The energy sector is set to kick off the holiday-shortened week mixed to higher, backed by strength in the underlying commodities but pressured by weakness in the major equity futures which fell as the markets digested another round of disappointing earnings from the banks and as government bond yields hit Covid-era highs.
WTI and Brent crude oil futures carried over Friday’s rally into today’s session, climbing to their highest level since October 2014 as possible supply disruption after attacks in the Mideast Gulf added to an already tight supply outlook. Supply concerns have risen this week after Yemen’s Houthi group attacked the United Arab Emirates, escalating hostilities between the Iran-aligned group and a Saudi Arabian-led coalition. After launching drone and missile strikes which set off explosions in fuel trucks and killed three people, the Houthi movement warned it could target more facilities, while the UAE said it reserved the right to “respond to these terrorist attacks”. Lingering geopolitical tensions between OPEC+ member Russia and Ukraine and reports showing some producers within the OPEC+ are struggling to pump at their allowed capacities due to underinvestment and outages, continued to offer support. Opec will release its January oil market report later today.
Natural gas futures inched back higher this morning, supported by new extended forecast calling for colder weather in key consuming regions than originally anticipated.
BY SECTOR:
US INTEGRATEDS
ExxonMobil announced its ambition to achieve net zero greenhouse gas emissions for operated assets by 2050, backed by a comprehensive approach to develop detailed emission-reduction roadmaps for major facilities and assets.
Reuters reported that Exxon Mobil plans to shut the second-largest crude distillation unit (CDU) at its 560,500 barrel-per-day (bpd) Baytown, Texas, refinery by late next week, sources familiar with plant operations said on Friday.
INTERNATIONAL INTEGRATEDS
Crown Estate Scotland said it has made option agreements to 17 projects which reserve the rights to specific areas of seabed in its ScotWind leasing round which is aimed at supporting wind energy development. Out of 74 applications from developers looking for the rights to build projects across the 15 areas of available seabed, first option agreements have been made to companies including BP, SSE, Shell New Energies and Scottish Power Renewables and Vattenfall.
bp and the Ministry of Energy and Minerals in Oman signed a Strategic Framework Agreement (SFA) and a Renewables Data Collection Agreement which will support the potential development of a multiple gigawatt, world-class renewable energyand green hydrogendevelopment in Oman, by 2030.
bp and EnBW have been awarded a lease option off the east coast of Scotland to develop a major offshore wind project — to be known as Morven. The award was made in the highly competitive ScotWind leasing round, the results of which were announced by Crown Estate Scotland.
Indonesia expects its Jambaran Tiung Baru (JTB) and Tangguh Train-3 gas projects to come on stream this year after delays due to restrictions linked to COVID-19, upstream oil and gas regulator SKK Migas said. BP’s Tangguh Train-3 is now expected to start production in December 2022, after being delayed by about a year, while Pertamina’s JTB is now likely to start operations in May 2022, after initially targeting commencement in the second half, SKK Migas said.
BP Canada Energy Group ULC (BP Canada) has forfeited the $3 million drilling deposit it paid in 2021 for exploration licence 2434R (EL 2434R). This drilling deposit previously extended Period 1 of the exploration licence to the full nine years permitted by legislation. EL 2434R expired on January 14, 2022 and all lands have reverted to Crown Land.
Equinor Canada ULC (Equinor Canada) did not drill a validation well on either of its two (2) exploration licences (ELs 2434 and 2435) prior to the expiry of Period 1. As a result, both of these exploration licences expired on January 14, 2022, at the end of Period 1, and all lands have reverted to Crown Land.
Equinor and bp announced the finalization of the Purchase and Sale Agreements (PSAs) with the New York State Energy Research and Development Authority (NYSERDA), for Empire Wind 2 and Beacon Wind 1.
CGG has been awarded a three-year contract extension to continue operating a dedicated permanent reservoir monitoring (PRM) imaging center in Equinor’sStavanger offices.
Equinor and SSE Thermal have awarded two key contracts for work on the proposed hydrogen storage facility at Aldbrough, reinforcing their commitment to kickstarting a low carbon hydrogen economy in the region.
Norway awarded 53 new petroleum production licences on the Norwegian continental shelf in the latest licensing round for mature areas, the oil and energy ministry said. Norwegian state-controlled Equinor won stakes in 26 licences, of which it will operate 12.
The Petroleum Safety Authority Norway has given Equinor Energy consent to use the Floatel Endurance mobile quarters facility on the Johan Sverdrup field.
Braskem SA filed with the Securities and Exchange Commission on Friday for a share offering in which Petrobras and Novonor will sell their stakes in the petrochemical company.
China may triple electricity generation to supply 60% of the country’s total energy under Beijing’s carbon-neutral goal by 2060, up from the current 23%, Royal Dutch Shell said.
Shell and ScottishPower have secured joint offers for seabed rights to develop large-scale floating wind farms as part of Crown Estate Scotland’s ScotWind leasing. The partners have won two sites representing a total of 5 gigawatts (GW) off the east and north-east coast of Scotland.
TotalEnergies has signed an agreement to sell, jointly with Inpex, the company Angola Block 14 B.V. to the Angolan Company Somoil. The transaction is subject to the approval of the Angolan authorities.
The joint venture between TotalEnergies, Macquarie’s Green Investment Group and RIDG, a Scottish developer in offshore wind, said it had won the rights to develop a 2 GW offshore windfarm project in the ScotWind leasing tender.
Reuters reported that repairs to the gasoline-producing fluidic catalytic cracker (FCC) at TotalEnergies 225,500 barrel-per-day (bpd) Port Arthur, Texas, refinery may continue until mid-February, said sources familiar with plant operations on Friday.
CANADIAN INTEGRATEDS
Suncor provided an update on recent incidents and fourth quarter 2021 production. In Q4 2021, average production was reduced by approximately 35,000 bbls/d and annual 2021 production was reduced by approximately 8,000 bbls/d as a result of these outages at the end of the year. The fourth quarter utilization rates for Firebag and Syncrude were 93% and 90% respectively. For the full year, 2021 utilization at Firebag was 96% and the utilization at Syncrude was 83%.
U.S. E&PS
Atlas Technical Consultants announced that it has been awarded a $5 million contract to provide environmental services to ConocoPhillips. Services include the assessment and remediation of petroleum-oil impacted soil and groundwater associated with historical oilfield activity in the western region of the United States. The contract is for a five-year term.
The Board of Veris Ltd advised that wholly owned subsidiary Aqura Technologies has continued to build upon its momentum in the energy sector with ConocoPhillips Australia (as Downstream Operator for APLNG) engaging Aqura to deliver a next-generation Private 4G LTE network for its Curtis Island plant in Queensland.
Goldman Sachs upgraded ConocoPhillips to Buy from Neutral.
Continental Resources announced upcoming organizational changes. Jack Stark, the Company’s President and Chief Operating Officer, has announced his intention to retire by late Spring 2022. Upon retirement, Jack will transition into a part-time consulting role as a senior advisor to the Company’s Chief Executive Officer, Bill Berry, who will become the President and CEO. Additionally, Doug Lawler has been named Chief Operating Officer and Executive Vice President, effective February 1, 2022.
Kosmos Energy announced completion of the drilling of the Winterfell-2 appraisal well on Block 943 in the Green Canyon area of the U.S. Gulf of Mexico.
JPMorgan downgraded Ovintiv to Neutral from Overweight.
CANADIAN E&PS
No significant news.
OILFIELD SERVICES
KBR announced it has been awarded an engineering services contract by Woodside Energy (USA) Inc. for its proposed H2OK liquid hydrogen production facility project in Ardmore, Oklahoma.
DRILLERS
As previously disclosed on 10 November 2021, the business combination between The Drilling Company of 1972 A/S (“Maersk Drilling”) and Noble is conditioned on, among other things, clearance by antitrust and foreign direct investment authorities in the United Kingdom, Norway and Denmark, as well as certain other jurisdictions as agreed between the parties. The Parties were recently advised that the Norwegian Competition Authority (Konkurransetilsynet) has reviewed the Business Combination application pursuant to the filings submitted to it and has no objection to the Business Combination. The process for obtaining the other approvals is ongoing. The Parties cannot provide any assurance as to whether all required approvals and consents will be obtained or the timing of, or conditions to, such approvals if they are obtained.
Raymond James upgraded Precision Drilling to Outperform from Market Perform.
Transocean announced that, later this year as part of its current drilling contract with Equinor, the Transocean Enabler will drill one carbon injection well and a sidetrack for another carbon injection well drilled early 2020 in support of the Northern Lights Carbon Capture Storage Project, a joint venture created by Equinor, Shell and TotalEnergies. The project sets out to mitigate emissions and remove carbon dioxide from the atmosphere by creating the first cross-border, open-source carbon dioxide transport and storage infrastructure network in the European Union.
REFINERS
No significant news.
MLPS & PIPELINES
Texas LNG Brownsville LLC, a controlled subsidiary of Glenfarne Group, LLC developing a four million tonnes per annum liquefied natural gas export terminal in the Port of Brownsville, South Texas, and Enbridge have executed a pipeline transportation precedent agreement for the expansion of the Valley Crossing Pipeline to deliver approximately 720 million cubic feet per day of natural gas to Texas LNG’s export facility for a term of at least 20 years.
TEN Ltd. announced the delivery of the 174,000cbm LNG carrier “TENERGY” in South Korea and immediate charter to a major end-user.
MARKET COMMENTARY
Futures for Wall Street’s major indexes fell as traders returned from a long holiday weekend to position for a more hawkish Federal Reserve. However, European and Asian shares were lower due to geopolitical tension. Oil futures climbed to their highest level since 2014 as possible supply disruption after attacks in the Mideast Gulf added to an already tight supply outlook. Meanwhile, gold slipped, weighed down by a spike in U.S. Treasury yields and a stronger dollar.
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