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The Davos consensus is finally cracking

Energy News Beat

The bulk of reports percolating out of the WEF’s annual meeting have been scornful, revealing a proposed programme of enlightened elite global governance that is not going as planned. Geopolitics is back with a vengeance; the “energy transition” has turned out, so far, mostly to mean unilateral economic disarmament in favour of Russia and China. Populations are growing angry in the face of sharp rises in both mass migration and the cost of living.

And as the winds of macro-political change whistle around the (rumoured) erstwhile apostles of one world government, at least some of those apostles may be adjusting course. The New York Times reports that, off the record, the Davocracy expects Donald Trump to win — an expectation since reinforced by the concession of Ron DeSantis. And it seems that, as well as having a keen nose for the prevailing political current, at least some of these big corporate beasts are remarkably sanguine about the prospect of another Trump term.

Stephen Schwarzman, CEO of the financial services titan Blackstone, mused that he didn’t think the United States was prepared for further deficits and “open borders” — the policy slate he appeared to expect under Joe Biden. This echoes the shockwaves caused by JP Morgan Chase CEO Jamie Dimon last week, when he told CNBC that blanket condemnation of Trump voters — and of the ex-president himself — was a mistake. “Take a step back, be honest,” Dimon said. “He was kind of right about Nato. He was kind of right about immigration. He grew the economy quite well […] he wasn’t wrong about some of these critical issues.”

Does this suggest a plutocratic pivot to Trumpism? Or — more dramatic yet — that Davos man is in retreat? Well, if we take “Davos man” as shorthand for the full-fat globalisation programme, maybe. But if it’s shorthand for the international super-elite, there is no reason to imagine that just because the programme popular with this set during the “end of history” era seems to have run aground on reality, those networks — and the power and money they represent — will somehow disappear.

It does, however, suggest that we may be seeing meaningful policy disagreements emerging among the global aristocracy. Until recently, at least from my vantage point among hoi polloi, a quiet unanimity has prevailed in this stratum on issues such as eco-modernism, mass migration and global supply chains. This consensus has, in turn, helped constrain which issues ever become topics of democratic debate — indeed, part of the reaction to Trump in 2016 stemmed from the threat his election posed to this consensus.

A lot can change in eight years. If two beasts as big as Dimon and Schwarzman, commanding financial services colossi with a combined market cap of $638 billion, are now willing break ranks on record, on the hitherto unanimous elite denunciation of Trump, that indicates a vibe shift of some magnitude among the global aristocracy. And if we already live in a post-democratic era, in which the political weather is set not by voting publics but by postmodern lords and princes, this will matter a great deal.

We should not, of course, take this as licence to fantasise about an emerging caste of “based billionaires” that will somehow rescue us from the WEF lizards and restore cohesive, democratic nation states with well-paid industrial jobs and a welfare safety net. Nor should we take it as licence to fantasise about Trump delivering any such thing. That order is not coming back.

In its aftermath, we can reasonably expect ruling elites to do what they have always done: pursue their own interests. But this is much more difficult if the plebs hate you, and regard your position and privileges as illegitimate. Accordingly, even the most astronomically rich and connected Davocrat needs at least a weather eye for what the masses will tolerate.

Though it’s currently a muted change, the words of these financiers strongly suggest that some in the Davocracy have concluded a course correction is needed, if Western governments are to avoid provoking serious popular retaliation on contentious issues such as migration. If this is so, it’s a positive development. It may also be the closest actually existing post-liberalism gets to democratic accountability.

Source: Unherd.com

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The U.S. is breaking oil-production records with fewer drilling rigs. Here’s how.

Energy News Beat

U.S. oil production has been holding at or near record highs since October, topping the previous peak from 2020, even though the number of active domestic oil drilling rigs is down by nearly 30% from four years ago.

Strength in oil prices and gains in investment and output efficiency have contributed to that climb, though analysts see a potential slowdown in output growth ahead.

U.S. oil production has “nearly tripled in the last 15 years, fueled by advances in drilling and fracking technology and investments in the early 2010s due to sustained higher oil prices and favorable government policies,” said David Carter, industrials senior analyst with assurance, tax and consulting firm RSM US.

U.S. strategy to “reduce dependence on foreign oil led to various federal and state-level tax breaks and eased regulations for oil exploration and production (E&P) companies.”

The surge in production has also led the U.S. to become a “major oil exporter, opening up new markets for companies to sell the increased production despite limited increases in U.S. demand,” he told MarketWatch.

Weekly U.S. crude-oil production reached a record of 13.3 million barrels per day in the week ended Dec. 15, 2023, according to the Energy Information Administration.

U.S. crude-oil production stood at 13.2 million barrels per day as of the week ended Jan. 5, after reaching a record at 13.3 million bpd for the weeks ended Dec. 15 and Dec. 22, according to data from the Energy Information Administration.

That topped the previous record of 13.1 million bpd for the week ended March 13, 2020.

At that time, the number of active U.S. rigs drilling for oil stood at 683, according to data from Baker Hughes BKR . That number was at 499 as of the week ended Jan. 12, marking a roughly 27% drop.

Drilling efficiencies and rig counts

Since 2010, one of the biggest developments in oil production efficiency was the “increase in horizontal drilling, called laterals, and fracking, said Carter.

Horizontal drilling is a drilling technique in which a well is drilled along a horizontal path, while fracking involves injecting liquid at high pressure to help extract oil or gas.

In the Permian Basin, average lateral lengths, defined as the horizontal sections of a well, grew by over 250% to over 10,000 feet from 2010 to 2022, while average oil production per rig grew from 126 bpd in 2010 to 1,211 bpd in 2022, Carter said.

In a report published in September 2022, the EIA cited data from Enverus showing first quarter Permian Basin new well oil production of more than 200 bpd in 2010 and more than 1,000 bpd in 2022.

The Permian region spans parts of western Texas and southeastern New Mexico, with the EIA estimating that the region produces more crude oil than any other U.S. region, accounting for more than 40% of total domestic crude-oil production.

Oil E&P companies are also using “artificial intelligence and machine learning for optimization of exploration,” Carter said. Adoption of these technologies is likely to continue to “expand and mature as more use cases are discovered and optimized themselves.”

In a way, oil E&Ps are “becoming technology companies,” said Carter.

Imre Kugler, director of upstream research at S&P Global Commodity Insights, meanwhile, said that in roughly the last year and a half, the U.S. has had a 10% increase in the rate of penetration — the amount of feet drilled per day.

That means a rig today drills 10% more than it did just 2 years ago, he said. That’s where a lot of “efficiency gains” have been made.

Baker Hughes reported a U.S. oil drilling rig count of 499, as of the week ended Jan. 12 — a far cry from the four-digit rig counts last seen in 2015. The weekly U.S. oil drilling rig count last topped 1,000 on Feb. 20, 2015, at 1,019.

For that week, the EIA pegged production at just 9.285 million bpd.

A slowdown

Since the end 2022, the U.S. drilling rig count has dropped sharply but domestic oil production has climbed by around 1 million barrels per day.

The rig count has slowly fallen as commodity prices have fallen, but there is a “time lag, measured in months, between when the rig count increases and oil production increases,” said Chris Duncan, director of investments at Brandes Investment Partners.

Most of the drilling efficiency gains were made in the first half of the past decade, with drilling productivity gains slowing in the last three years, he said.

As production fields mature, there is the potential that efficiency gains are offset by less prolific wells, Duncan said. “Spare capacity in the oil-field service industry has been largely absorbed, leading to the risk of cost inflation if productivity gains are insufficient.”

So the “risk of productivity gains being offset by worsening geology and oil-field service cost inflation may be one of the many reasons for increased industry consolidation over the past couple of years,” he said.

Oil prices

Strength in oil prices have been a key reason to the rise in production.

At $70 a barrel, U.S. benchmark West Texas Intermediate crude is an important price point, said S&P Global’s Kugler. As long as prices are roughly over $70 a barrel on an annual basis, oil producers can still grow and provide return to shareholders, he said.

His company expects to see an average WTI oil price of $78 this year.

Unconventional oil production, which includes oil extracted from shale, likely breaks even at $60 to $65 a barrel, so prices around $80 would leave “a lot of breathing room,” said Kugler. That’s a “testament” to the overall resources available in the U.S., he said. “There’s still a lot of high quality, high break-even oil” that remains in U.S. unconventional oil drilling.

For now, oil prices trade closer to $70. On Tuesday, WTI crude for February delivery CLG24 CL.1 settled at $72.40 a barrel on the New York Mercantile Exchange, down 28 cents, or 0.4%.

Output growth

Looking ahead, production growth is likely to continue, “all else equal,” said Duncan, but “at a slower pace” than what has been seen over the past two years.

“How demand evolves over the next year will largely dictate the commodity price, which will dictate production growth” or decline, he said, with E&P cash flows at $70 a barrel likely to support current activity levels.

S&P Global Commodity Insights estimated U.S. oil production at 13.23 million bpd in December 2023, and sees growth in output to 13.76 million bpd in December 2024 and 14.23 million bpd in December 2025.

S&P Global Commodity Insights forecasts fresh year-end record highs for U.S. oil production this year and in 2025.

S&P Global Commodity Insights

Overall, U.S. production growth will be a “function of the cost to develop new resources and whether the commodity price supports the cost of that development,” Duncan said. For now, “both seem to support slow production growth, but that could change with a major shift in any of the demand or supply macro factors.”

Source: Marketwatch-com.cdn.ampproject.org

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UK Climate Chiefs Admitted Net Zero Plan Based On Single Year Of Data

Energy News Beat

Britain’s climate watchdog has privately admitted that a number of its key net zero recommendations may have relied on insufficient data, it has been claimed.

Sir Chris Llewellyn Smith, who led a recent Royal Society study on future energy supply, said that the Climate Change Committee only “looked at a single year” of data showing the number of windy days in a year when it made pronouncements on the extent to which the UK could rely on wind and solar farms to meet net zero. [emphasis, links added]

“They have conceded privately that that was a mistake,” Sir Chris said in a presentation seen by this newspaper. In contrast, the Royal Society review examined 37 years’ worth of weather data.

Last week Sir Chris, an emeritus professor and former director of energy research at Oxford University, said that the remarks to which he was referring were made by Chris Stark, the Climate Change Committee’s chief executive.

He said: “Might be best to say that Chris Stark conceded that my comment that the CCC relied on modeling that only uses a single year of weather data … is ‘an entirely valid criticism’.”

The CCC said that Sir Chris’s comments in a presentation given in a personal capacity in October, following the publication of his review, related solely to a particular report it published last year on how to deliver “a reliable decarbonized power system”.

Enshrined in law

But, in response to further questions from this newspaper, the body admitted that its original recommendations in 2019 about the feasibility of meeting the 2050 net zero target were also based on just one year’s worth of weather data.

The recommendations were heavily relied on by ministers when Theresa May enshrined the 2050 target into law.

A CCC spokesman said: “We stand by the analysis.”

In October 2021 The Sunday Telegraph revealed that assumptions underpinning the committee’s 2019 advice to ministers included a projection that in 2050 there would be just seven days on which wind turbines would produce less than 10 percent of their potential electricity output.

That compared to 30 such days in 2020, 33 in 2019, and 56 in 2018, according to analysis by Net Zero Watch, a campaign group.

Sir Chris’s report for the Royal Society, published in September, concluded that a vast network of hydrogen-filled caves was needed to guard against the risk of blackouts under the shift to wind and solar generation, which the Royal Society described as “volatile” because it depends on wind and sun to produce energy.

The report was one of the starkest warnings to date of the risks faced when relying on intermittent weather-dependent energy sources without sufficient backup.

Overestimate

It stated: “The UK’s need for long-term energy storage has been seriously underestimated… Studies that do not consider long sequences of years underestimate the need for long-term storage. Studies of single years cannot cast light directly on the need for storage lasting over 12 months and overestimate the need for other supplies.”

In a presentation delivered on Oct. 31, 2023, Sir Chris said: “By looking at one year you underestimate storage and you grossly overestimate the need for everything else. That’s exactly what the Committee on Climate Change [has] done.”

He added: “The Committee on Climate Change, as I already said, looked at a single year and they have conceded privately that that was a mistake. But they are still saying they don’t differ that much from us. Well, that’s not quite true.”

The Royal Society report found that up to 100 Terawatt-hours (TWh) of storage will be needed by 2050 to mitigate variations in wind and sunshine. This was based on 37 years of weather data rather than the single year relied on by the CCC.

Real weather data

The report noted that the CCC model required “a much greater level of supply … from other sources, and/or wind and solar than would have been required if storage had been allowed to transfer energy between years.”

A CCC spokesman said: “Our recent report modeled the 12-month operation of Britain’s power system in 2035 using hourly energy demand and real weather data from a low-wind year, stress-tested to simulate a 30-day wind drought.

“We welcome Sir Chris’ work, which considers other aspects of the energy challenge in 2050, under different assumptions about the future energy mix.”

Asked if the CCC disputed Sir Chris’s account, the spokesman said:  “We’ve got nothing further to add.”

Source: Climatechangedispatch.com

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Oil Strategists Do Not Expect Mid East Tensions to Reduce Crude Supply

Energy News Beat

In an oil and gas report sent to Rigzone recently, Macquarie strategists said they do not expect current Mid East tensions to reduce crude supply, “even with large changes to normal shipping routes already underway”.

“According to our global intelligence and security colleagues Michael Bender and Mariya Dimova, no major actor wants the conflict to result in all-out war and most parties appear to be responding to instigation in a measured way that does not seek heavy escalation,” the strategists noted in the report.

“Sparring and skirmishes are likely to continue for the indefinite future. Maritime attacks by the Yemeni based militant group Ansar Allah, aka the Houthis, represent the largest source of logistical and overall supply risk to the market,” they added.

“The Houthis continue to target commercial vessels in response to the ongoing conflict in Gaza and Israel’s operations there. Methods of attacks include missiles, unmanned aerial vehicles, and vessel hijacking,” they continued.

In the report, the Macquarie strategists said initial announcements by Houthis stated their intention to target only Israel-linked vessels. Since then, non-Israel linked carriers have been targeted, the strategists highlighted, adding that, in response, the U.S. has led the formation of a maritime task force named Operation Prosperity Guardian.

“As of 17 January, the Houthis have launched 30+ attacks against international commercial vessels and dozens more against non-commercial and unspecified targets, with connections to approximately 55+ nations,” the strategists noted in the report.

“The largest escalation took place on 9 January when Houthi militants targeted U.S.-led coalition naval vessels with 20+ clustered munitions (drones and missiles), an act followed by retaliatory ‘tit for tat’ action that saw the coalition conduct joint strikes on 16 Houthi military targets (weapons depots, air defense systems, launching locations, etc.) on land for the first time,” they added.

Despite the recent escalation in the Red Sea, most attacks have included a single or small number of projectiles, have been highly calibrated, and caused minimal damage, the strategists stated in the report.

“Further, U.S.-led responses including intercepting projectiles/hijacking efforts, and surveillance have been equally calibrated,” they noted.

“The measured nature of Houthi tactics demonstrates a primary tactical goal of creating widespread concern for maritime shipping rather than inflicting significant damage to specific targets,” they added.

“However, intermittent escalatory spikes in ‘tit for tat’ actions are likely to persist and Houthi actions will continue to pose a threat to crude and especially refined product supply logistics, even if overall supply is largely unchanged,” the strategists continued.

Airbase Attack, Centcom Airstrikes

In a statement posted on its X page on January 20, U.S. Central Command (Centcom) said that, at approximately 6.30pm Baghdad time that day, “multiple ballistic missiles and rockets were launched by Iranian-backed militants in Western Iraq targeting al-Assad Airbase”.

“Most of the missiles were intercepted by the base’s air defense systems while others impacted on the base. Damage assessments are ongoing,” Centcom said in the statement.

“A number of U.S. personnel are undergoing evaluation for traumatic brain injuries. At least one Iraqi service member was wounded,” it added.

In a statement posted on its X page earlier on the same day, Centcom said its forces conducted airstrikes on January 20 “against a Houthi anti-ship missile that was aimed into the Gulf of Aden and was prepared to launch”.

The strikes came “as part of ongoing efforts to protect freedom of navigation and prevent attacks on maritime vessels”, Centcom outlined in the statement.

“U.S. forces determined the missile presented a threat to merchant vessels and U.S. Navy ships in the region, and subsequently struck and destroyed the missile in self-defense,” Centcom said in the statement.

“This action will make international waters safer and more secure for U.S. Navy and merchant vessels,” it added.

In another post on its X page on January 19, Centcom revealed that, on that day at approximately 6.45pm Sanaa time, Centcom forces conducted strikes “against three Houthi anti-ship missiles that were aimed into the Southern Red Sea and were prepared to launch”.

“U.S. forces identified the missiles in Houthi-controlled areas of Yemen and determined that they presented an imminent threat to merchant vessels and the U.S. Navy ships in the region,” it added.

“U.S. forces subsequently struck and destroyed the missiles in self-defense. This action will make international waters safe and secure for U.S. navy vessels and merchant vessels,” Centcom continued.

Source: Rigzone.com

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Exxon files lawsuit against investors’ climate proposal

Energy News Beat

HOUSTON, Jan 21 (Reuters) – Exxon Mobil Corp (XOM.N), opens new tab on Sunday filed a complaint in a Texas court seeking to prevent a climate proposal by activist investors from going to a vote during the company’s shareholder meeting in May.
This is the first time Exxon is seeking to exclude a shareholder proposal by filing a complaint in court. The case was assigned to a judge with a track record of ruling in favor of conservative causes.
Exxon says the investors are “driven by an extreme agenda” and that their repeated proposals do not serve investors’ interests or promote long-term shareholder value.
Investors led by U.S. activist investment firm Arjuna Capital and shareholder activist group Follow This are asking Exxon and other oil majors to adopt tighter climate targets.
They want Exxon to set so-called Scope 3 targets to reduce emissions produced by users of its products. Exxon is the only one among the five Western oil majors which does not have such targets.
Follow This in the past two years made similar proposals in shareholder meetings of different oil majors. It received a 28% approval in a 2022 voting, and 10% last year. Exxon claims shareholders have already rejected scope 3 targets so it wants to exclude the proposal from its proxy statement.
Arjuna and Follow This were not available for comment on the lawsuit on Sunday night.

JURISDICTION

Exxon is asking a court in the U.S. District Court for the Northern District of Texas to exclude the Scope 3 proposal in its proxy statement.
Cases from Spring, Texas, where Exxon is based, are usually addressed by the court for Southern District. The complaint was filed to the Northern court on Sunday around 5 p.m.
The case has been assigned to U.S. District Judge Reed O’Connor, an appointee of Republican former President George W. Bush in Fort Worth. O’Connor has a track record of ruling in favor of conservative litigants challenging laws and regulations governing guns, LGBTQ rights and healthcare.
In 2018, the judge declared Democratic former President Barack Obama’s signature healthcare law, the Affordable Care Act known as Obamacare, unconstitutional. The U.S. Supreme Court later upheld the law.
Exxon says Arjuna and Follow This pursue a strategy to “become shareholders solely to campaign” for changes “calculated to diminish the company’s existing business.”
Follow This said last year that investing in the energy transition and setting a Paris-aligned medium-term target covering Scope 3 is of shareholders’ best interest. Goals would prevent risks of losing access to capital markets, of facing policy interventions and incurring in losses associated with stranded assets, it said.
Exxon is seeking relief by March 19. Its proxy statement needs to be filed by April 11, in time for its annual shareholder meeting on May 29.

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Union Says Around 100 Offshore Drillers Are Set to Strike

Energy News Beat

In a statement sent to Rigzone recently, Unite the union said around 100 offshore drillers employed by Odfjell Technology (UK) Ltd, working on Equinor’s Mariner platform, are set to strike over three months to secure improvements to working rotas.

“Unite members voted unanimously in favor of strike action, and by 99 percent in favor of a continuous overtime ban on a high turnout,” Unite noted in the statement, adding that the members involved in the dispute “encompasses all deck crew”.

“The industrial action entails a series of 24-hour strikes taking place every Monday, Wednesday, and Saturday for 12 consecutive weeks. The action will begin on Monday 29 January and end on Saturday 20 April,” Unite said in the statement. A continuous overtime ban will also be in place throughout the 12-week period, Unite added.

The dispute centers on the drillers fighting for a better work and life balance, according to Unite, which is reporting that its members are recording concerns over physical and mental burn out, fatigue, and stress due to staff shortages.

“The Odfjell members work 12-hour shifts for three weeks at a time but they must also conduct any required training during their field breaks,” Unite noted.

Unite predicted in the statement that, “due to the scale and length of industrial action, it will effectively close down all drilling activity on Equinor’s Mariner platform, and it could impact on production”.

In the statement, Unite General Secretary Sharon Graham said, “Odfjell drillers on the Mariner platform are ready to take their employer head-on”.

“Unite will fully support our members in their fight for a better work and life balance,” Graham added.

“Unite is entirely focused on enhancing the job, pay, and conditions of its members and the Odfjell workers have the union’s unwavering support,” Graham continued.

Unite Industrial Officer Vic Fraser said in the statement, “Unite has fought long and hard for an improved working rotation in the interests of safety and a better working environment”.

“Odfjell is ignoring the serious concerns which our members are raising,” Fraser added.

“The only way that this dispute can be solved is if Odfjell discuss with Unite changes to the working rotation. Our members are resolute and they are prepared to strike over 12 weeks, until the company sees sense,” Fraser continued.

“The action will undoubtedly have a major impact and will in effect bring the Mariner platform to a standstill,” Fraser went on to state.

Rigzone asked Odfjell Technology Ltd and Equinor for comment on Unite’s statement. While Odfjell Technology Ltd has not yet responded to Rigzone at the time of writing, an Equinor spokesperson told Rigzone, “from Equinor’s side, I can confirm that we have received notification from Odfjell Technology that they have been served with a notice for industrial action commencing 29th January”.

“Our main priorities are to ensure the safety and welfare of our people and to minimize any impact to operations and the environment,” the spokesperson added.

“We cannot comment on the details of the strike,” the spokesperson continued.

In a statement sent to Rigzone back in November last year, Unite announced that over 80 Odfjell Technology Ltd drillers had settled a long running dispute over pay and conditions on TAQA installations.

“A revised pay offer by the company was overwhelmingly accepted by 77 percent of Unite’s drillers,” the union said in the statement.

“The pay deal backdated to June 1, 2023, will increase basic salaries by eight percent,” the union added.

“A fixed contract payment worth around five percent on top of basic monthly salaries will now be fully converted into the basic salary going forward,” it continued.

“In effect, this equates to a 13 percent increase being fully consolidated into pensions, overtime, and future pay increases,” Unite went on to state.

The Unite union noted in the statement that a 15 percent retention bonus upon release from the TAQA contract was also negotiated as part of the pay deal.

Rigzone previously asked Odfjell Technology Ltd and TAQA for comment on Unite’s November statement. While Odfjell Technology Ltd’s Corporate Secretary and Sustainability Manager, Gillian Basson, revealed that Odfjell Technology (UK) Ltd had no comment on the statement “at this time”, TAQA did not respond to Rigzone’s request.

Source: Rigzone.com

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Is ExxonMobil’s Acquisition Of Pioneer Good News Or Bad News For Climate Change?

Energy News Beat

On October 23, 2023 ExxonMobil announced the acquisition of Pioneer Natural Resources in an all-stock transaction valued at approximately $64.5 billion. The acquisition would combine Pioneer’s more than 856,000 acres in the Midland Basin with ExxonMobil’s 570,000 net acres in the adjacent Delaware and Midland Basins resulting in an estimated 16 billion barrels of oil equivalent resources in the Permian Basin. In its announcement ExxonMobil explained the rationale for the acquisition:

· “Transforms ExxonMobil’s upstream portfolio, more than doubling the company’s Permian footprint and creating an industry-leading, high-quality, high-return undeveloped U.S. unconventional inventory position.”

· “Expect to generate double-digit returns by recovering more resource, more efficiently and with lower environmental impact.”

· “Combines Pioneer’s sizeable acreage, entrepreneurial culture and deep industry expertise with ExxonMobil’s balance-sheet strength, advanced technologies and industry-leading project development capabilities.”

· Plans to accelerate Pioneer’s net zero Permian ambition from 2050 to 2035.”

Silhouette of Permian Basin pumpjacks taken at dusk, north of Midland, Texas, U.S. in late 2019.

Source: Forbes.com

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Sunoco to Buy NuStar Energy in $7.3 Billion Deal

Energy News Beat

Gas station owner Sunoco LP will buy pipeline and liquids terminal operator NuStar Energy in an all-equity transaction valued at around $7.3 billion, including debt, the companies said on Monday in the latest merger deal in the U.S. energy sector.

Under the terms of the definitive agreement, NuStar common unitholders will receive 0.400 Sunoco common units for each NuStar common unit, implying a 24% premium based on the 30-day VWAP’s of both NuStar and Sunoco as of January 19, 2024.

Sunoco has secured a $1.6-billion one-year bridge term loan to refinance NuStar’s Series A, B, and C Preferred Units, Subordinated Notes, Revolving Credit Facility, and Receivables Financing Agreement, Sunoco said..

The Sunoco-NuStar combination diversifies and adds scale to the business, as well as captures the benefits of vertical integration.

The deal is expected to increase distributable cash flow per unit by more than 10% by the third year following the closing of the transaction, which is expected in the second quarter of 2024.

The transaction has been unanimously approved by the board of directors of both companies and is expected to close in the second quarter of 2024 upon the satisfaction of closing conditions, including approval by NuStar’s unitholders and customary regulatory approvals, the companies said.

Prior to closing, NuStar will make a cash distribution of $0.212 per common unit to its common unitholders.

NuStar has around 9,500 miles of pipeline and 63 terminal and storage facilities that store and distribute crude oil, refined products, renewable fuels, ammonia, and specialty liquids.

The Sunoco-NuStar deal is the latest combination in the U.S. energy industry, following several large merger deals of the past months, including big all-stock acquisitions that both Exxon and Chevron have announced.

In one of the latest transactions, Chesapeake Energy Corporation and Southwestern Energy agreed earlier this month to merge in an all-stock transaction valued at $7.4 billion, which will create the biggest U.S. natural gas producer by market value and production.

Source: Oilprice.com

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Russia And Iran Finalize 20-Year Deal That Will Change The Middle East Forever

Energy News Beat
Iran’s Supreme Leader Ayatollah Khamenei gave his official approval to a new 20-year comprehensive cooperation deal between the Islamic Republic of Iran and Russia.
The agreement will replace the 10-year-deal signed in March 2001 and has been expanded not only in duration but also in scope and scale.
The new deal includes far-going agreements on defense and energy.

Iran’s Supreme Leader, Ali Khamenei, gave his official approval on 18 January to a new 20-year comprehensive cooperation deal between the Islamic Republic of Iran and Russia, according to a senior energy source in Iran and a senior source in the European Union’s (E.U.) energy security complex, exclusively spoken to by OilPrice.com last week. The 20-year deal – ‘The Treaty on the Basis of Mutual Relations and Principles of Cooperation between Iran and Russia’ – was presented for his consideration on 11 December 2023. It will replace the 10-year-deal signed in March 2001 (extended twice by five years) and has been expanded not only in duration but also in scope and scale, particularly in the defense and energy sectors. In several respects, the new deal additionally complements key elements of the all-encompassing ‘Iran-China 25-Year Comprehensive Cooperation Agreement’, as first revealed anywhere in the world in my 3 September 2019 article on the subject and analysed in full in my new book on the new global oil market order.

In the energy sector to begin with, the new deal gives Russia the first right of extraction in the Iranian section of the Caspian Sea, including the potentially huge Chalous field. The wider Caspian basins area, including both onshore and offshore fields, is conservatively estimated to have around 48 billion barrels of oil and 292 trillion cubic feet (tcf) of natural gas in proven and probable reserves. In 2019, Russia was instrumental in changing the legal status of the Caspian basins area, cutting Iran’s share from 50 percent to just 11.875 percent in the process, as also detailed in my new book. Before the Chalous discovery, this meant that Iran would lose at least US$3.2 trillion in revenues from the lost value of energy products across the shared assets of the Caspian Sea resource going forward. Given the newest internal-use only estimates from Iran and Russia, this figure could be a lot higher. Previously, the estimates were that Chalous contained around 124 billion cubic feet (bcf) of gas in place. This equated to around one quarter of the gas reserves contained in Iran’s supergiant South Pars natural gas field that account for around 40 percent of Iran’s total estimated gas reserves and about 80 per cent of its gas production. The new estimates are that it is a twin-field site, nine kilometres apart, with ‘Greater’ Chalous having 208 bcf of gas in place, and ‘Lesser’ Chalous having 42 bcf of gas, giving a combined figure of 250 bcm of gas.

The same right of first extraction for Russia will also now apply to Iran’s major oil and gas fields in the Khorramshahr and nearby Ilam provinces that border Iraq. The shared fields of Iran and Iraq have long allowed Tehran to side-step sanctions in place against its key oil sector, as it is impossible to tell what oil has come from the Iranian side or the Iraqi side of these fields, which means that Iran is able simply to rebrand its own sanctioned oil as unsanctioned Iraqi oil and ship it anywhere it wants, as also analysed in full in my new book on the new global oil market order. Former Petroleum Minister, Bijan Zanganeh, publicly highlighted this very practice when he said in 2020: “What we export is not under Iran’s name. The documents are changed over and over, as well as [the] specifications.” Another advantage of the shared fields is that they allow effectively free movement of personnel from the Iranian side to the Iraqi side, and the utilisation of key oil and gas developments across Iraq is a key part of Iran’s longstanding plan, fully supported by Russia, to build a ‘land bridge’ to the Mediterranean Sea coast of Syria. This would enable Iran and Russia to exponentially increase weapons delivery into southern Lebanon and the Golan Heights area of Syria to be used in attacks on Israel. The core aim of this policy is to provoke a broader conflict in the Middle East that would draw in the U.S. and its allies into an unwinnable war of the sort seen recently in Iraq and Afghanistan, and which may soon be seen as the Israel-Hamas War escalates.

The price of all manufactured items traded between Russia and Iran, including military and energy hardware, has been formalised in the new deal, although also not in Iran’s favour. For Iranian goods exported to Russia, Tehran will receive the cost of production plus 8 percent. However, these export sales to Russia will not be transferred to Iran, but rather they will be held as credit in the Central Bank of Russia (CBR). Moreover, Iran will receive a huge markdown on US dollar/Rouble or Euro/Rouble exchange rates used to calculate its credits in the CBR. Conversely, for Russian goods exported to Iran, Moscow will receive the payment in advance of delivery and at a much stronger exchange rate that benefits Russia. Moreover, the base price before any exchange rate calculations are made, will be founded on the highest price that Russia has received in the previous 180 days for whichever product it is selling Iran. This system has informally been in place for several weeks now, and according to the senior energy sector source in Tehran exclusively spoken to by OilPrice.com last week, Russia has ensured itself the highest possible price by selling to Belarus at a very large premium whichever product it intends to sell later to Iran, so establishing the required pricing benchmark. Payments for goods and services falling outside the direct finance route between the central banks of the two countries can now be done through interbank transfers between Iranian and Russian banks. Those also involving renminbi can also be done through China’s Cross-Border Interbank Payment System (CIPS) system, its alternative to the globally-dominant Society for Worldwide Interbank Financial Telecommunications (SWIFT) system.

In many cases, the expansion of military cooperation between Iran and Russia is tied into the energy sector elements of the new 20-year deal. Progress is earmarked to be made on upgrading the facilities at the key airports and seaports that have long been targeted by Russia as being especially useful for dual-use by its air force and navy, and which are also close to major oil and gas facilities. Top of the list of Iranian airports that Russia regards as the best for dual-use by its air force are Hamedan, Bandar Abbas, Chabahar, and Abadan, and it is apposite to note that in August 2016, Russia used the Hamedan airbase to launch attacks on targets in Syria using both Tupolev-22M3 long-range bombers and Sukhoi-34 strike fighters. Top of the list of seaports for use by its navy are Chabahar, Bandar-e-Bushehr, and Bandar Abbas. Similarly linked to Russia’s gaining the first right of extraction in the Iranian section of the Caspian Sea is that it will also be given a joint command capability over the northern aerospace defense section of Iran’s Caspian area.

It is also apposite to note here that Iran’s electronic warfare (EW) system can easily be tied into Russia’s Southern Joint Strategic Command 19th EW Brigade (Rassvet) near Rostov-on-Don to the northwest of the Caspian. This can also be linked in with China’s EW capabilities. These EW capabilities would include jamming systems for neutralising air defences in the region. This will be augmented with new missiles designated to be sent to Iran by Russia under the new deal, according to the senior E.U. security sector source exclusively spoken to by OilPrice.com last week. “Selected IRGC [Islamic Revolutionary Guard Corps] personnel will be trained on the latest Russian upgrades of several short- and long-range missiles – the Kh-47M2 Kinzhal, the Iskander M, the RS-26 Rubezh, the BrahMos3, and the Avangard – before the plan to manufacture them under licence in Iran begins, with the aim being to have 30 percent of them stay in Iran, with the rest being sent back to Russia,” he said.

“What all of this means, is that the new 20 -year deal between Iran and Russia will change the landscape of the Middle East, southern Europe, and Asia as Iran will have a much-extended military reach that will give it much more leverage to make political demands across those region,” he exclusively told OilPrice.com last week. “This reach also means that countries in these areas will feel that continuing to rely on the U.S. for their protection is a lot more of a precarious option than it was before,” he concluded.

Source: Oilprice.com

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The post Russia And Iran Finalize 20-Year Deal That Will Change The Middle East Forever appeared first on Energy News Beat.

 

Sunoco to Buy NuStar Energy in $7.3 Billion Deal

Energy News Beat

Gas station owner Sunoco LP will buy pipeline and liquids terminal operator NuStar Energy in an all-equity transaction valued at around $7.3 billion, including debt, the companies said on Monday in the latest merger deal in the U.S. energy sector.

Under the terms of the definitive agreement, NuStar common unitholders will receive 0.400 Sunoco common units for each NuStar common unit, implying a 24% premium based on the 30-day VWAP’s of both NuStar and Sunoco as of January 19, 2024.

Sunoco has secured a $1.6-billion one-year bridge term loan to refinance NuStar’s Series A, B, and C Preferred Units, Subordinated Notes, Revolving Credit Facility, and Receivables Financing Agreement, Sunoco said.

The Sunoco-NuStar combination diversifies and adds scale to the business, as well as captures the benefits of vertical integration.

The deal is expected to increase distributable cash flow per unit by more than 10% by the third year following the closing of the transaction, which is expected in the second quarter of 2024.

The transaction has been unanimously approved by the board of directors of both companies and is expected to close in the second quarter of 2024 upon the satisfaction of closing conditions, including approval by NuStar’s unitholders and customary regulatory approvals, the companies said.

Prior to closing, NuStar will make a cash distribution of $0.212 per common unit to its common unitholders.

NuStar has around 9,500 miles of pipeline and 63 terminal and storage facilities that store and distribute crude oil, refined products, renewable fuels, ammonia, and specialty liquids.

The Sunoco-NuStar deal is the latest combination in the U.S. energy industry, following several large merger deals of the past months, including big all-stock acquisitions that both Exxon and Chevron have announced.

In one of the latest transactions, Chesapeake Energy Corporation and Southwestern Energy agreed earlier this month to merge in an all-stock transaction valued at $7.4 billion, which will create the biggest U.S. natural gas producer by market value and production.

Source: Oilprice.com

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The post Sunoco to Buy NuStar Energy in $7.3 Billion Deal appeared first on Energy News Beat.

 

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