I started to consider a big economic reality about the explosive growth of EVs in China while I have been traveling during these past three weeks. The taxi drivers from Di-di, the Chinese version of Uber, told me that charging their EVs would cost only a quarter of the money compared to what they would spend to buy gasoline.
Speaking of the energy transition, let’s dig into two pieces of news from the past week.
Shangyou Nie
Editor, Well Read
ExxonMobil Signs 271,000 Acres for CO2 Storage in Offshore Texas
About the new acreage:According to Upstream, the deal with state regulatory body buys ExxonMobil 271,068 acres east of Galveston Bay, offshore from Jefferson, Chambers, and Galveston counties.
Giving back:
In addition to reducing emissions, the deal will enhance education for Texas children and promote community development. The details of the agreement have not been released, but ExxonMobil said that it will “directly benefit the Texas Permanent School Fund.”
“As a mom, I have long said that educating our children is the most important thing we do, and I am thrilled that the revenue from this lease will go toward benefiting … our Texas school children,” said Dawn Buckingham, commissioner for the Texas General Land Office.
The Texas-based major is actively expanding CCS efforts in Wyoming.
CNOOC and Shell are working with ExxonMobil on a potential CCS project in the Guangdong province, which would capture 10 million tons of CO2 per year.
What they are saying: “With our growing roster of customers ready to deploy CCS, we’ll be driving substantial emissions reductions along the Gulf Coast… that make us a clear leader,” said Dan Ammann, president of ExxonMobil’s Low Carbon Solutions group.
What to watch:
Will other companies try to join ExxonMobil’s newly captured CCS acreage?
When will large-scale CCS become a reality along the U.S. Gulf Coast?
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Sinochem, China’s fourth-largest national oil company, has decided to sell all the overseas upstream assets it has acquired over the past 20 years, strategically ending its overseas expansion. The decision may spark a trend for other Chinese NOCs.
Behind the deal:According to Upstream, the overseas assets that Sinochem is selling include 32 oil and gas blocks in eight countries, including Brazil, Colombia, and the United States.
First sale: The initial sale will be for the shallow water field Peregrino in Brazil. In September, Sinochem reportedly reached an agreement with Brazilian independent Prio to sell the assets for $1.9 billon.
Peregrino is one of Sinochem’s largest international assets, located in Brazil’s Campos Basin.
Sinochem has 40 percent equity in the Peregrino Field, which is producing 87,000 barrels per day gross. It is operated by Equinor (60 percent). Sinochem acquired Peregrino Field in 2010 for $3 billion.
What’s next:
Sinochem will sell its shale gas assets in the Permian next. It is reportedly in discussions with potential buyers for a 40-percent of stake in the Wolfcamp Shale in the Permian.
Sinochem’s Permian asset was originally operated by Pioneer Natural Resources for 60,000 barrels of oil equivalent per day. Pioneer has now been acquired by ExxonMobil.
Sinochem holds more than 873,000 net acres in the Permian.
About Sinochem:
Sinochem is Beijing-based and the fourth-largest Chinese NOC after CNPC, Sinopec Corp, and CNOOC.
Sinochem started in 1950 as China National Chemicals Import and Export Corp. In 2002, it created Sinochem Exploration and Development Co. as a subsidiary for vertical integration.
Sinochem holds more than one billion barrels of recoverable oil and gas reserves, according to its own estimates.
Global context:
Despite being the world’s sixth-largest oil producer—after the United States, Russia, Saudi Arabia, Canada, and Iraq—China is the world’s largest oil importer.
In 2023, China produced approximately 4.2 million barrels of oil per day—roughly 25 percent of its domestic consumption of 16.6 million barrels per day.
Chinese NOCs have been acquiring international assets to counter domestic decline over the past 20 years. They were especially aggressive from 2011 to 2013, when oil prices were high, and the acquisitions were widely considered to be too expensive.
Chinese NOCs have been reluctant to offload these assets, fearing that they would not receive attractive offers to justify the high prices they had paid.
A few of these acquisitions have paid off for the Chinese NOCs, most notably CNOOC’s acquisition of 25 percent equity in the Stabroek Block operated by ExxonMobil in Guyana, as well as CNPC’s acquisitions in Iraq.
What to watch:
Does Sinochem’s decision to exit all overseas upstream assets signal that the Chinese government has realized that selling these under-performing assets will be better than holding them?
Who will be the potential buyers for Sinochem’s assets?
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