Daily Energy Standup Episode #332 – China’s Pollution, Saudi Aramco’s Critique, and Shifting Dynamics in Ukraine and Germany

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Climate bureaucrats giving China a free pass on its massive pollution

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Michael Tanner: [00:00:14] What’s going on, everybody? Welcome into the Tuesday, March 19th, 2024 edition of the Daily Energy News Beat stand up. Here are today’s top headlines. First up, climate bureaucrats giving China a free pass on its massive pollution. I think the cover art does this one all the justice it needs. Next up a little air a week action for everybody. Saudi Aramco CEO says energy transition is failing. The world should, quote, abandon the fantasy of phasing out oil. Harsh words from the Aramco CEO at Ceraweek down in Houston. Next up Ukraine won’t extend Russian gas transit deal, according to official sources out of both countries. Finally, Germany signs long term LNG supply deal with Abu Dhabi National Oil Company. Stool. Then toss it over me. I will quickly cover what’s going on in the oil and gas. Fine. Finance marketing specifically cover a nice article put out by the Wall Street Journal today talking about private equity, specifically cashing out, on all things oil and gas. As always, guys, I’m Michael Tanner, joined by Stuart Turley. Let’s go ahead and kick it off. Stuart where do you want to begin. [00:01:25][71.3]

Stuart Turley: [00:01:26] Hey let’s start out with our buddies over there in China. Climate bureaucrats giving China a free pass on massive, pollution. Miss producer, if you don’t mind, you gotta. You gotta show this to our folks. There is absolutely smog galore. See? You can’t see anything, and they are still wearing a mask. I guess it’s Covid, but here’s where I. I think it’s absolutely funny that we’re buying so much crap from, China that it is actually disgusting because they’re making all of the stuff using coal and killing people. So, yeah, I love this one. Section in here, the readiness of taxpayer funded bureaucrats to cast off the basic principles of justice and common sense should be cause for concern. Really? While socialist regimes that regimes have long embraced collective guilt, group punishment and individual responsibility is fundamental to the American dream. And we’re getting browbeat for not being green enough. And we have reduced our carbon emissions by 22%, and China has increased by 2,220%. I just find this despicable. [00:02:50][84.4]

Michael Tanner: [00:02:52] Yeah, it’s it’s pretty unbelievable. I mean, anybody who’s been paying attention or has watched the show in the past year, or is a reader of energy news be knows that China is is talking with one hand over here, but doing another thing over here and it’s you know, it’s exactly it’s the shell game with emissions. They’re they’re buying cheap oil from everywhere, storing it, selling it cross markets while burning coal at home. So again, that’s the issue. China and. [00:03:21][29.6]

Stuart Turley: [00:03:22] LNG. [00:03:22][0.0]

Michael Tanner: [00:03:23] 2.61 emissions oh times larger than what we’re doing. Emissions in the United States. Unbelievable. [00:03:29][6.7]

Stuart Turley: [00:03:30] Oh yeah. And we go in our in energy costs are going through the roof. And energy poverty is real in the US. And we’re having to shut down everything because of the smog in China. What was the old saying? You better eat all your food on your plate because there’s starving kids in China. How about don’t breathe? Because there’s people in in China that need to breathe? [00:03:56][25.5]

Michael Tanner: [00:03:57] Hold your breath on this one. [00:03:58][1.2]

Stuart Turley: [00:03:58] All right, Rex Lewis, let’s go to our buddies over there in Saudi Arabia. That was funny. I don’t care who you are. It’s a good one. Saudi Aramco CEO says energy transition is failing and world should abandon the fantasy of phasing out oil. This one is pretty cool. Our main this year said, that energy transition is failing the real world. Here’s a quote. In the real world, the current transition strategy is visibly falling on most fronts as it collides with five hard realities. The they are, urgently needed. Let’s see where they are. [00:04:38][39.6]

Michael Tanner: [00:04:39] Yeah, I was I watched this interview because it was on CNBC. He says that there’s these five hard realities but didn’t really go on and explain what they were. The next quote that he’s got is a transition strategy. Reset is urgently needed. And my proposal is this we should abandon the fantasy of phasing out oil and gas and instead invest them in adequately or invest in adequately reflecting realistic demand assumption. Well, that’s a shot across to the IEA. [00:05:06][27.1]

Stuart Turley: [00:05:07] Oh, absolutely. And in Paris they said that. Oh, shoot. Peak oil and gas and coal would come in 2030. Nasser said demand is unlikely to peak any time soon. Okay, we know that, Janet Yellen is saying that inflation is transitory. I’d like to say that we’ve got a new one. Now, Nasser is saying natural gas is not transitory. So he has a better haircut than Janet Yellen. Oh my God. [00:05:39][31.9]

Michael Tanner: [00:05:40] Hey, at least he’s got. At least they both got hair compared to what you’re. [00:05:43][2.8]

Stuart Turley: [00:05:43] Working with over there. Smoke em if you got them. That was a guy. [00:05:46][3.3]

Michael Tanner: [00:05:47] But no, this was really. I was watching this live on CNBC. This was a shot across at the IEA. And he specifically says that he goes. He goes on to suggest that the IEA is focusing on demand in the U.S. and Europe and needs to refocus on the developing world as well. Who would have thought the IEA only cares about the countries that give it money? Who would have thought. [00:06:08][21.2]

Stuart Turley: [00:06:09] Who would have thought that they’ve been criminally, accepting money? I’m going to call them criminals. We’ll just go on to the next one here. Ukraine won’t expand. Russian gas transit deal. This is official from both sides. Michael Lynton. Mr. Producer, if you can call up the the picture of what’s called the land bridge in Ukraine, there’s a little more to this story. And another story. It’s a blue red. And this is really Ukraine. And you can see where Crimea, Crimea is down there. And I called it, when the war started. Michael, I said, this war will be over when he gets his land bridge. Now, so when you take a look at this, he can confirm this is Dallas. Stanko can go. I can confirm we have no plans to enter into any additional agreements or extend this current agreement. Listen to these stands. Under the agreement signed in 2019, Gazprom agreed to transit 65,000,000,000m³ of gas through Ukraine in 2020 and 40,000,000,000m³ between 2021 and 2024. Wow. Here’s my prediction. I’m going on record. And that is, two months into the war. Biden stopped them from signing a deal. The war mongers got involved two months. And so, Tucker, basically brought out an awful lot. And I don’t think Ukraine war can continue so that all the information that came out, Ukraine and Russia are now talking again. And I think that very soon it’s going to be okay again to buy Russian natural gas because of the deindustrialization of Germany is killing the economy. And you’re seeing a lot more conservative governments coming around the corner. [00:08:16][126.2]

Michael Tanner: [00:08:17] So yeah, I mean, it was it was it was clearly it was clear that he wasn’t going to continue this. I mean, if if I didn’t have that on my I don’t that wasn’t on my bingo card or that was on my bingo card list of Ukraine not going to do business in Russia. So I didn’t necessarily take this that fine. This too crazy. What this will do is in 20, 30 years, this will damage them because now they’re cutting off in access to cheap low cost energy. Where if in 30 years, I mean, in 30 years, they could be friends. Who knows what happens? I can’t tell you what’s going to happen in the region tomorrow yet, let alone in 30 years. By doing this and not and not locking this in, it’s only going to make Ukrainian energy more expensive down the road because we have the source from somewhere else. [00:09:04][47.4]

Stuart Turley: [00:09:05] And looking at a map, Michael, it’s not just Ukraine that we’re talking about. It’s everything from Ukraine all the way to the Strait of Gibraltar, through, France through, I mean, through down through Spain and everything else, because that pipeline fans out like you wouldn’t believe. So anyway, this this has a total impact to the EU. So anyway, okay, let’s go to Germany. This goes to where they’re trying to put a Band-Aid, on this whale. Band aids don’t really stick in the ocean. By the way, have you ever been bitten by something and tried to put a band aid on it? Doesn’t stay on Germany signs and LNG supply deal with that or not. And so, yeah, they signed a 15 year deal, with, FEMA for the delivery of Michael, 1 million metric tons per annum. [00:10:08][63.3]

Michael Tanner: [00:10:09] Yep. And it’s coming out of the Abu Dhabi’s new, Wallace LNG project, which they’re currently under construction right now. So they’re already pre-selling LNG that’s coming out of their new constructions. Love this. [00:10:21][12.1]

Stuart Turley: [00:10:23] I bet they’re permitting it. Get some on time and under budget. [00:10:26][3.5]

Michael Tanner: [00:10:27] Now, what I do want to know is this Wallace LNG project is, quote unquote, expected to be the first LNG export facility in the Middle East and North America. We are North Africa region. Excuse me to run on, quote clean power. What do they mean by clean power? [00:10:43][15.8]

Stuart Turley: [00:10:44] Who knows? [00:10:44][0.1]

Michael Tanner: [00:10:45] Probably natural gas. Nuclear. Oh, this is going to run on nuclear. [00:10:48][3.8]

Stuart Turley: [00:10:49] This is going to run on nuclear. [00:10:50][0.6]

Michael Tanner: [00:10:51] Oh, where do you know that? Does it? It doesn’t say that here in the article. [00:10:55][3.5]

Stuart Turley: [00:10:55] It doesn’t, but I know the area. [00:10:56][1.1]

Michael Tanner: [00:10:58] So you think this is going to run on nuclear power? [00:11:00][2.0]

Stuart Turley: [00:11:01] The in right across the border in Dubai is where they have the brand new four nuclear reactors that have come online. So the answer is nuclear. [00:11:11][9.9]

Michael Tanner: [00:11:12] Absolutely. They’ve also got a natural gas delivery deal with Ecuador lined up. For an estimated $55 billion total net worth. So they’re they’re cranking it out over there. [00:11:25][13.4]

Stuart Turley: [00:11:26] Oh, and we’ve got, Biden go over here going no LNG for you, even though we have promised it. Well. [00:11:33][7.3]

Michael Tanner: [00:11:34] It’s it’s it’s it’s unbelievable. [00:11:36][2.1]

Stuart Turley: [00:11:37] So if, Seinfeld’s soup Nazi, you know, if you sit back and kind of go, Biden doing an imitation of Seinfeld. [00:11:45][7.5]

Michael Tanner: [00:11:47] What it’s come to unfortunately. [00:11:48][0.6]

Stuart Turley: [00:11:49] That is after you, dude. [00:11:50][1.5]

Michael Tanner: [00:11:51] All right, well, we’ll go ahead and kick it over to finance. But before we do that, guys, we’ll go ahead and pay the bills. As always, check us out. World’s greatest website www.energynewsbeat.com. The best place for all your energy and oil and gas news. Stu in the team took a tremendous job making sure that website stays up to speed. Everything you need to know to be the tip of the spear when it comes to the energy and oil and gas business, hit the description below all the links to the articles of the timestamps so you can jump back here about Saudi Aramco and what they said at Ceraweek. But also you can jump ahead and and hear about one of the stories I’m going to cover, which is all the PR firms making a boatload of money in the oil and gas business right now. You can also check out dashboard.EnergyNewsbeat.com the best place for all your energy and data news combo. That’s a nice little MVP we have where it’s going behind some sort of paywall at some point, folks. So please really enjoy the feedback that we’ve gotten on that and and are looking forward to bumping that up. We’ve also got some some cool stuff that we’re considering working on. So I’d recommend in the description below. Take that survey. We’d really appreciate to get you signed up. For our latest, free trial of, of of of our potential new subscription that we’re gonna be rolling out here soon. So again appreciate everybody www.energynewsbeat.com. [00:13:01][69.9]

Michael Tanner: [00:13:05] You know when we look at how the markets did that H2 S&P 500 up about 6/10 of a percentage point Nasdaq up a full percentage point ten year or two year yields and ten year yields basically flat about 0.04 percentage points and 8.09 percentage points a ten year out tracking the two year barely, dollar index, a .14 percentage point Bitcoin down a little bit, 67,000, off of its peak of around 73 earlier in the week. And crude oil had itself a a great day to day. Brant. WTI up 1.38 percentage points 8216. Brant oil only about half a percentage point, but finishing above $86 at 8694. And we saw 87 today on that Brant side. Main reason for that is a couple things. So Iraq and Saudi Arabia came out today and officially said that they’re going to be lowering export volumes. Iraq, which is the second largest OPEC producer, said it’s going to go ahead and reduce crude exports to 3.3 million barrels per day in the coming months to compensate for exceeding the OPEC plus quota since January. Yeah. So I do want to ask you a question. So this would quote unquote cut shipments by 130,000 barrels of oil today. The real question is do you believe them to the market. [00:14:20][74.9]

Stuart Turley: [00:14:21] Did I don’t believe them at all because they are. There’s a whole new, another article I was reading this morning. Old 20 year old tankers have gone on sale, and they are $32 million a piece cheaper. And they’re being sucked up by Iran, by Venezuela. So the answer is no. Sources are telling me this is hogwash. [00:14:46][25.4]

Michael Tanner: [00:14:48] Yeah, absolutely. I mean, just I would have assumed so, but really what? So and then then what you’re saying is what the market is really keying on is what Saudi Arabia exports. Their actual streams of crude exports have flown for the second straight month down to 6.29 million. That’s down from 6.3 million in December. We also did see some more Ukrainian drone attacks and energy infrastructure, which have shut down about 7% of Russian refining. So, you know, we’ll be definitely watching there. Even though Russia did also increase, their exports by about 200,000 barrels to 2.15 million per day. You know, the only other thing I saw us do is, I mean, we’re pretty quiet on the Western front, from a, from an from an oil and gas standpoint, you know. ConocoPhillips and Devon are kind of the only two players out there on the on the deal front that haven’t really done anything. So it’d be interesting to see when they decide to make a move, whether it’s with each other. I’m not saying I’ve heard anything on that standpoint, but they’re really two. The outstanding players I thought was interesting was Wall Street Journal today came out with an article stew specialist buyout firms cash in on shale consolidation. Really nice overview that you can read on on ENB right now specifically covering some of, you know, kind of the top three private equity firms and cap capital quantum groups and MGP, energy Capital Management, the lot, the last one being a Dallas based company where I’m at, you know, in the last year they sold assets, those three companies for an expected value of about $30.55 billion, fueling huge distributions to investors, which is really a stark contrast from where private equity space had been in the last, you know, sorry, 2 or 3 years, you know, to kind of walk through, for example, end cap, you know, they distributed 7.8 billion to their investors in 2023 for its oil and gas funds, mainly off the back, of the sale of its West Texas company of vintage. And they went ahead and drafted a and got old vintage to kind of peel off a lot of their Midland Basin stuff. We saw Quantum Capital Partners disperse about 3.1 billion, which was a little bit less than their 3.8 billion. They didn’t in 2022. That was mainly off the back of their sale of Rock Cliff energy, and their sale of its gas producing asset in East Texas to Tokyo Gas. So majority of that going for NGP capital surpassed their record of 1.5 billion paid out in 2021, mainly from asset sales from a bunch of few smaller, deals that they went ahead and, and made. They, they were behind, a lot of the I had a bunch of stuff in the Permian right now. Friend of the show, Andrew, did more. I thought he he was quoted in this piece. I thought he did a good job of saying, really, oil has been at this Goldilocks price range, that 75 to $85 a barrel. That’s a comfortable point to transact for both buyers and sellers. Not a terribly robust statement, but I do think it from Andrew did more over there in advance. We loved them. But I do think it highlights that this zone we’re in right now makes it very easy to transact. You buyers feel like they’re getting there’s some value to get in terms of free cash flow to cover any EBITDA margins. And sellers feel like they’re getting good value relative to what they’re getting. They’re willing to maybe take equity in a stock. I mean, think about when oil prices are down. It’s harder to take a stock deal because why would you do that? Stock’s trending down if prices are up and you feel like there’s room for that stock price to grow, you’re more willing to transact specifically in stock. But on the other hand, you’ve also just got more cash available as a buyer. So if you’re interested in buying assets, you’ve got more cash available. You know, obviously what what does this mean. Also private equity is going to be in the buying phase here soon. So if there’s ever a time to get your private equity funding, now’s the time because they’re going to be looking they’re going to be looking for an experienced management team. Dittmar went on to say, I think it’s one of the more interesting conversations among private equity groups is how much of their drilling inventory do we convert to production and cash flow, and how much do we leave for a buyer develop? Very interesting comment. Because, you know, the old adage was drill, baby, drill, drill as many holes as you want, get that production up, sell off that production. Or now the question is of the of the depleting inventory that we have in the United States. I’ve talked at nauseam about this. You know, we’re not coming up with more tier one rock folks, so it’s all getting drilled up. It’s eventually going to go away specifically in the Permian. So the question is how much? How much? You know, how many bites of the apple. Do you leave the potential buyer down the road to get versus taking it all yourself, cash flowing the asset? The real question is, you know, how good are you at drilling? You know the old adage phrase, you wouldn’t want to screw up a good prospect by drilling it. Sometimes it’s better to just buy the prospect and not drill it, because then just then you can sell the dream to somebody else. It’ll be interesting to see how that goes. You also have to remember these private equity companies tend to do a little bit less debt, debt heavy deals and do a little bit more equity, which can be bad when prices are low but good when prices are high because it can fuel these distributions. These companies, I guarantee, are out raising money from institutional investors like gangbusters right now. So expect to see these funds get extremely big. But you know what? What do you think about this dude? Private equity is going crazy right now. [00:20:15][327.5]

Stuart Turley: [00:20:16] Oh I think it’s fabulous. Now I, I still disagree with you, on the tier one versus tier two because of the new technology that’s come around the corner, some of the tier two has actually stepped up a bit. And and so I still why are we producing. More with less rigs. [00:20:37][20.9]

Michael Tanner: [00:20:38] Well, we’re not. We are. Well, okay. The rig. Remember, we’re six months behind. Let’s talk about declining production, especially in the Permian and six months. But, yes, I tend to agree with you is that technology will get better. We’ll become more efficient at creating the next, you know, the next dollar. I think you also have to remember oil and gas production overall is climbing because of our I mean, we I, we didn’t cover this today but there’s a new gas this year. There’s a new oil discovery in Guyana that Exxon talked about today at there’s at Ceraweek. I watched the interview over there with Dare Not and I think it’s not there yet. Darren Woods, he’s the CEO over there at ExxonMobil. He was specifically talking about how they you know, I don’t have the article in front of me. You can find it on Newsbeat, but they’re hoping to ramp that thing up to 600,000 barrels a day this year. And by 2026 or 2027, see that being 1.2 million barrels. So that’s where the growth is coming. It’s not coming from us onshore. Yes, U.S. onshore will become more capital efficient. It will. Over time, we’ll see a reversion to where we will begin to drill a lot more economic wells. But the growth and why oil production is growing has nothing to do with us. Onshore has everything to do with what’s going offshore. That’s where we’ll disagree a little bit. Okay. Yes. Rigs are going down and production is going up. Not because U.S. onshore is becoming more efficient. It’s because the majority of these rigs that are getting picked up is offshore. I mean, that’s what you’re going to see finally. I mean, I didn’t there’s another story you can check on Newsweek we didn’t talk with. There’s over $30 billion of final investment decisions waiting out there to be approved this year. Most of that being offshore. And with prices at $86 for Brant, you’re going to see a lot of those get approved. So there’s where the growth is. [00:22:28][109.9]

Stuart Turley: [00:22:29] Yes, sir. [00:22:29][0.2]

Michael Tanner: [00:22:30] Absolutely, absolutely. You got anything else? [00:22:33][2.7]

Stuart Turley: [00:22:34] No, we just have a lot going on. We’re keeping an eye on Ceraweek, and, there’s just a lot of things coming around the corner. Did we have, today is Tuesday when this is airing. And on Wednesday, we have Dune and Chris Wright rolling out. [00:22:50][16.4]

Michael Tanner: [00:22:51] Your 200th, interview. [00:22:52][1.1]

Stuart Turley: [00:22:53] Isn’t that pretty cool? [00:22:54][0.6]

Michael Tanner: [00:22:55] It is. We we didn’t even attempt to line that up. It just happened. And I saw that this week, and I was like, oh, that’s perfect. [00:23:00][5.7]

Stuart Turley: [00:23:02] oh. It was pretty wild. And what? Two great guests to celebrate our number 200. Now, we did over 500 between me and you, last year. So, I mean, we hit 500. [00:23:14][12.1]

Michael Tanner: [00:23:15] Yeah, we’re over 500 for the for for the Total Energy News Beat podcast. But similarly with your your conversations. That’s awesome. Check that out again guys. Energy news beat.com. We’ll go ahead and let you guys get out of here though. We appreciate you checking us out here on this gorgeous Tuesday March 19th for Stuart Turley I’m Michael Tanner. We’ll see you tomorrow folks. [00:23:15][0.0][1333.7]

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