Exxon to Boost Share Buybacks to $20 Billion Next Year

By Tsvetana Paraskova - Dec 06, 2023

ExxonMobil plans to accelerate the pace of its share repurchases to $20 billion annually in 2024 as it raises production and generates higher cash flows and earnings, the U.S. supermajor said in a corporate plan update on Wednesday.  

Since 2019, ExxonMobil has added about $10 billion to its annual earnings and cash flow at a real Brent price of $60 per barrel, the company said in the update following the announced acquisition of Pioneer.  

“These improvements provide a strong foundation to further grow annual earnings and cash flow by $14 billion from year-end 2023 through 2027, as the company continues to reduce structural costs and improve the mix of its business by growing production from low-cost-of-supply, advantaged assets and increasing sales of high-value performance chemicals, lower-emission fuels, and performance lubricants,” Exxon said.

Over the next five years, around 90% of Exxon’s planned upstream capital investments in new oil and flowing gas production are expected to generate returns greater than 10% at a Brent price of $35 per barrel, said the company which is growing its oil production in the Permian and Guyana and becomes the top Permian producer with the Pioneer merger.

Exxon expects its oil and gas production to be about 3.8 million oil-equivalent barrels per day in 2024, rising to about 4.2 million oil-equivalent barrels per day by 2027, driven by growth in the Permian and Guyana.  

Higher cash flows and earnings enable additional shareholder distributions, the supermajor said, adding that it remains on track to complete $17.5 billion in share repurchases in 2023 as part of the $35 billion repurchase program previously announced for 2023 and 2024.

After the Pioneer merger closes, Exxon plans to increase the pace of the share buyback program in 2024 to $20 billion annually through 2025, “assuming reasonable market conditions.”

“We remain committed to providing the energy and products that raise living standards around the world while building a new business to reduce emissions in hard-to-decarbonize parts of the economy,” chairman and CEO Darren Woods said.

“ExxonMobil is uniquely equipped to do both, and we’re confident that both present significant opportunities for profitable growth.”

By Tsvetana Paraskova for Oilprice.com

PUTIN APPROVES

Russia Says US-Led Effort to Triple Nuclear Energy Capacity is ‘Positive Shift’

By Tsvetana Paraskova - Dec 06, 2023

Russia didn’t sign up to a U.S.-led pact pledging to triple nuclear energy capacity by 2050, but Moscow welcomed the declaration at COP28 as a “positive shift” in energy goals to help achieve global climate targets.

At the COP28 climate summit, the United States and 21 other countries pledged to triple nuclear energy capacities by 2050, saying incorporating more nuclear power in their energy mix is critical for achieving their net zero goals in the coming decades.   

The United States, alongside Britain, France, Canada, Sweden, South Korea, Ghana, and the United Arab Emirates (UAE), among others, signed the declaration at the COP28 climate summit currently underway in Dubai.

“The Declaration recognizes the key role of nuclear energy in achieving global net-zero greenhouse gas emissions by 2050 and keeping the 1.5-degree Celsius goal within reach,” the U.S. Department of State said.

John Kerry, President Biden’s climate envoy, says there are “trillions of dollars” available that could be used for investment in nuclear energy.

“We are not making the argument to anybody that this is absolutely going to be the sweeping alternative to every other energy source — no, that’s not what brings us here. But you can’t get to net-zero 2050 without some nuclear power,” he told reporters.

Commenting on the pact, Russia’s Deputy Economy Minister Vladimir Ilyichev told Bloomberg in an interview that “Without nuclear energy it is impossible to achieve climate goals.”

The declaration recognizing the key role of nuclear energy in helping to achieve climate goals is a “positive shift,” Ilyichev told Bloomberg at the COP28 summit.

Talks on climate between the West and Russia have stalled since the Russian invasion of Ukraine.

The sanctions hinder negotiations, according to the Russian official.

Russia is one of the world’s biggest nuclear power developers and a major producer of oil and gas.

Russia will continue to pitch natural gas as a lower-emission source of energy, Ilyichev told Bloomberg.

By Tsvetana Paraskova for Oilprice.com

 IMPERIALIST INVASION

Venezuela Orders “Immediate” Start of Oil Exploration in Disputed Territory

By Charles Kennedy - Dec 06, 2023

Venezuela’s president, Nicolas Maduro, has ordered the immediate start of exploration and exploitation of oil reserves in the Essequibo region—the disputed territory that Venezuelans voted to annex.

Per an AP report, President Maduro said that he is “to grant operating licenses for the exploration and exploitation of oil, gas and mines in the entire area of our Essequibo.” 

He also issued an order for the creation of local subsidiaries of the state oil and mining companies, PDVSA and Corporacion Venezolana de Guayana.

The Venezuelan parliament has yet to pass a law establishing Venezuela’s jurisdiction over the Essequibo region, which represents two-thirds of the territory of Guyana and is where its oil riches are concentrated.

Guyana has refused to accept the results of the Venezuelan referendum, saying it was an attempt at annexing most of its territory, even after the International Court of Justice ruled that Essequibo is part of Guyana. Venezuela’s government has said it does not recognize the jurisdiction of the ICJ on the matter.

Essequibo used to be part of Venezuela during its colonial period but at the end of the 19^th century an international arbitration gave the land to Guyana, then a British colony. Venezuela has never accepted the arbitration decision but for most of the time since it was made it has not acted on its grievance.

Following last weekend’s referendum, Guyana said it will reach out to the UN Security Council for help if Venezuela takes any further steps to establish control over the Essequibo region.

The Attorney General of the former British colony told the AFP that "any action or any attempt to take any action pursuant to the referendum will necessitate a resort to the UN Security Council as an injured party."

As Maduro yesterday announced the set-up of a Comprehensive Defense Operational Zone for the Essequibo region, Guyana’s Attorney General said that "In terms of military, it (the UNSC) can authorise the use of armed forces by member states to assist in the enforcement." 

By Charles Kennedy for Oilprice.com

Green Energy Giants to Invest $16 Billion in Offshore Wind and Hydrogen

By Tsvetana Paraskova - Dec 05, 2023

Spain’s Iberdrola and the UAE’s Masdar agreed on Tuesday to form a strategic partnership looking to invest $16.2 billion (15 billion euros) in offshore wind and hydrogen in major markets including the U.S., the UK, and Germany.

Iberdrola, a utility giant with 41 gigawatts (GW) of renewables in operation, and the UAE’s clean energy developer Masdar will look to jointly invest in the 1.4-GW UK East Anglia 3 offshore wind project. This deal has been under negotiation for the last few months and could be signed by the end of the first half of 2024. Masdar’s stake in this wind farm could be 49%, Iberdrola said.

“Beyond the East Anglia 3 transaction, both companies will work together to jointly invest in future offshore wind and green hydrogen projects in Europe and other markets,” Iberdrola noted.

Iberdrola and Masdar agreed in July 2023 to co-invest in the Baltic Sea wind farm offshore Germany.

“We are very pleased to be expanding our existing alliance with a leading long-term partner like Masdar from Germany, where we are already constructing new offshore wind turbines, to the UK and across the world,”  Iberdrola’s executive chairman Ignacio Galán said.

The agreement with Masdar was announced at the COP28 climate summit, at which 118 governments pledged to triple global renewable energy capacity to at least 11,000 gigawatts by 2030.

Last month, UK’s Octopus Energy said it was launching a $3.7-billion (£3 billion) offshore wind fund in cooperation with Japan’s Tokyo Gas as part of an ambition to invest in projects in Europe to reduce fossil fuel reliance and boost energy security.

Earlier this year, Octopus Energy said it plans to lead investments worth $18.6 billion (£15 billion) into offshore wind power projects globally by 2030. Octopus Energy said its plans “to unleash” the investments into offshore wind would go towards the generation of 12 GW of renewable electricity a year, enough to power 10 million homes.

BP Spuds Production Well at $6-Billion Azerbaijan Oilfield

By Tsvetana Paraskova - Dec 05, 2023

BP has started drilling the first production well from a new platform developing the next $6-billion stage of a giant field in the Caspian Sea in Azerbaijan, the UK oil and gas supermajor said on Tuesday.

As operator of the Azeri-Chirag-Deepwater Gunashli (ACG) field development, BP announced that the first production well was spudded from the new Azeri Central East (ACE) platform, following the safe completion of all offshore hook-up, installation, and commissioning of the ACE topsides unit which sailed away from the Bayil fabrication yard in August 2023.

The well is planned to reach a total depth of up to 3,188 meters (10,459 ft), which is expected to take around three months.

“We are excited to commence drilling the first platform production well on ACE. This allows us to meet our first oil production target for ACE and deliver it in early 2024,” said Gary Jones, BP’s regional president for Azerbaijan, Georgia, and Turkey. 

“We look forward to delivering this first ACE production well safely, efficiently and on schedule.”

The $6 billion ACE project is the next stage of development of the giant ACG field in the Caspian Sea. The Azeri-Chirag-Deepwater Gunashli (ACG) field is located about 100 kilometers (62 miles) east of Baku and is the largest oilfield in the Azerbaijan sector of the Caspian basin.

The new platform and facilities are designed to process up to 100,000 barrels of oil per day (bpd) and the project is expected to produce up to 300 million barrels over its lifetime, BP said.

The new project was sanctioned in April 2019 and was the first major investment decision by the ACG partnership following the extension of the ACG Production Sharing Agreement (PSA) to 2049, agreed in 2017. Around $42 billion has been invested in the development of the ACG area since the original PSA was signed in 1994, according to the UK supermajor.   

Governments Are Paying Up to Restore Confidence in Offshore Wind

By Tsvetana Paraskova - Dec 05, 2023

After a year of struggles for offshore wind developments amid rising costs, canceled projects, and failed auctions, governments and policymakers in Europe and the U.S. have realized they may need to pay up to ensure projects are built to help their decarbonization goals.

Europe and the United States risk missing their ambitious wind power installation targets as soaring costs, supply chain delays, and low electricity prices at auctions hamper development and lead to a cancelation of offshore wind projects.   

The offshore wind industry has seen several major setbacks since the summer—auctions in the U.S. and the UK were a flop and a large UK project was canceled due to surging costs and challenging market conditions pressuring new developments. Meanwhile, developers in the U.S. are seeking looser requirements for tax credits to make projects economically feasible.

But now some governments, including the UK government, have raised the minimum prices for next year’s auctions to ensure there will be bidders to develop offshore wind projects.

“The reality is governments are starting to react and are accepting that to keep their offshore wind programmes on track - which are important for the economy, energy security, decarbonisation targets and jobs - it’s worth paying a bit more,” Jonathan Cole, chief executive of project developer Corio Generation, told Reuters.

In the UK, the government last month raised the maximum price for offshore wind projects in its flagship renewables scheme, the Contracts for Difference (CfD) auction.

“Following an extensive review of the latest evidence, including the impact of global events on supply chains, the government has raised the maximum price offshore wind and other renewables projects can receive in the next Contracts for Difference (CfD) auction to ensure it is performing effectively,” the UK said.

In a bid to keep Europe competitive in the wind power industry, the European Commission unveiled last month the so-called European Wind Power Action Plan, “to ensure that the clean energy transition goes hand-in-hand with industrial competitiveness and that wind power continues to be a European success story.”

By Tsvetana Paraskova for Oilprice.com

 

Insurance Risk Premium Increases After Houthi Strikes On Ships

By Charles Kennedy - Dec 04, 2023

In the aftermath of new attacks by Houthi missiles on commercial vessels in the Red Sea, war risk insurance premiums have risen for this trade route. 

"It has now become clear the Houthis will attack anything at sea with links to Israel or Israelis, regardless of how feeble the links may be, and regardless of the potential for collateral damage to non-Israelis, for example crew members," Jakob Larsen, head of maritime safety & security with BIMCO, told Reuters. On Sunday, Yemen’s Houthis attacked three ships off the Red Sea coast of Yemen with ballistic missiles, while a U.S. warship shot down three Houthi drones

“These attacks represent a direct threat to international commerce and maritime security,” the U.S. military’s Central Command said in a statement. “They have jeopardized the lives of international crews representing multiple countries around the world.”

Last month, the Houthis seized a cargo ship linked to an Israeli businessman, sparking speculation that more such attacks will follow against Israeli-owned vessels. A second hijacking took place shortly after, but was determined to have been Somali pirates taking advantage of the chaos in the Red Sea in the wake of the Hamas attack on Israel on October 7, and Israel’s aggressive response in Gaza. Sunday’s attacks were claimed by the Houthis who claimed the vessels were linked to Israel, though U.S. Central Command said the three vessels were connected to 14 nations and not to Israel.

Following the Sunday attacks, an Israel military spokesman cited by Reuters said, “there is little a merchant ship can do to protect itself against weapons of war. Rerouting away from the area is a valid consideration, especially for ships at heightened risk.” 

Insurance risk premiums have risen as of Monday from around 0.03% prior to Red Sea attacks last week to between 0.05%-0.10% of the value of a ship, according to Reuters. The heightened risk means that commercial vessels will be forced to pay higher insurance or to use longer routes, which can increase transportation costs by tens of thousands of dollars. 

By Charles Kennedy for Oilprice.com