FO [fuel oil] in Singapore”
“Argus to launch an electronic trading platform for 0.5% sulfur FO”

Make sure to watch the Argus full webinar or check out the slide deck for more information.

+ Singapore to launch low-sulfur fuel oil contract ahead of new shipping rules – Hydrocarbon Processing

Hydrocarbon Processing covered the launch of Argus’ Singapore-based LSFO futures contract.

As alluded to earlier in this newsletter, “Singapore-based Asia Pacific Exchange (APEX) will launch a low-sulfur fuel oil (LSFO) futures contract aimed at helping shipping and energy firms manage price fluctuations as stricter global marine fuel rules kick in from 2020.”

“The new contract aims to help the energy and shipping sectors to hedge risk in the relatively new market for 0.5% LSFO delivered marine fuels, or bunkers.”

“The cash-settled, U.S. dollar-denominated LSFO futures contract will be for 10 tonnes of fuel oil, and will use the Argus Bunker Index (ABI) Singapore LSFO 0.5% as the settlement price, according to APEX and Argus company websites.”

Impact on the Refiners

On the refiner side, expect increased demand for VLSFO. Complex refineries will begin converting their high sulfur crudes to lower sulfur products, including VLSFO. They will also likely begin to “maximize their production of distillates—which can be used to make compliant fuel, such as marine gas oil (MGO), a fuel that could rise sharply in demand. Simple refineries that mostly produce HSFO and have relatively low distillate yields will have greater difficulty maintaining their margins,” according to the BCG report. The report continues, “optimal marine engine operation hinges not just on sulfur content but on secondary fuel characteristics (such as viscosity and stability), and the comingling of fuels from different providers on vessels is inevitable.”

U.S. onshore shale wells typically contain light, sweet crudes that contain less sulfur, causing less of a headache to refiners in the U.S. On the other hand, notoriously heavier crudes in places like Venezuela will cause even more strain on refiners who now face decreased demand for the HSFO commonly produced from heavier crudes.

Generally though, “Refinery earnings should improve, as tighter fuel quality standards requires higher activity levels by the refining sector, for which it will earn a margin,” according to a Forbes article. Additionally, “The relative value of crude oils will change, as high sulfur, heavy crudes will become less valuable than today. This will have an impact on the upstream sector and has the potential for this legislation to drive all crude prices higher.”

“Refinery investments will also be important, as refiners could undertake major projects to supply 0.5% sulfur fuel oil. To date, few have committed to major capital projects and those that have are investing around US$1 billion on projects that will take a number of years to implement,” continues the Forbes article.

BCG anticipates a few different disruption scenarios:

The BCG report is dense and worth a read if you want to learn more about their different modeling scenarios and what they suggest.

+ SK Innovation expects IMO 2020 to help improve refining margins – Hydrocarbon Processing

A recent announcement by SK Innovation, the owner of South Korea’s top refiner, SK Energy, supports the notion of improved refining margins as previously mentioned in the Forbes article.

“Refining margins are expected to improve led by middle distillates demand as the International Maritime Organization (IMO)’s shipping fuel rules set to take effect from 2020.”

You can check out the article for more nuggets from SK Innovation.

+ Refiner to start producing IMO-compliant fuel oil mid-2020 – Hydrocarbon Processing

“Gunvor Group will overhaul its refinery in Rotterdam in March next year and reconfigure the plant to produce some low sulfur fuel oil that complies with new, global shipping rules, its chief executive officer said.”

The article reinforces points we mentioned earlier, such as “the industry has been gearing up as the switch approaches. Fuel suppliers are stocking up Very Low Sulphur Fuel Oil at key ports and refineries are also favoring heavy sweet crudes that yield higher volumes of compliant fuel oil.”

Remember that “ships could also opt for more expensive diesel or continue using high sulfur fuel oil if they install units that remove sulfur, known as scrubbers.”

Conclusion

+ IMO 2020 and effects on the shipping industry – Seahawk Investments

Bringing back the Seahawk Investments article from the beginning of this newsletter…

“In order to comply with IMO 2020, shipowners will primarily choose either to switch to VLSFO or to install scrubbers on existing vessels.”

“IMO 2020 is a game-changer in the shipping industry, affecting shipowners, refiners, and all other key stakeholders along the marine fuel supply chain. The world will see a greener environment in the shipping industry, but also a profound change in global fuel supply and demand. Some players such as refiners with an already set-up infrastructure to supply compliance fuel, or marine equipment suppliers for scrubbers benefit from the changes. Shipping costs are likely to increase once the regulation takes effect.”

Have a great weekend!

-Danny Foelber

EKT Interactive Managing Editor

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Energized! #031

Friday, November 8th, 2019

Hello all,

Happy Friday and welcome to Energized, your weekly look into the geopolitics, news, and happenings of energy markets.

Now, onto this week’s issue.

Energized!

Curated weekly oil and gas newsletter

Oil Prices and Markets

+ Fast Facts – Houston Chronicle “Fuel Fix” as of Sunday, November 3rd, 2019

Light, sweet crude (dollars per barrel): $56.20

Last Week: $56.66

Natural Gas (dollars per million British thermal units): $2.714

Last Week: $2.30

Rig count (United States): 822

Last Week: 830

Natural Gas

+ Natural gas soars on cold-weather forecasts – The Wall Street Journal

“Prices are at their highest level since late March; investors focus on inventory data”

Natural gas prices tend to go up in the wintertime and that’s exactly what’s occurring in the commodities market with cold weather forecasts for November and the following months.

“While a sustained rally in natural-gas prices could significantly push up heating costs for consumers, cutting into available income and threatening economic growth, prices are still down for the year and well below where they were around this time last year.”

This Wall Street Journal article discusses the trading around the commodities market, so feel free to give it a read if you’re interested in that. If not, the main takeaway is that natural gas prices went up 17% since last week, which is a pretty big move for prices that have been in the low $2.00-2.40 range for some time now.

Trade, Policy, and Commerce

+“America First”? Kill the Jones Act – Wall Street Journal Opinion + The Jones Act – Investopedia.com

Before getting into the article, here’s some primer on the Jones Act. Also known as Section 27 of the Merchant Marine Act of 1920, the Jones Act was a return to American protectionist/isolationist policies commonly seen before World War 1 (think Theodore Roosevelt’s Big Stick initiatives in Nicaragua, Cuba, Venezuela, etc.) The United States was looking for ways to sustain the industrial and manufacturing boom that came as a result of America entering WWI in 1917. As a result, Congress enacted the Jones Act, which stimulated the American shipping industry by requiring “goods shipped between U.S. ports to be transported on ships that are built, owned, and operated by United States citizens or permanent residents.” That basically means that shipping costs to non-continental U.S. states or lands such as Alaska, Hawaii, Puerto Rico, Guam, U.S. Virgin Islands, etc. are significantly increased because there’s a small supply of American built, owned and operated vessels that can deliver imports. “This creates a scenario in which shipping companies can charge higher rates because of a lack of competition, with the increased costs passed on to consumers.”

The Wall Street Journal Opinion piece questions the delivery of Russian gas to an American port in the wake of U.S. natural gas supply that is now the largest in the world. Why import more supply when we have enough and producers want higher prices? The author argues the Jones Act is partially to blame.

“It’s a particular problem for liquid natural gas, since there are zero LNG tankers that meet Jones Act rules. That means Puerto Rico effectively is barred from importing gas from LNG terminals in Georgia or Louisiana. As a result, it apparently turned to Siberia. The same happened two winters ago in New England, where gas is short due to a lack of pipeline capacity. A tanker of Russian gas was unloaded in Boston. How is this an “America First” policy?”

Eliminating the Jones act would stimulate other industries and free up the possibility for more trade deals. The author argues the cost-efficiencies of eliminating the Jones Act simply outweigh the pros of insulating the American shipping industry from foreign competition. Give the article a read to decide what you think about the Jones Act and feel free to start a discussion with our nearly 200-member Energized LinkedIn Group.

Southeast Asia

+ 3 new IEA reports provide fresh insights into Southeast Asia’s energy future – IEA

“Southeast Asia Energy Outlook 2019 finds encouraging indications in many areas, but also some warning signs in terms of the security and sustainability of energy systems. The report, part of the IEA’s flagship World Energy Outlook series, was released alongside two other studies focused on the region: The Future of Cooling in Southeast Asia and ASEAN Renewable Energy Integration Analysis.”

“Southeast Asia is set to become a key driver of world energy trends over the next 20 years as its energy demand grows at twice the global average, reflecting the region’s economic rise but also increasing the challenges for its policy makers, according to a new report by the International Energy Agency.”

The IEA, one of the leading energy agencies in the world, dropped a bomb with these reports, reinforcing the potential of Southeast Asia as covered by this newsletter, specifically in our LNG Spotlight Issue.

Probably the most ambitious quote from the report was the following: “”Southeast Asia is set to have a major impact over the next two decades, adding the equivalent of Japan’s entire energy system to global demand. This rapid growth underscores the importance of Southeast Asian countries’ energy policies for their citizens but also for the world,” said Dr. Fatih Birol, the IEA’s Executive Director.”

Is Southeast Asia’s energy potential as big as Japan’s, the third-largest economy and one of the largest energy importers in the world? Dr. Birol says so. But that’s because the IEA is forecasting 60% growth between now and 2040 based on today’s policy settings. That estimate sounds reasonable when you consider that “since 2000, Southeast Asia’s 80% increase in overall energy demand has largely been met by a doubling in fossil fuel use.”

The article is full of highlights from the three reports. Worth a read if you live in Southeast Asia or are interested in the Southeast Asian energy market.

Upstream

+ IHS Markit: US oil production growth heading for “major slowdown” – Oil & Gas Journal

“US shale production—the chief source of rapid growth that made the US the world’s largest oil producer—is slowing down fast, according to a recent report from IHS Markit.”

“”Going from nearly 2 million b/d annual growth in 2018, an all-time global record, to essentially no growth by 2021 makes it pretty clear that this is a new era of moderation for shale producers,” said LeBlanc. ”

IHS Markit’s grim outlook should come as no surprise to Energized readers who are familiar with other reports and opinions such as data discussed by the Spears Brothers in Episode 126: Hitting The Brakes.

Bear in mind that slowing growth and no growth are not necessarily bad. It just means that massive upswings can’t last forever. It’s a similar comparison to a developing economy such as China, posting massive GDP growth rates every year until the economy gets big, and well, can’t grow as fast (this is happening to China by the way, whose economic growth slowed to a 27-year low). Again, it’s not terrible. U.S. production, like China, has grown so much in the past few years that it’s unsustainable, if not even healthy, for growth rates to slow so that the market can catch up to itself.

Safety

+UK records rise in offshore hydrocarbon releases – Offshore Magazine

For those of you involved in the safety aspect of the industry, this article is for you.

Two takeaways:

-“The fatal accident rate per 100,000 flying hours fell to zero for the first time since 2001, despite flying hours increasing by 12% in 2018 to 77,286.”

-“On the minus side, major hydrocarbon releases, which had declined steadily since 2012, increased to four across the shelf in 2018.”

Hydrocarbon releases basically mean oil and gas leaks, which can be extremely dangerous offshore or onshore. Safety is a major concern for offshore projects as the 10th anniversary of the Deepwater Horizon Oil Spill will occur next year.

“OGUK’s Health and Safety Manager Trevor Stapleton said: “We cannot take our eye off the ball. When it comes to getting people home safely, nothing is more important, and we must strive to always do better…””

Energy in Transition

+ Could electric roads spark a green transport revolution? – BBC News

“Specially adapted trucks in Germany are being tested on electric roads.”

The link is a fun and informative video that describes a system that is being tested on German trucks. The system looks like a typical electric rail system for passengers, only with trucks. Worth a watch if you’re interested in energy in transition. “Trucks turn off their diesel engines while connected. The driver decides when to connect and disconnect.” A pretty cool combination of diesel and renewable energy sources.

Business

+ Saudi Aramco: the buyers matter more than the price – The Wall Street Journal

The article discusses the long-anticipated IPO of Saudi Aramco, the largest National Oil Company (NOC) in the world. Aramco is responsible for producing 1/8 barrels of oil in the world. The valuation would be $1.5-2.0 trillion, more than Apple, Microsoft, or Amazon and more than five times ExxonMobil on the low end. The problem is that NOCs typically garner lower valuations than corporations due to their enhanced political risk.

Saudi Aramco hopes to get half of the money from Saudi Arabia and half from global investors. The company expects to pay a $75 billion annual dividend. The article notes that Saudi Aramco is a source of pride in Saudi Arabia, so the real challenge will be raising international capital.

+ Chevron selling Azerbaijan interests to MOL – Offshore Magazine

“MOL has agreed to acquire Chevron Global Ventures’ and Chevron BTC Pipeline’s E&P and midstream interests in Azerbaijan for $1.57 billion.”

Chevron’s sale to MOL, a Hungarian multinational oil and gas company, is likely part of the company’s effort to focus more on onshore production and refining.

Chevron’s unconventional portfolio value has doubled between 2017 and 2019 thanks to land optimization, well performance, and better technology.

It’s no surprise Chevron has been able to grow its unconventional upstream assets so rapidly: The company is spending $3.6 billion of its $20 billion capital and exploratory expenditures in the Permian alone, with another $1.6 billion in other shale plays. Chevron has an industry-leading earnings per barrel (EPB) of $2.66 and the highest-complexity refinery system with an NCI of 12.7.

“The Nelson Complexity Index (NCI) is a measure of the sophistication of an oil refinery, where more complex refineries are able to produce lighter, more heavily refined and valuable products from a barrel of oil. Refineries that are higher on the Nelson Complexity Index are valued higher relative to their peers because of their ability to handle lower quality crude oil or produce more value-added products. Due to their greater complexity, high NCI refineries are more costly to build and operate.” –Investopedia

Have a great weekend!

-Danny Foelber

EKT Interactive Managing Editor

Head Writer | Eau Claire Writing

Eau Claire Writing is a Houston-based freelance writing company that specializes in gas compression, turbomachinery, onshore and offshore drilling, and well service content for the oil and gas industry.

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Energized! #030

Friday, November 1st, 2019

Hello all,

Happy Friday and welcome to Energized, your weekly look into the geopolitics, news, and happenings of energy markets.

Now, onto this week’s issue.

Energized!

Curated weekly oil and gas newsletter

Oil Prices and Markets

+ Fast Facts – Houston Chronicle “Fuel Fix” as of Sunday, October 27th, 2019

Light, sweet crude (dollars per barrel): $56.66

Last Week: $53.64

Natural Gas (dollars per million British thermal units): $2.30

Last Week: $2.32

Rig count (United States): 830

Last Week: 851

Upstream

+New innovations touted to give shale oil a boost – Houston Chronicle

“The U.S. shale boom is at a tipping point as it struggles to profit amid weaker oil prices, but the industry is leaving tens of billions of dollars in the ground each year with wells that aren’t nearly efficient enough.”

If you’re interested in the shale plays, I would give this article a read. It’s the result of an analysis of 80,000 drilled wells in the Permian. “Better well designs coupled with a greater understanding of the shale rock and fluid movements underground could boost efficiency levels by about 20 percent, representing almost $25 billion in annual savings for the U.S. shale sector, said Scott Sanderson, a principal in Deloitte’s oil and gas strategy and operations practice.”

Speaking of Deloitte, here’s the report the Houston Chronicle alluded to:

+ How the shale revolution is reshaping the US oil and gas labor landscape – Deloitte Insights

“Not only has the shale revolution transformed production in the US oil and gas industry, it is reshaping the composition of the industry’s workforce in ways that will fundamentally redefine tomorrow’s oil and gas job opportunities.”

“This article delves into the two subsectors—exploration and production (upstream) and oilfield services (OFS)—and analyzes the overall employment trend over the past 15 years. Our analysis, covering the three phases of oil price movements and the progress of the shale revolution, indicates that the structural changes in the sector have had significant implications on employment, demand for different kinds of skilled professionals, and wages across occupations, although to varying degrees. Nonetheless, the past may not be the best prologue to what lies ahead, given the uncertainty around how the labor market will likely shape up in the future as the sector adopts new technologies to increase well productivity and change cost structures.”

Excellent analysis by Deloitte and worth the read.

The article is broken into three phases.

Phase 1 (2003–2008): The beginning of the US shale revolution

High oil prices, high employment, high capital expenditures, high demand from developed and developing nations. High oil prices as a result of depleting conventional reserves. The shale revolution was motivated by the need for more reserves.

Phase 2 (2008-2014): Big focal shift in the shale revolution and employment trends

Strong employment, strong investment growth, shift from shale gas to shale oil. US crude oil production soared and grew at the fastest pace between 2012 and 2014.

The great recession caused job loss in 2008-2010 but rebounded in 2010 as oil prices revived and stabilized.

“Wages paid to the highly and mid-skilled professionals grew much faster than the overall US industry average, especially during the global financial crisis. The annualized wage growth for highly skilled professionals increased 4.9 percent in 2008–2010, almost twice the overall US industry annualized wage growth of 2.5 percent.”

Phase 3 (2014–2017): The oil downturn and shale’s responsiveness to oil prices

layoffs, year-over-year price declines. Both shale drilling and production recovered their losses from late-2016 after the oil price stabilized above US$50/bbl. Loss of oilfield services jobs, growth in downstream jobs.

“The third phase saw the longest and one of the deepest downturns in oil prices. Three consecutive years of decline led to the slashing and deferring of investments in areas deemed expensive to drill and develop.”

“Although there was always a need for shale companies to become capex light and production efficient, the oil price downturn compelled them to adopt new technologies and focus on the best resources to strike a new balance in the equation.”

“Higher productivity stemming from technology gains and a better understanding of the resource base may cap employment growth. Nonetheless, technology and automation will likely help companies create unimagined, new, and unique work profiles.”

+Drilling and production outlook market report – Spears&Associates

“The Drilling and Production Outlook (DPO) is a quarterly forecast of rig activity, wells/footage drilled and spending through 2025 for more than 50 countries. It is used by oilfield equipment and service companies as an important planning tool for future sales, marketing and manufacturing efforts.”

“Global oil demand growth has slowed, but the supply outlook remains constructive.

US oil production growth slowing
Saudi Arabia cutting output
US sanctions reducing oil exports from Iran”

“The OPEC+ group is expected to continue to curb output into 2020 in an effort to keep global oil inventories near normal and support oil prices. Pressured by their investors, US operators are expected to focus on profitability over volume growth and exhibit a high degree of capital discipline going forward, resulting in a 10% decline in US drilling and frac activity in 2020.”

“Conversely, exploration and new field development activity in markets outside North America is expected to grow 4% in 2020 as IOCs and national oil companies cautiously step up investment in order to maintain oil production capacity. ”

Source: Spears & Associates

Offshore

+ Eni highlights 2019 exploration track record – Offshore Magazine

“Eni delivered six offshore discoveries as operator during the first nine months of the year.”

Location of the five recent discoveries in block 15/06 offshore Angola. (Courtesy Eni)

“According to the company’s latest results statement, three of the finds were in block 15/06 off Angola, bringing the number of new fields proven since exploration resumed on the block last year to five.

Eni estimates the cumulative resources at 2 Bbbl in place.”

+U.S. coast guard responds to three spills – The Maritime Executive

“The U.S. Coast Guard is responding to an oil sheen in Breton Sound, Block 37, Louisiana. It is just one of three spill responses underway on Monday. The three-mile by 10-mile sheen originated from a damaged and inactive wellhead owned by Texas Petroleum Investment Company (TPIC). Currently, the well is intermittently discharging a mixture of oil, water and mud. The cause of the damage to the wellhead is unconfirmed and is currently under investigation.”

“5,000 feet of boom has been deployed on the northwest corner and south of Breton Island. So far, there are no reports of impacted wildlife.”

The coast guard also investigated a sheen in Virginia, likely a petroleum product, as well as an “oil discharge in Pass A Loutre Wildlife Management Area, Louisiana, where crude oil is leaking from a storage tank owned by Whitney Oil and Gas. The maximum potential for the spill was estimated to be 2,520 gallons, but the discharge was contained before all the contents of the tank entered the water.”

+ Somalia says Shell, Exxon agree to pay $1.7 million for oil blocks lease – Reuters

“Royal Dutch Shell and Exxon Mobil have paid $1.7 million to Somalia to lease offshore blocks for 30 years, the country’s state news agency reported on Friday.”

Climate Change

+ Exxon hid “catastrophic” climate prediction, state suit says – Bloomberg

ExxonMobil “was sued by Massachusetts for allegedly hiding its early knowledge of climate change from the public and misleading investors about the future financial impact of global warming, two days after a trial started on similar claims in New York.”

ExxonMobil finds itself in the cross-hairs in response to a “205-page complaint” filed last Thursday. The Massachusets complaint comes on top of a “suit filed a year ago in New York by alleging Exxon misled the general public as well as shareholders by concealing the looming crisis.”

So where does the “catastrophic” quote in the headline come from? “Exxon went so far as to disregard the findings of one of its own scientists, who decades ago correctly predicted the amount of CO2 in the atmosphere in 2019 and said that climate change would become “catastrophic.”

Massachusets Attorney General, Maura Healey, has been investigating Exxon since 2016 and “claims Exxon’s actions violated the Massachusetts Consumer Protection Act.”

This suit will be a story to watch. By now you’ve probably seen ExxonMobil ads on biofuels, promoting #UnexpectedEnergy and Exxon’s new motto “Energy Lives Here”. The company has been rebranding itself as an energy company, not just an oil and gas company, in an attempt to change negative public perception about Big Oil. For Exxon, the stakes are high. Redefining its brand will help the company recruit top talent and probably bolster the depressed stock price. In the meantime, negative press and lawsuits do Exxon no favors.

In response, Exxon’s claimed the state “twisted” reality “by conflating two internal metrics the company uses to account for the financial impact of climate change on its business. Instead, Exxon had evidence proving the two metrics were used for different purposes and were never intended to be public, refuting New York’s claims that the differing numbers were kept to give the public a falsely rosy picture of the company’s financial health.”

Have a great weekend!

-Danny Foelber

EKT Interactive Managing Editor

Head Writer | Eau Claire Writing

Unsubscribe | Update your profile | 9813 Shadow Wood Dr., Houston, TX 77080

Energized! #029

Friday, October 25th, 2019

Hello all,

Happy Friday and welcome to Energized, your weekly look into the geopolitics, news, and happenings of energy markets.

Now, onto this week’s issue.

Energized!

Curated weekly oil and gas newsletter

Oil Prices and Markets

+ Fast Facts – Houston Chronicle “Fuel Fix” as of Sunday, October 20th, 2019

Light, sweet crude (dollars per barrel): $53.64

Last Week: $54.49

Natural Gas (dollars per million British thermal units): $2.32

Last Week: $2.27

Rig count (United States): 851

Last Week: 856

Offshore

+Record Gulf of Mexico oil production expected to continue – Offshore Magazine

According to the EIA, crude oil production in the Gulf of Mexico averaged 1.8 MMb/d in 2018, setting a new annual record.

“Based on EIA’s latest Short-Term Energy Outlook’s expected production levels at new and existing fields, annual crude oil production in the GoM will increase to an average of 1.9 MMb/d in 2019 and 2.0 MMb/d in 2020.”

“Eight new projects are expected to come online in 2019 and four more in 2020.”

Due to the continual increase in onshore production despite price declines, offshore is expected to account for just 15% of crude oil production in 2019 and 2020 compared to 23% of total US crude oil production in 2011.

The article notes the importance of distinguishing between onshore and offshore patterns. As noted in this newsletter, offshore is a longer-term game reliant on hitting goals and meeting deadlines rather than prices alone. Breakevens tend to be significantly lower to justify the often lofty capital expenditures incurred for offshore projects.

“Crude oil price increases in 2017 and 2018 relative to lows in 2015 and 2016 have not yet had a significant effect on operations in the GoM, but they have the potential to contribute to increasing rig counts and field discoveries in the coming years. Unlike onshore operations, falling rig counts do not affect current production levels, but instead they affect the discovery of future fields and the start-up of new projects.”

Climate Change

+ Facing climate change, ExxonMobil ramps up energy research – Axios

“The world’s biggest publicly traded oil company has been creating new partnerships with American and foreign universities in recent years totaling at least $75 million, and it just inked another, unprecedented $100 million deal with the U.S. Energy Department.”

This is a great article for those of you interested in the ways the largest integrated oil and gas company is investing in renewable energy. It’s not just about money, it’s partnerships too. “In 2014, Exxon began pursuing an internal goal to establish several partnerships with leading universities — roughly one per year — that go far beyond money. Exxon-employed scientists spend significant time at the universities. Many have offices, give guest lectures and co-author peer-reviewed research.”

Exxon recognizes the scrutiny it faces in the public eye. This scrutiny is a major headwind for the reputation of Exxon and the ability for the company to hire talented employees.

This is an excellent article for a breakdown of what Exxon is doing to turn itself into an “energy” company not just an “oil and gas” company.

LNG

+Canadian East Coast LNG export plans progress with Pieridae’s Shell deal – Reuters

“The Canadian LNG industry has been slower than its U.S. counterpart to take advantage of soaring gas demand around the world and build export plants, in part due to securing feedstock supplies for the terminals. This contrasts to the U.S. Gulf Coast, where there is so much gas being produced thanks to the shale revolution, some producers have had to pay buyers to take it off their hands. This makes it easier for LNG projects there, which tend to buy gas rather than own gas assets. Five large LNG export terminals operate in the United States including the 25 million tonne a year (mtpa) Sabine Pass, operated by Cheniere Energy <LNG.A>. By contrast, there are no operating LNG export facilities in Canada although Shell has begun constructing a massive one on the West Coast.”

“Pieridae Energy moved closer to building a liquefied natural gas export terminal on Canada’s East Coast after taking ownership of fields from Royal Dutch Shell which will feed gas into the plant, the company said. The Goldboro LNG terminal would be the first on Canada’s East Coast and compete with the growing number of plants on the U.S. Gulf Coast, hoping its shorter distance to Europe and further west will help sell its LNG by cutting shipping costs. Pieridae said in a statement late on Thursday it had closed a C$190 million ($145 million) acquisition of Shell’s gas assets in Alberta’s Foothills region, giving it most of the gas needed to supply the first of two plants at the Goldboro terminal.”

+ Big U.S. liquefied natgas players move fast; smaller ones try to keep up – Reuters

“A gap is emerging in the U.S. liquefied natural gas (LNG) industry as big players such as Exxon Mobil Corp and Cheniere Energy Inc race ahead to build export terminals with fewer long-term contracts, while smaller developers struggle to find financing for their first plants.”

The article discusses how ExxonMobil and Cheniere are pulling away from smaller players as they invest in infrastructure developments while others try and keep up.

“The industry is moving away from long-term agreements to justify construction of a new facility to a true commodity business,” said Charif Souki, co-founder and Chairman of Tellurian Inc.”

“Tellurian has been seeking investors for its 27-mtpa Driftwood export terminal in Louisiana. Instead of trying to line up long-term purchase agreements, it offers customers the opportunity to invest in the company’s gas production, pipelines and liquefaction. The company has delayed the start of construction to early next year from a previous target of the first half of this year, according to company presentations. It also reduced how much its partners need to invest in the project to receive LNG to $500 per tonne from a previous target of $1,500 per tonne. By contrast, Exxon and Qatar Petroleum decided this year to move ahead with their 15-mtpa Golden Pass project in Texas without substantial long-term agreements, while Cheniere is adding a sixth liquefaction train at its Sabine Pass terminal in Louisiana, initially supported by fewer long-term contracts than in the past.”

Larger players are actualizing their goals while smaller players face delays that could cripple them if the market continues to be filled with increased supply. Everyone wants to get into the LNG game, it’s truly a race to see who can get the infrastructure built and begin exporting.

Middle East: A Deep Dive

United States-Saudi Arabia-Iran Relations and Opinion

Two weeks ago, I attended a Rice Global Engineering & Construction Forum at Rice University on Saudi Arabia, Iran, and the Middle East. Dr. Richard Stoll, the Albert Thomas Professor of Political Science at Rice University, and a Baker Institute Rice Scholar gave a talk on the current actions of Iran with the drone attack on Saudi Arabian petroleum infrastructure. He discussed the motivation for those actions, and what Iran expects to achieve in the Middle East, and to a greater extent, in Europe and the Western World as a result of these actions. Dr. Stoll also provided some thoughts concerning actions the United States should take with both Iran and Saudi Arabia, and the historical relationship between the United States and Saudi Arabia.

My greatest takeaway from this talk was the extent of deep-rooted conflict Stoll addressed between Iran and Saudi Arabia. Despite admitting Saudi Arabia’s low-ranking human rights scores by various reports such as those by Freedom House and World Report, Stoll was adamant about the United States’ responsibility to back Saudi Arabia in the oil and gas economy of the Middle East.

To sum up Stoll’s talk, there’s no stopping Iran’s ability to acquire nuclear weapons anyway. The country can dodge sanctions and embargoes by improvising using outdated technology. According to Stoll, the conflict between Iran and Saudi Arabia is cultural, religious, economic, and has no end in sight.

Several newsletters ago, I recommended The Prize by Daniel Yergin, arguably the greatest book on the history of oil and gas ever written. In that book, Yergin pays homage countless times to Ibn Saud and his establishment of Saudi Arabian oil dominance as well as the role Saudi Arabia played as one of the only pro-US players in OPEC during the United States’ 1970s energy crisis

“At the age of forty-five, Ibn Saud was the master of Arabia. In the course of a quarter of a century of skillful war making and astute business politics, he had reestablished Saudi ascendancy over nine-tenths of the Arabian Peninsula. The restoration was virtually complete” (268), The Prize. Unlike prior Arabic leaders, Ibn Saud was an adopter of western inventions like cars and the telephone, squashing conservative rebellions wherever they sprang up.

Fast forward a few decades later, and towards the end of World War II, on February 13th, 1945, President Roosevelt talks with Ibn Saud for five hours aboard the USS Quincy on the Great Bitter Lake on the Suez Canal. FDR, Churchill, and Ibn Saud got along marvelously, marking the beginning of Saudi Arabia’s geopolitical partnership with the West. Ibn Saud presented Churchill with such amazing gifts that Chrchhill felt bad so he promised to get Ibn a new Rolls Royce which he did.

After the war, Ibn made sure his oil only went to American companies, garnering interest from Standard Jersey and Socal.

Once Britain left the Suez Canal in November 1971, it would mark the beginning of a few very quick years when Western influence fell in the Middle East. Soon after, there was the oil crisis in 1973. The British departure from the Suez was the first domino to fall. With the British military out, it’s really the producers who controlled the land, unlike the precedent of “concessions” which was standard before 1971.

“The 1970s also saw a dramatic shift in world oil. Demand was catching up with available supply, and the twenty-year surplus was over. As a result, the world was rapidly becoming more dependent on the Middle East and North Africa for its petroleum” (549).

The 1960s and 70s were flush with cheap oil prices encouraging the production of gas-guzzling cars. This was the time of expensive and inefficient air conditioning units in cars and other energy-consuming accessories that would backfire. Sure enough, the USA ran out of surplus capacity, with 1970 being the year of peak production. The Chairman of the Texas Railroad Commission, which was allowed full production capacity, put it gravely when he said, “Historic occasion, damned historic, and a sad one. Teas oil fields have been like a reliable old warrior that could rise to the task when needed. That old warrior can’t rise anymore”. The new production from Indonesia and Nigeria and new world demand exceeded the growth that the Middle East and Africa could grow at.

Throughout the energy crisis of the 1970s, Saudi Arabia continued to thwart all-out price gouging from OPEC on energy consumers in North America and Europe, a lever Saudi Arabia could have easily pulled to essentially destroy western economies. This was one thing I couldn’t forget when I first read The Prize. Although a political strategy that still pays dividends today, the fact that Saudi Arabia flexed its muscles on its OPEC partners countless times to keep oil prices somewhat affordable is a testament to the partnership between the United States and Saudi Arabia.

Although the two countries don’t agree on everything, it’s clear why Professor Stoll was so set on the partnership between the US and Saudi Arabia. The power of Iran’s weapons arsenal alone is one reason why professor Stoll is confident the drone strikes on Saudi Arabia, as covered in Energized #24, were an attack by Iran on Saudi Arabia.

+ Goodbye to the Middle East – Peter Zeihan, October 15th, 2019

Peter Zeihan provides a starkly contrasting view of Saudi Arabia and the Middle East to Professor Stoll. Zeihan is completely against American involvement in the Middle East, writing with a sobering and solemn tone all the while condemning violent and inhumane actions by many Middle Eastern countries, including Qatar.

Zeihan is considered to be a “seer” of sorts on global topics. His recent commentary is a response to the October 7th news that U.S. President Donald Trump will execute a partial withdrawal of U.S. forces from Syria which escalated to a full-scale withdrawal on October 9th. The withdrawal leaves the Kurdish forces unprotected, America’s allies in the Middle East.

“The Kurds – whether in Syria or Iraq – have been America’s only reliable regional allies since America’s first major confrontation with Iraq back in the early 1990s.”

“Without the Kurds’ assistance the overthrow of Saddam Hussein would have been far nastier affair, post-Saddam Iraq would have been far less stable, the defanging of ISIS and the destruction of the ISIS caliphate would not have happened. In Syria in specific, the Kurds habitually provided at least five times the forces the Americans did.”

Zeihan’s tone is bitter but unsurprised. “The United States was always going to leave Syria. If the Americans were unwilling to commit 100,000 troops to the overthrow of Syria’s Assad government and its subsequent forcible reconstruction, then there was little reason to become involved in a decades-long, grinding multi-sided civil war.”

“Aside from the Iranian vector, American national and strategic interests in Syria are utterly nonexistent. Syria – even backed up by Iran – is a military pigmy that Israel could easily shatter. If Jerusalem really wanted to, it could roll into Damascus in a long weekend.”

Zeihan discusses the history of the Kurdish-American relationship and the inevitable withdrawal out of the region. “The far more important fact – comfortable or uncomfortable depending upon your view – is that the evolving American view of Syria is really little more than a microcosm of an evolving American view of the Middle East writ large. American troop deployments throughout the region have been plunging for a decade and are now down to about one-tenth of their peak. America now has more troops in Afghanistan than the rest of the region combined, and that deployment is well on its way to a complete phase out.”

Zeihan acknowledges the intensity of the decline of American forces in the region, but he isn’t surprised. He goes on to address just how chaotic the region’s leadership is, expecting an Iraqi civil war to ensue within the coming years and the current Saudi Arabian de facto leader, Crown Prince Mohammad bin Salman, to go down as “one of the evilest individuals in modern history.”

“The sheer volume of public support, money, arms and ideological cover given to religiously-tinted fighters – that’s jihadis or terrorists based on your politics – by various Saudi citizens and royals alike has boomed in step with the Kingdom’s regional ambitions…Saudi Arabia habitually backs the most extreme, violent interpretation of Islam and regularly exports it far and wide at the end of a gun or leading wave of an explosion.”

Zeihan and Professor Stoll agree that Saudi Arabia’s human rights atrocities are unacceptable. That being said, Zeihan believes the United States should terminate it’s relationships with Saudi Arabia and even Qatar, citing examples of Qatar-backed terrorist threats. “Mohammad bin Salman is not a friend, nor is Saudi Arabia an ally. America used to have to put up with this sort of activity from the Saudis during the Cold War because without Saudi oil, the global trading system would have collapsed and taken the American alliance network with it. Courtesy of America’s shale revolution, those days are over.”

As discussed in Energized, the shale revolution has brought upon American pricing power that limits the strain the OPEC-lever can inflict on energy importers.

Zeihan adds the melancholy note of the fate of the Kurds and its close resemblance to the Hmonh people, a fractious mountain group allied with America during the Vietnam war. “The Kurdish dream of independence was never going to be more than a dream. Landlocked and partitioned, the only way a real Kurdistan could emerge would be if one of the four countries which house Kurds actively sponsor it. That’s just not in the cards. The Kurds are a lost cause; They were never more than an ally of the moment.”

“So why all the noise back in the United States? Aren’t the Americans exhausted with the Middle East? Shouldn’t they be celebrating?”

“In part it is because abandoning an ally is bad form, particularly if you think the U.S. should play a role in preventing genocide, promoting human rights, stymieing traditional rivals, or keeping a hand on the throat of the global economy. Even if you think none of this is the U.S.’ business, you’ve got to admit a lot of stuff happens in the region, and having a finger in the pot does prove useful from time to time. In the grand scheme of things, 2000 troops in Syria isn’t that big of a deal.”

Zeihan concludes with a breakdown of each region. Most situations are negative.

The article is informative and bleak. Zeihan is taking the American-Middle East relationship much further than Professor Stoll’s casual fireside talk at Rice. Buckle down and give it a read, I think it’s more worthwhile than the lecture I heard.

Have a great weekend!

-Danny Foelber

EKT Interactive Managing Editor

Head Writer | Eau Claire Writing

Unsubscribe | Update your profile | 9813 Shadow Wood Dr., Houston, TX 77080

Energized! #028: Women in Oil & Gas Spotlight Issue

Friday, October 18th, 2019

Hello all,

Happy Friday and welcome to Energized, your weekly look into the geopolitics, news, and happenings of energy markets.

Now, onto this week’s spotlight issue, “Women in Oil & Gas”

Energized!

Curated weekly oil and gas newsletter

Women in Oil & Gas Spotlight Issue

Image Source: OilandGasPeople.com

2019 is the 100-year anniversary of Women’s suffrage in the United States. Yet never in our country’s history has there been a female president, and today just 15% of oil and gas workers are female. Out of all the supermajors, (ExxonMobil, Chevron, Shell, BP, Total, and Eni), there isn’t a single female CEO. ExxonMobil, Chevron, and Eni don’t have a single woman with a “C-Suite position”. BP, Shell, and Total each have just one female C-Suite employee. Out of the 30 key executives of these 6 companies, there are just 3 women or 10%. This issue is dedicated to honoring the women who are leading the energy industry today in the hopes that more women will be leading the energy industry of the future.

Supermajors – Profiles

Jessica Uhl

Shell-CFO: Executive Director

Ms. Uhl has the second-highest position at Shell: CFO and Executive Director. She replaced Simon Henry in March 2017.

Just a few days ago, Uhl was ranked 24th on Fortune’s list of Most Powerful International Business Women.

Shell has a history of C-Suite female management and leads supermajors in this category. Judy Boynton was CFO of Shell from 2001-2004.

As CFO, Ms. Uhl leads Shell’s quarterly financial results. After the conference calls and investor presentation, Uhl records a video, a rare yet delightfully personal touch that directly speaks to shareholders. Her videos are available on Youtube. Here is the Q1 2019 video.

Dr. Angela R.E. Strank

BP-Chief Strategist and Head of Technology – Downstream

Ms. Strank is the chief scientist of BP. She is responsible for the technology addressing refining, petrochemicals, lubricants, and BP’s fuels business. She was awarded a Doctor of Science in 2018.

BP’s downstream business continues to grow, with underlying replacement cost profit growth of $7.6 billion in 2018.

Marie – Noelle Semeria

Total-CTO

Ms. Semeria is the CTO of Total. She leads big-picture strategy, policy, and implementation. Total is one of the largest corporations in France is regarded as a core integrated oil and gas company with a global reach. Semeria has held the position since November of 2017.

Exploration and Production – Profiles

Meg Gentle

Tellurian – President, CEO & Director

Vicki Hollub

Occidental Petroleum – President, CEO & Director

At the helm of Tellurian is CEO Meg Gentle, whose experience at Anadarko and rival LNG company, Cheniere, makes her more than qualified to lead LNG-start up, Tellurian. Tellurian was founded in 2016 for one purpose, to tap into the United States’ rich gas reserves and dominate the energy export economy. Occidental is one of the largest Exploration and Production companies along with ConocoPhillips, EOG, Pioneer Natural Resources, Devon Energy, Concho Resources, and Marathon Oil Corporation, which have just four female c-suite executives out of the 30 total executives. Two of the four female executives are from ConocoPhillips.

Female c-suite executives, let alone, CEOs, are a rarity in oil and gas exploration and production (E&P) companies. Two female CEO’s, Tellurian’s Meg Gentle and Occidental Petroleum’s Vicki Hollub, have no problem embracing the spotlight with top-flight multi-billion dollar-deals.

Hollub made a splash in April 2019 when she outgunned Chevron in a quest to purchase Anadarko Petroleum, as covered extensively in this newsletter. Like Hollub, Gentle can strike deals with the best of them. Most recently, Indian prime minister, Narendra Modi, visited Houston, USA to attend the signing of a US$2.5 billion deal between the largest Indian importer of LNG, Petronet LNG, and Tellurian. As mentioned in Energized #26, the deal will be finalized in March 2020. Operations will begin in 2021 to supply Petronet with 5 mtpa of Driftwood’s 27.6 mtpa (1,325 bcf) total projected output. This is the first deal ever between an Indian LNG importer and an American exporter. Prime minister Modi plans to increase natural gas from under 7% to 15% of the nation’s power generation mix by 2030.

Entrepreneurs and Social – Profiles

Katie Mehnert

CEO-Pink Petro

“What’s a pretty young lady like you doing in a dark, dangerous business like oil and gas?” That’s what a friendly man on a plane asked me as I was flying back to Houston.” – Katie Mehnert

Energy 2.0 Equality | Energy | Economy

That’s the message from Pink Petro founder, Katie Mehnert. https://lnkd.in/gUDCR3m. The company’s Energy 2.0 Whitepaper is a response to the following call to action: “Energy needs a new story, one that reflects our role in society, our authentic concern for the environment and how we fuel civilization with sustenance for billions of people.”

To quote the company’s LinkedIn page: “Pink Petro is the first of its kind, business social community for women (and men) in the energy value chain. Pink Petro is creating a new culture for workforce and supply chain transformation in the energy sector. It’s a community bringing digital learning and focused relationship building to a new level in an industry starving for diverse talent as the sector undergoes massive transformation. It’s a fresh approach to helping industry tell its story and helping others “Experience Energy” that’s cross cultural, cross-generational and gender inclusive. Come drive the future together with us.”

In mid-August, I attended Katie’s panel discussion at the Society of Petroleum Engineers (SPE) Energy Dot conference. Katie had sensational insight on women in oil, and gas as well as Energy 2.0. You can download the company’s Energy 2.0 manifesto here.

Krista Escarnilla

Host-Permian Perspective Podcast

Ms. Escamilla hosts the popular Permian Perspective podcast.

Escamilla lives in the Permian and covers the region through her weekly podcast featuring a variety of guests.

Carla Williams

Author- Wildcat Women: Narratives of Women Breaking Ground in Alaska’s Oil and Gas Industry

“Subzero temperatures, whiteout blizzards, and even the lack of restrooms didn’t deter them. Nor did sneers, harassment, and threats. Wildcat Women is the first book to document the life and labor of pioneering women in the oil fields of Alaska’s North Slope. It profiles fourteen women who worked in the fields, telling a little-known history of the Trans-Alaska Pipeline. These trailblazers conquered their fears to face hazardous working and living conditions, performing and excelling at “a man’s job in a man’s world.” They faced down challenges on and off the job: they drove buses over ice roads through snowstorms; wrestled with massive pipes; and operated dangerous valves that put their lives literally in their hands; they also fought union hall red tape, challenged discriminatory practices, and fought for equal pay—and sometimes won. The women talk about the roads that brought them to this unusual career, where they often gave up comfort and convenience and felt isolated and alienated. They also tell of the lifelong friendships and sense of family that bonded these unlikely wildcats. The physical and emotional hardship detailed in these stories exemplifies their courage, tenacity, resilience, and leadership, and shows how their fight for recognition and respect benefited woman workers everywhere.”

Katy Heidenreich

Author- The Oil Industry’s Best Kept Secret: A book full of inspiration and advice

“Launched in November 2018 – with the backing of BP, the Oil & Gas Technology Centre, Shell and Baker Hughes, a GE company – the book’s central aim is to encourage more women to pursue careers in the critical energy industry. This is underpinned by profile pieces and interviews of women who have already smashed through the glass ceiling of the offshore oil and gas sector – from engineers and field specialists to chief executives.”

“An inspirational new book which shines a light on leading women in the UK’s offshore oil and gas industry. This new book aims to encourage more girls to pursue careers in the critical energy sector, and includes profile pieces and advice drawn from interviews with high profile women across the sector. Profiled interviews include Dame Judith Hackitt, chemical engineer and leading health and safety expert who most recently led the UK Government’s independent review into building regulations and fire safety following the Grenfell Tower fire, lead geologist at Shell UK Ltd, Caroline Gill, and Baker Hughes, a GE Company, Wireline Field Specialist, Lauren Adams.”

Have a great weekend!

-Danny Foelber

EKT Interactive Managing Editor

Head Writer | Eau Claire Writing

Unsubscribe | Update your profile | 9813 Shadow Wood Dr., Houston, TX 77080

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IMO 2020 Spotlight Issue

Background:

Bunker Oil, Sulfer Oxide, HSFO, LSFO, VLSFO, ULSD, and Scrubbers

Data derived from argusmedia.com based on ISO data

Overall Impact/ Impact on the Shipping Industry

Scrubbers

LNG-powered ships

Implications of IMO 2020

Impact on the Traders: Markets, Pricing, Key Takeaways

Pricing

Key Takeaways

Impact on the Refiners

Conclusion

Natural Gas

Trade, Policy, and Commerce

Southeast Asia

Upstream

Safety

Energy in Transition

Business

Upstream

Phase 1 (2003–2008): The beginning of the US shale revolution

Phase 2 (2008-2014): Big focal shift in the shale revolution and employment trends

Phase 3 (2014–2017): The oil downturn and shale’s responsiveness to oil prices

Source: Spears & Associates

Offshore

Location of the five recent discoveries in block 15/06 offshore Angola. (Courtesy Eni)

Climate Change

Offshore

Climate Change

LNG

Middle East: A Deep Dive

United States-Saudi Arabia-Iran Relations and Opinion

Women in Oil & Gas Spotlight Issue

Supermajors – Profiles

Exploration and Production – Profiles

Entrepreneurs and Social – Profiles