This Houstonian saw superstar Nelly Korda win her fifth consecutive LPGA title at the Chevron Championship, live in The Woodlands. It was a big week for Korda and for gas assets worldwide. Let's tee off with the three news items in this week's edition…
Shangyou Nie
Editor, Well Read
The End of an Era
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The Dutch government announced a complete shutdown of the Groningen gas field, the biggest in Europe. This represents the end of an era for the Netherlands as a significant gas producer and supplier to Europe.
Normal gas production at Groningen in northern Netherlands ended last October.
The Dutch government had previously kept an option to activate up to five sites at Groningen field in times of need.
Two sites were then ordered to re-open to produce gas during the January 2024 winter freeze, as the Netherlands and Europe adjusted to large reductions in pipeline gas supply from Russia.
Goodbye to a gas legend:
With more than 90 trillion cubic feet reserve, Groningen gas field was the biggest in Europe.
It's estimated that Groningen has produced more than 70 percent of its reserves since it started in 1963.
It was operated by a 50:50 joint venture between Shell and Exxon called NAM.
Groningen was originally planned to produce gas for 100 years.
Shaking up the plan:
In 2018, the Dutch government ordered Shell and ExxonMobil to reduce production significantly, due to increasing risk of earthquakes from gas extraction.
In 2018 and 2019, Shell and ExxonMobil reached an interim agreement with the Dutch government to gradually phase out production at Groningen.
Shell and ExxonMobil filed an arbitration case against the Dutch government in 2020, seeking compensation for having to end gas production early.
Why it matters:
Increasingly, oil and gas production requires careful evaluation of factors beyond reservoir conditions.
Similar concerns about earthquakes have led regulators to investigate oil and gas production in Oklahoma and other U.S. states.
U.S. Reimposed Sanctions on Venezuela, BUT…
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The Biden Administration announced that it would reimpose economic sanctions on Venezuela last week, citing that Maduro’s government has not followed through on its promises to hold a free and fair presidential election.
Any hope for a significant rebound of Venezuela’s oil industry will have to wait for now, BUT…
And they have. ENI (Italy), Repsol (Spain), and Maurel and Prom (France) resumed their operations in Venezuela with state company PDVSA beginning in October.
Tellechea called the latest Biden Administration decision “a brutal wave of repression.”
Sanctions specifics: The State Department said: “In order to implement an orderly process following the expiration of General License 44, the United States will issue a 45-day wind-down license,” and “will consider requests for specific licenses to continue activities beyond the end of the wind-down period on a case-by-case basis.”
Market reactions:
Brent and WTI went up 3 to 4 percent on April 18 after the initial news.
As of April 22, Brent was trading at $86.78 per barrel, and WTI at $81.78 per barrel—returning back to levels seen before the announcement.
The Interational Energy Agency and Energy Information Administration of the DOE both projected Venezuela’s oil production would recover to about 1 million barrels per day by year's end.
Venezuela is producing roughly 800,000 barrels per day, or about 25 percent of what it produced in pre-sanction years before 2016.
What to watch:
Nicolas Maduro will likely win his third six-year term in the presidential election on July 28, barring any major surprises.
Will IOCs and other companies quietly apply for specific licenses to work with PDVSA to continue increasing production in Venezuela?
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Pure gas play EQT announced last week that it has entered into an agreement with Norway major Equinor to sell gas assets in Pennsylvania in exchange for Equinor’s onshore assets in the Appalachian Basin and $500 million.
The deal highlights companies’ efforts to optimize their portfolios in the Marchellus and Utica shale gas resources.
In return, EQT will receive 26,000 net acres in Ohio with an estimated 2025 production of 135 MMcf/d, 10,000 net acres in Pennsylvania, and 15 MMcf/d in EQT-operated assets.
Equinor will also transfer partial ownership of a gas gathering system in Pennsylvania to EQT.
A buyback agreement is also part of the deal, in which Equinor will purchase gas from EQT.
EQT’s perspective:
EQT is the largest gas producer in the USA, producing about 6.1 bcf per day across assets in Pennsylvania, Ohio, and West Virginia. It has a market cap of $17 billion.
EQT has 1.1 million net acres and 27.6 trillion cubic feet of proven gas reserves.
EQT is also trying to grow in the LNG business as a gas provider to several Gulf of Mexico-based LNG exporters.
Equinor’s motives:
From Equinor’s perspective, it will high-grade its portfolio by selling 100 percent interest in, and operatorship of, its gas assets in the Appalachian Basin in Ohio.
In exchange, it increases equity ownership in non-operated gas assets in Pennsylvania.
As a result of this transaction, Equinor has completely exited its operated onshore positions in the USA.
This will allow it to focus on other growth areas, including offshore wind, offshore and onshore oil and gas production, and low-carbon value chain positions.
Why it matters:
U.S. gas producers can find creative ways to commercialize gas resources, rather than becoming victim to some of the lowest gas prices in the world.
Like we noted with the French a few weeks ago, U.S. companies can look for deal opportunities with European companies as they try to grow their American footprint.
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