Daily Digest: April 6th, 2020
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Oil Prices Dip After Producers Delay Talks
Oil benchmarks fell following reports over the weekend that a meeting between Opec and other producers on possible supply cuts had been delayed.
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The Big Picture:
- Prices rebounded later in the day and are at time of press [12.35 GMT] higher than they were earlier this month, amid optimism that suppliers will strike a deal to rebalance the market.
- Media reports claimed last week that officials from Russia, Saudi Arabia and other members of the Opec+ suppliers' pact were planning to hold a meeting via video conference to discuss a response to the Covid-19 pandemic. Reports also suggested that Russia and Saudi Arabia want the US and other non-Opec+ producers to take part in a co-ordinated reduction.
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Oil Crash Could Support Gas: Sproule
The crude oil demand crash that is expected to reduce global Q2 2020 demand by as much as 20mn b/d could bring some temporary relief for Canadian natural gas producers, Calgary-based consultant Sproule says.
The Big Picture:
- Associated production from the Permian basin in the US has grown at an annual compound rate of 30% over the last three years, and the Permian now produces as much as all of western Canada.
- With shale producers ratcheting back spending plans for 2020 in the face of the Covid-19 pandemic, growth will be unattainable in the new operating environment. “Ultimately, this means easing pressure on an oversupplied US natural gas market,” the report notes.
Norway E&P Better Placed than UK: Westwood
Norway's upstream industry is better able to cope with low oil prices than the UK's, according to a new report by Aberdeen-based Westwood Global Energy.
The Big Picture:
- If oil prices do not exceed $27/b, UK production will not generate enough revenue to cover both operating costs and planned capital expenditure in 2020, even after recently announced cuts.
- Norway, on the other hand, can cover both operating and capital expenditure even if oil dips below $20/b.
Wentworth Strategy Weathers the Crisis
At a time when nearly all oil and gas producers are in defence mode, one exception is Wentworth Resources which produces gas in Tanzania.
The Big Picture:
- Reasons for Wentworth's success include its asymmetrical gas sales contract underpinned by steady demand growth.
- While other companies are scrapping dividends this year, it said it would pay shareholders the equivalent to a 7.2% yield.
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Neptune Targets Emissions Cut by 2030
Private equity-backed Neptune Energy is targeting a substantial reduction in its carbon and methane intensity in the North Sea over the next decade, it announced.
The Big Picture:
- It plans to reach this goal by building on its experience in carbon capture and storage in Norway and the Netherlands, and advancing its PosHYdon offshore hydrogen project in the Dutch North Sea.
- Neptune already boasts among the lowest carbon and methane intensities in the industry, it said.
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Austrian energy firm OMV will keep producing more gas and burning less oil, its latest sustainability report says. At the moment gas is 57% of its oil-equivalent barrels.
The Big Picture:
- "We see gas as well as hydrogen as enablers of the energy transition towards a low-carbon energy system," it said.
- OMV said it is also exploring ways to store CO2 in underground storage facilities and to reuse CO2 as a raw material for chemical products and developing "economically viable hydrogen solutions for industry and mobility."
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Oz East Coast LNG Exports to China Continue to Drop
LNG exports from projects located on the Australian east coast to China were sharply down for the second straight month in March owing to the outbreak of Covid-19.
The Big Picture:
- There are three LNG export projects in the state of Queensland. ConocoPhillips-Origin Energy Australia Pacific LNG (APLNG), Shell’s Queensland Curtis LNG and the Santos-led Gladstone LNG.
- The projects shipped 1.09mn metric tons of LNG to China in March, down 16.8% yr/yr, the data showed. In February, exports to China were down 15% yr/yr.
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Woodside Mulls Carbon Neutral Hydrogen Exports
Woodside has signed an agreement with Jera, Marubeni Corporation and IHI Corporation to undertake a joint study examining the exports of hydrogen as ammonia to decarbonise coal-fired power generation in Japan, it said.
The Big Picture:
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Woodside CEO Peter Coleman said the agreement was another step forward in Woodside’s exploration of the potential of hydrogen as a clean fuel of the future.
- "Woodside and its partners in Japan have forged new energy pathways before and we can do so again, as we expect by 2030 to see large-scale hydrogen production around the world and we intend to be part of that,” it said.
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UK RockRose Cuts Spending, Opex
UK independent RockRose announced a reduced discretionary spending programme this year as its two-week financial reporting moratorium ended.
The Big Picture:
- It said capital expenditure in 2020 will be reduced by at least $80mn, down from the original plan of around $200mn. Production last year was up on the year before owing to acquisitions, including the Marathan Oil assets.
- CEO Andrew Austin said RockRose was well placed to deal with the twin challenges of Covid-19 and weak commodity prices.
