Oil & Energy

Date Issued – 23rd April 2024

Courtesy of Steve Alain Lawrence, Chief Investment Officer

Janis Urste, Chief Market Strategist

Gazprom

Russia's natural gas behemoth, recently closed over two dozen wells in its Orenburg region operations due to the worst flooding the area has seen in eight decades. The flooding, which caused the Ural River to surpass its banks, prompted the proactive shutdown to prevent water damage to the gas wells. According to internal communications cited by Reuters, Gazprom Dobycha Orenburg, the local operating unit, manages fields annually producing roughly 10 billion cubic meters of natural gas and 300,000 tons of oil and gas condensate. Despite the floods, aerial inspections confirmed that the facilities remained undamaged with no leaks detected. Additionally, the floodwaters necessitated the temporary closure of a nearby refinery and prompted evacuations, with rising river levels posing ongoing threats to the region.

Biden Administration Allocates $7 Billion for Rooftop Solar Grant

President Joe Biden will announce $7 billion in grants to support solar installations for over 900,000 low-income households, as part of the Solar for All competition funded by the Environmental Protection Agency. This initiative, highlighted during an Earth Day event in Virginia, is expected to save these households approximately $350 million annually in energy costs and reduce carbon emissions by over 30 million metric tons across 25 years. This announcement aligns with the significant growth of solar power in the U.S., which made up more than 50% of new electricity capacity in 2023. However, changes in policy could impact the future growth of the residential solar market, particularly in California, where new billing structures are expected to decrease the value of rooftop solar credits significantly.

Polish Economic Recovery Hindered by Coal Production Decline

In March 2024, Poland's industrial output fell sharply by 6% due to a 26% drop in coal mining, casting doubts on the expected 3% economic growth. Despite this setback, optimism remains due to potential domestic demand increases and economic improvements in Germany. Amidst economic concerns, Poland's government is contemplating a definitive end date for coal usage in power generation to better plan the transition to renewable energy. Last year, renewables accounted for 26% of Poland's electricity, with plans to invest $16 billion in grid enhancements to support this shift.

OPEC Allegedly Urges Resumption of Kurdish Oil Exports

A week after Iraq announced repairs on its oil pipeline to Turkey, OPEC has reportedly urged Baghdad to allow Kurdish oil exports through the Turkish port of Ceyhan. According to Kurdish media, the request for 200,000 barrels per day exports has been forwarded to the Iraqi Prime Minister. This development comes as Baghdad seeks to end the Kurdish region's semi-autonomous status, pressuring international oil companies to renegotiate contracts. The repaired pipeline, bypassing the Kurdish route and potentially centralizing control under Baghdad, is expected to be operational by the end of the month, potentially destabilizing the region further.

California Mulls Legal Action Against Exxon for Plastic Pollution

California is nearing the conclusion of a two-year investigation into Exxon over allegations of plastic pollution, with a decision on whether to sue the oil giant expected soon, according to the state’s Attorney General Rob Bonta. Speaking to Reuters, Bonta indicated a lawsuit is likely, citing Exxon's misleading claims about the recyclability of plastics.

This development coincides with UN discussions on a potential global plastics ban, which aims to significantly reduce oceanic and landfill waste, and which Exxon opposes. While the company advocates for solutions that do not limit plastic production, citing ineffective pollution control, California accuses Exxon of decades-long deceptive practices regarding plastic recycling. This issue, alongside global challenges in managing plastic waste—where only 9% is recycled—will be a focus at today's UN meeting.

IEA Optimistic on EV Sales Despite Industry Concerns

Despite a downturn in electric vehicle (EV) sales due to subsidy reductions and consumer doubts about affordability and range, the International Energy Agency (IEA) remains optimistic about the market's potential. The IEA projects global EV sales will reach 17 million in 2024, with China alone expected to account for nearly 10 million sales, or 45% of its total car sales. In contrast, in the United States, EVs are predicted to represent one in nine cars sold, and one in four in Europe, despite these regions experiencing a general slump in car sales.

The IEA underscores the importance of EV adoption in reducing global oil dependence by 10 million barrels per day by 2035, equivalent to the current road transport oil demand in the U.S. To sustain growth, making EVs more affordable and expanding charging infrastructure are seen as critical steps.

Venezuela Shifts Oil Sales to Cryptocurrency

Venezuela is transitioning its oil transactions to digital currency using Tether to circumvent sanctions and avoid frozen accounts, following the expiration of temporary sanctions relief on April 15. PDVSA, Venezuela’s state-run oil firm, began this shift in 2023 and now requires new clients to maintain digital wallets. Amid preparations for July elections, where President Maduro has been accused of repressing opposition, Venezuela continues to engage in new oil business negotiations, including expanding joint ventures with Chevron in the Orinoco Belt. Despite these developments and ongoing geopolitical tensions, the reintroduction of sanctions has had little impact on stabilizing depressed oil prices.

Halliburton Surpasses Earnings Expectations

Halliburton Company exceeded first-quarter earnings expectations with adjusted net income of $679 million, or $0.76 per share, buoyed by a 2% rise in total revenue to $5.8 billion, despite a slight decline in North American operations. International revenues increased by 12% to $3.3 billion due to stronger demand across the Middle East, Europe, and Latin America. This performance aligns with the positive trends seen in the industry, as echoed by SLB, which also reported strong international drilling demand supporting a robust market outlook.

[Disclaimer: This article provides financial insights & developments for informational purposes only. It does not constitute financial advice or recommendations for investment decisions.]

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