Chevron Bids Highest For Gulf Of Mexico Drilling Rights

By Charles Kennedy - Mar 30, 2023

Gulf of Mexico oil lease sale number 259 held on Wednesday attracted $264 million in bids for drilling rights in an area estimated to hold nearly 30 billion barrels of oil, with Chevron coming in with the highest bids, followed by BP, Shell and Equinor.

Chevron turned up with seven of the 10 highest bids for blocks, with BP Exploration & Production Inc and Equinor Gulf of Mexico LLC representing the second and third highest bids. Chevron offered up $108 million for 75 tracts, followed by BP with $47 million in bids and Shell, with $20 million. 

The auction saw 38% higher bids than the previous auction, and also ranks as the highest bidding since 2017.

The Biden administration was forced to move ahead with the controversial auction of 114,000 square miles of oil and gas leases in the Gulf of Mexico due to a climate bill compromise, which prohibits public land leases for renewable power unless oil and gas is first offered tens of thousands of acres.

The outer continental shelf in the Gulf of Mexico is estimated to hold 29.95 billion barrels of oil and 54.85 trillion cubic feet of natural gas in undiscovered technically recoverable oil. It is also estimated that the Gulf of Mexico could produce more than 1 billion barrels of oil and more than 4 trillion cubic feet of natural gas in five decades.

Still, BP, Chevron, and Talos Energy received disappointing results at the beginning of this month from their Puma West-2 appraisal well, which encountered hydrocarbons in multiple zones, but not enough to immediately consider whether to move forward.

The lease sale, the Biden administration’s first in over a year, comes right after the administration approved the controversial Willow drilling project in Alaska.

Responding to the Gulf of Mexico lease sale, Democrat Senator Joe Manchin, who forced the climate bill compromise, said in a statement that the sale demonstrates that the climate bill was “holding this administration’s feet to the fire” in terms of continuing fossil fuel production in the U.S., ABC News reported. 

By Charles Kennedy for Oilprice.com

Republican-Sponsored Energy Bill Passes The House

By Julianne Geiger - Mar 30, 2023

A Republican sponsored energy bill passed the House on Thursday that seeks to promote oil and gas production in the United States, as well as repeal parts of Biden's Inflation Reduction Act.

H.R. 1 passed the House by a 225-204, according to Bloomberg, although it must now face a seemingly insurmountable hurdle in the Senate and President Biden's desk.

The elements of the Republican-backed bill include:

• Repealing the first-time fee on methane emissions
• Rolling back the fees for oil and gas industries that were included in the Inflation Reduction Act
• Increasing royalties rates for oil and gas, which were also spelled out in the Inflation Reduction Act
• Putting into law former President Trump's changes to the National Environmental Policy Act
• Repealing the $27 billion in funding to the EPA for the purposes of establishing a green bank
• A plan to speed up energy project permitting
• Putting a two-year limit on environmental reviews for energy projects
• Limiting litigation surrounding reviews
• Exempting certain activities from environmental reviews
• Mandating more oil and gas lease sales
• Making it more difficult for individual states to block interstate pipeline projects
• Streamlining the permitting process for energy projects

Senate Majority Leader Chuck Schumer referred to the H.R. 1 as dead on arrival.

The Bill could also get vetoed by the President.

The legislation, however, could gain traction in exchange for Republicans giving way to their resistance to the Democrats' plan to raise the federal debt limit.

Domestic energy policy became a popular subject of political debate in the days following the coronavirus pandemic as oil and gasoline prices shot up with the increase in demand. President Biden has tried to balance his aggressive climate policies amid rising energy prices, alienating both the oil and gas industry and climate groups.

By Julianne Geiger for Oilprice.com

More Kurdistan Oil Production Is Shut In As Exports Remain Halted

By Tsvetana Paraskova - Mar 31, 2023

London-listed Gulf Keystone Petroleum, which operates one of the largest oil discoveries in Kurdistan, is shutting in as of Friday part of its production in the semi-autonomous region of Iraq as exports from Kurdistan from the Turkish port of Ceyhan remain suspended.  

Gulf Keystone Petroleum, operator of the Shaikan Field in Kurdistan, said it expects to shut in production processed at Production Facility 1 on Friday, while production flowing into Production Facility 2 will continue into storage tanks at reduced rates for around another two weeks before also being shut-in. The combined storage capacity at PF-1 and PF-2 is around 150,000 barrels, the company said in an update on its operations in Kurdistan.

Earlier this week, Gulf Keystone Petroleum said that its facilities “have storage capacity that allow continued production at a curtailed rate over the coming days after which the Company will suspend production.”

Kurdistan’s crude oil exports – around 400,000 bpd shipped through an Iraqi-Turkey pipeline to Ceyhan and then on tankers to the international markets – were halted late last week by the federal government of Iraq.

Last week, the International Chamber of Commerce ruled in favor of Iraq against Turkey in a dispute over crude flows from Kurdistan. Iraq had argued that Turkey shouldn’t allow Kurdish oil exports via the Iraq-Turkey pipeline and Ceyhan without approval from the federal government of Iraq.

Talks between officials from Kurdistan and from the Iraq federal government have failed in recent days, but they are set to continue next week.

Gulf Keystone said in today’s field operations update that “The Company understands that discussions between the Kurdistan Regional Government and the Iraqi Ministry of Oil are ongoing and continues to believe that the suspension of exports will be temporary.”

Earlier this week, the company pumping a quarter of Kurdistan’s crude oil exports, Norway-based DNO ASA, said that it had started an orderly shutdown of its oil fields following the suspension of oil exports.

“It is unfortunate it has come to this given the likely impact of a continuing supply disruption on oil prices and at a fragile time in global financial markets,” DNO’s Executive Chairman Bijan Mossavar-Rahmani said.

By Tsvetana Paraskova for Oilprice.com

Brazil’s Oil Exports Surge To Record-High Despite New Tax

By Charles Kennedy - Mar 31, 2023

Despite a new export tax, Brazilian oil exports have jumped to a monthly record-high this month, Reuters reported on Friday, quoting government data and industry experts.

Brazil’s oil exports soared by 75.4% year over year between March 1 and 24, per data from foreign trade agency Secex, as oil producers did not have time to relocate oil cargoes after a surprise export tax was announced in early March.

The Brazilian government announced at the start of this month that it would collect taxes on crude oil exports for four months in a bid to offset the effects of an earlier decision to keep fuels tax-exempt.

That decision, however, was made without consulting the industry, and it will increase uncertainty about future investments in Brazil’s oil and gas resources, according to Shell, one of the large foreign operators in the South American country.

Shell, together with other international oil majors, in early March filed an injunction against the new oil export tax that the Lula da Silva government introduced surprisingly as of March 1.

Shell has been joined by the local subsidiaries of TotalEnergies, Repsol, Equinor, and Portugal’s Galp in fighting back against the government’s decision.

“This measure, which was announced with no significant consultation with the industry, brings uncertainty to new investment decisions, negatively impacting the country’s competitiveness in the upstream sector – one where Brazil carries significant geological potential,” Shell told Bloomberg.

According to the Brazilian government, the new tax, which will be in place between March and July, will provide Brazil with a better fiscal balance and will help offset losses incurred from not hiking fuel prices in accordance with market prices.  

Brazil is one of the world’s biggest crude oil producers not part of the OPEC+ alliance, which is limiting supply by 2 million barrels per day (bpd) through the end of this year. Brazil, alongside the United States, Norway, Canada, and Guyana, will be the main driver of liquids supply growth from outside OPEC and the OPEC+ alliance this year, the cartel said in its latest Monthly Oil Market Report (MOMR) published in the middle of March.

By Charles Kennedy for Oilprice.com

China's Growing Arctic Ambitions Spell Trouble For Russia

By The Jamestown Foundation - Mar 29, 2023

• Russia's decision to involve China in joint development of the Northern Sea Route (NSR) has raised concerns about China's growing role in the Arctic.
• China has been working to assume a significant economic and geo-strategic position in the Arctic for the past decade, and has been constructing icebreakers and ice-capable ships, among other initiatives.
• Putin's decision may ultimately give China the leverage it wants to negotiate more gas purchases from Russia in the future, while also giving the Chinese a greater say in the Arctic region more broadly.

At the recent summit with Chinese President Xi Jinping, Russian President Vladimir Putin announced he was ready to establish a joint Chinese-Russian working group to develop the Northern Sea Route (NSR). However, the offer has not led to a new Chinese contract to purchase more Russian gas as the Kremlin leader clearly had expected. Rather, it has sparked concerns within the Russian Federation that China is now in a position to elbow Russia aside not only along the NSR but across the Arctic more generally. Indeed, one Russian observer on the “Captain Arctic” Telegram channel warns that Putin’s misguided move has given Xi “the keys” to the Arctic and pushed Russia into a minefield, where an area that Moscow had always viewed as exclusively its own will now be subject to negotiations with a foreign power. According to this observer, while the conflict with the West over Ukraine will eventually end, Russia’s differences with China will continue and Moscow will come to regret the advantages it has handed Beijing (T.me/caparctic, March 21).

For much of the past decade, China has been working hard to assume a major role in the Arctic, both economically and geo-strategically (see EDM, October 3, 2017; July 12, 2018; June 12, 2019; May 6, 2021). It has been building icebreakers and ice-capable ships (see EDM, July 23, 2020) and has been promoting Chinese development of infrastructure in those northern portions of Russia where an increasingly hard-pressed Moscow could not afford to do so (see EDM, March 9). But Putin’s readiness to involve China in the joint development of the NSR, especially given that he has not received anything in return, represents a major turning point, one that highlights Russia’s growing weakness in the Arctic and China’s growing strength.

Putin clearly believes that, by giving Beijing this opening, Russia will receive the short-term help it needs and may even convince China to agree to purchase more Russian natural gas, something critical for Gazprom given its loss of markets in the West. Some Russian experts agree (Sco-khv.org, September 22, 2017). Yet, others say that the Russian president is being overconfident. They argue that the Chinese, being hard bargainers, believe that Moscow, faced with the problems of diminished gas sales in the West, will eventually be forced to sell its gas to China at even more of a discount—and Beijing knows this. Moreover, they point out that given the fact that Putin has mixed this issue in with the development of the NSR, it represents a far more serious and, from Russia’s point of view, negative development. Beijing is not concerned only with the NSR, Chinese officials say. It merely wants a voice in the Arctic more generally and even in the development of the portions of Russia adjoining China, areas that Moscow has long assumed to be its own by right (Nakanune.ru, March 24).

Vasily Koltashov, an expert at Moscow’s Plekhanov University of Economics, is one of these skeptics. He says that all will be well if Russia can control China’s participation in Arctic affairs. In such a case, Beijing would make investments that Russia needs without challenging Moscow’s position. However, there is a very real risk that, if Moscow’s own position deteriorates further or if the Kremlin fails to manage the situation well, China will exploit the circumstances and Russia will be “transformed into the periphery of China,” an outcome Putin clearly does not want but may be unable to prevent (Nakanune.ru, March 24). In that event, Russia will lose more than dominance over the NSR: It will also lose its place in the Arctic. And other Russian analysts, including Igor Yushkov of Moscow’s Financial University, say that what happened at the summit shows that China is thinking in far bigger terms than Russia, focusing on the Arctic as a whole rather than just the NSR.

Russia’s turn toward Asia and especially China in the Arctic may be more ramified than even the discussions of the Putin-Xi exchanges suggest. In recent decades, Russia had focused its efforts on the Arctic Council, the chairmanship of which it has had for the past two years. But because the other members have boycotted the organization to protest Russia’s invasion of Ukraine, the Arctic Council has not played the role either Russia or its Western members had expected. The Western Arctic powers have continued bilateral and multilateral consultations among themselves on Arctic issues, but Russia has adopted a different strategy. In recent months, it has sought to create an alternative to the Arctic Council, one involving China and other Asian countries to make it less of a target for Western boycotts.

Moscow has taken the lead in establishing the Russian-Asian Consortium of Arctic Researchers, known by its Russian acronym RAKAI, which brings together scholars from Russia and China in the first instance but also from North and South Korea, India, Vietnam, Singapore and Hong Kong (Ysia.ru, November 25, 2022). Not accidentally, this group played a key role at a meeting in Yakutsk of Arctic researchers that took place during the same week as the Putin-Xi meeting. This is yet another indication of Russia’s turn to the East as far as the Arctic is concerned and Beijing’s exploitation of Moscow’s move, especially when it comes to programs and policies affecting the region (Nezavisimaya gazeta, March 23).

At present, it may be excessive to suggest that Putin has presented Xi with “the keys to the Arctic” as the “Captain Arctic” Telegram channel suggests. Nevertheless, the fact that some Russians think he has calls attention to just how great a shift may now be happening in the Arctic. Moreover, these judgments about what Putin has done will have consequences even if these fears prove overblown, sparking opposition in the form of foot dragging or, worse, to the Kremlin leader’s move. And this could have the potential of leading some who fear the rise of China relative to Russia to go public and exploit long-standing Russian fears that Beijing is planning to absorb parts of the Russian Federation. If either of those things happens, they may highlight Putin’s offer to Xi on a joint working group to develop the NSR among the most consequential developments to come out of their meeting.

By the Jamestown Foundation

Indian Energy Investor Recoups $20 Billion After Short Seller Attack

By Alex Kimani - Mar 29, 2023

• In January, short-seller Hindenburg Research published a damning report alleging that Indian conglomerate Adani Group was involved in “brazen stock manipulation”.
• 
  
• The report sent shares of the Adani Group companies crashing, with Adani losing two-thirds of his net-worth from $123B to $41.5B in the space of two months.
• 
  
• Adani moved quickly enough to repair the damage and salvage his reputation.

The business world is a real rollercoaster where fortunes can be made or lost in an instant. But few events in the investing universe can be as devastating as being in the cross-hairs of a short-seller, as Indian billionaire Gautam Adani recently found out. 

Back in January, short-seller Hindenburg Research published a damning report alleging that Indian conglomerate Adani Group was involved in “brazen stock manipulation” and “an accounting fraud scheme over the course of decades”. 

According to Hindenburg, Gautam Adani, Founder and Chairman of the Adani Group, had managed to amass a net worth of roughly $120 billion, with $100 billion coming in the past 3 years, largely through stock price appreciation in the group’s seven key listed companies, which had spiked an average of 819% over the timeframe. Hindenburg argued that Adani Group’s seven key listed companies “…had 85% downside purely on a fundamental basis owing to sky-high valuations”. 

The report sent shares of the Adani Group companies crashing, with Adani losing two-thirds of his net-worth from $123B to $41.5B in the space of two months. Adani also slipped from his #3 spot on the Bloomberg Billionaires Index to #21 currently. But all was not lost, even if the entire affair even prompted anti-government street protests. Adani moved quickly enough to repair the damage and salvage his reputation. 

To allay investor concerns, Adani Group sold Rs 15,446 crore (~$1.9B) worth of shares in four of its companies to US-based equity fund GQG Partners. GQG Partners bought 55,600,000 shares of Adani Green Energy; 38,701,168 Adani Enterprises shares, 88,600,000 Adani Ports shares and 28,400,000 shares of Adani Transmission. To enhance its green credentials, Adani canceled a Rs 7,017 crore ($857.6 million) coal plant purchase, ditched plans to buy a stake in power trader PTC India and suspended work on a Rs 34,900 crore ($4.3B) petrochemical project in Gujarat.

Adani Group later revealed that it prepaid share-backed financing of Rs 7,374 crore ($901.2 million) to various Indian financial institutions and international banks. The company also held multiple roadshows in London, Dubai, Hong Kong and Singapore, among other locations.

Well, these moves appear to be working. Shares of the group's flagship Adani Enterprises have rocketed 127% from its 52-week low they hit on February 3; Adani Green Energy shares have rallied 86%, Adani Transmission is up 63%, Adani Total Gas has gained 37% while shares of Adani Power have gained 22% over the past 30 days alone. 

Related: Mexico Risks Trade War With U.S. Over Energy Reform Roll Back

Gautam Adani is not complaining either, with his net worth up $20B over the timeframe, though he’s still $65B poorer than he was before Hindenberg hammered him and his companies.

Mixed Fortunes

Other energy investors have experienced mixed fortunes so far this year. 

The world’s 5th richest person, Warren Buffett, cannot be considered an energy investor per se since his other investments dwarf what he has put into oil and gas stocks. Nevertheless, Buffet has seen his net worth decrease by $2.1B in the year-to-date to $105B. After a five-month hiatus, Buffett has resumed buying shares of Occidental Petroleum (NYSE:OXY). Earlier this month, Buffett's company spent $355 million on OXY stock in three days, raising its stake in the energy giant to 22.2%. 

After emerging as the S&P 500’s best performer in 2022 with a nearly 120% gain, OXY is down 0.8% in the year-to-date.

Here’s a rundown of how fortunes of other global energy investors are faring in the current year.

#1. Mukesh Ambani

      Country: India

      Industry: Oil Refinery

      Net Worth: $77.1B

      YTD Change: -$10.1B

With a net worth of $77.1B Mukesh Ambani is the world’s 12th richest man and the richest energy investor.

Ambani controls India’s Reliance Industries (NSE:RELIANCE), the world's largest oil refining complex. The Mumbai-based conglomerate's other businesses include a 4G wireless network across India. Two years ago, Reliance Industries overtook ExxonMobil (NYSE:XOM) to become the world’s largest publicly traded energy company. However, an epic run by XOM last year saw it reclaim its position as top dog with a market cap of $430.7B.

RIL’s energy business accounts for ~80% of the company’s revenue. However, investors have chosen to focus on Chairman Mukesh Ambani’s plan to grow the company’s digital and retail arms. Reliance’s big bet in non-energy businesses such as telecom, retail, and digital services has helped it to vastly expand its revenue base.

#2.  Low Tuck Kwong

       Country: Indonesia

       Industry: Coal/Port Operator

       Net Worth: $26.6B

       YTD Change: -$1.7B

Low is the 47th richest person and the founder of Bayan Resources, a coal producer and port operator in Indonesia. He is also the largest shareholder of Singapore-based renewable energy company, Metis Energy. In 2021, Bayan sold 40 million metric tons of coal and reported revenue of 40.8 trillion rupiah ($2.9 billion) in 2021. Low is also the largest shareholder of Metis Energy, a Singapore-based renewable energy company.          

#3.  Leonid Mikhelson

       Country: Russia

       Industry: Natural Gas

       Net Worth: $26.2B

       YTD Change: +$1.6B

Leonid Mikhelson is the 48th richest person and chief executive officer of Novatek, Russia’s largest non-state-owned natural gas provider. The billionaire owns about one quarter of the publicly traded company, which produces about 10% of the country's gas. He also holds a 36% stake in closely held petrochemical producer Sibur.       

#4.  Harold Hamm

       Country: United States

       Industry: Oil & Gas

       Net Worth: $22.4B

       YTD Change: +$25.0M

Harold Hamm is the 66th richest person and chairman of Continental Resources (NYSE:CLR), the biggest oil producer in the Bakken oil basin in North Dakota and Montana. Last year, shares of the Oklahoma City-based publicly traded company nearly tripled leading to a massive jump in Hamm’s net worth.

As of December 31, 2020, CLR’s proved reserves were 1,104 million barrels of crude oil equivalent (MMBoe) with proved developed reserves of 627 MMBoe. Last year, the company said in a press release that it would be folded into Ham-owned Omega Acquisition.

#5.  Vagit Alekperov

       Country: Russia

       Industry: Oil & Gas

       Net Worth: $18.4B

       YTD Change: +$3.0B 

Alekperov is the 89th richest person and chairman of Lukoil, the publicly traded producer of about 2% of the world's oil production. The Moscow-based company employs more than 100,000 people and had revenue of $125.1 billion in 2021. Alekperov collected more than $5 billion in dividends. He also co-owns the Spartak Moscow soccer team.

#6.  Sarath Ratanavadi

       Country: Thailand

       Industry: Energy

       Net Worth: $11.3B

       YTD Change: -$301M

Ratanavadi is the 147th richest person, major shareholder and chief executive officer of Gulf Energy Development, a Thai energy producer. The Bangkok-based company operates gas-fired and solar electricity generation projects across the country and has more than 14,000 megawatts of capacity. Gulf Energy became publicly traded in 2017.        

By Alex Kimani for Oilprice.com