Daily Digest: March 31st, 2020

US president Donald Trump and his Russian counterpart Vladimir Putin agreed during a phone call on March 30 to have their top energy officials discuss the situation in the oil market, according to the Kremlin's website.

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The Big Picture:

Russia, Saudi Arabia and other Opec+ producers are preparing to ramp up production next month once previously agreed supply quotas expire, at a time when fuel demand is plummeting as a result of coronavirus (Covid-19) lockdowns.

Washington, which in the past has welcomed low oil prices as good for motorists, is now concerned about their impact on the highly leveraged US shale industry.

Explosion Knocks Out Iranian Gas Flows to Turkey

The pipeline carrying Iranian gas to Turkey exploded in Turkish territory on the morning of March 31, cutting off supplies, Iran's state gas company NIGC has announced.

The Big Picture:

“The attack was probably conducted by terrorist groups inside Turkey,” the head of NIGC Mehdi Jamshidi Dana told the state-run Irna agency, adding that Kurdistan Workers' Party (PKK) had carried out several attacks on pipeline in the past and were likely behind the latest one.

African Upstream to See 33% Drop in 2020 Capex

Africa's upstream sector is expected to cut capital spending by a third in 2020, with operators targeting similar reductions in operating expenditure in a bid to protect cash flow, Wood Mackenzie said in a research note.

The Big Picture:

"Unlike the 2015-2016 price crash, this time nothing is sacrosanct: some operators will even wield the axe on committed spend, as well as the discretionary expenditure," the Edinburgh-based consultancy warned.

Operators will target cuts to short-run marginal costs, or the price required for existing production to stay profitable. Most African fields will break even at $40/barrel in 2020.

UAE's Dana Gas Mulls Business Split

Private UAE gas firm Dana Gas is considering splitting its upstream and midstream businesses and listing the former on the Abu Dhabi securities exchange, the company said in a stock filing.

The Big Picture:

Its upstream operations include onshore and offshore assets in Egypt and concessions in Kurdish Iraq.

Dana is the biggest private gas company in the Middle East. It increased production of oil and gas to 66,200 boe/d in 2019, up from 63,050 boe/d in the previous year, helping it to swing back to a net profit of $157mn.

Shell to Book $400-800mn in Q1 Charges

Shell warned it expected to book between $400mn and $800mn in post-tax impairment charges in its first quarter results because of a weaker oil price outlook in 2020.

The Big Picture:

Shell announced on March 30 that it was withdrawing from the 16.45mn mt/yr Lake Charles LNG project in Louisiana, citing current market conditions.

Worley, Chevron Australia Extend Services Contract

Sydney-listed engineering and services company Worley has been awarded an extension to an existing services contract with Chevron Australia, it said in a statement.

The Big Picture:

Under the contract, engineering and procurement services will be provided to support Chevron’s Australian assets, including the Gorgon and the Wheatstone projects.

Last month, Worley was awarded two master service agreements by Total E&P Mozambique Area 1 to provide services to the Mozambique LNG project.

ADB Supports Wuhan Gas Supplier

The Asian Development Bank (ADB) said it had signed an agreement to lend $20mn to China Gas Holding (CGH) to support natural gas and liquefied petroleum gas deliveries to households, hospitals, industry and crucial services.

The Big Picture:

CGH is the main gas supplier to households and commercial and industrial users in Wuhan, the original epicentre of the pandemic.

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