Glimpses of the 23 WPC 2021 in Houston

The 23rd World Petroleum Congress (WPC) – widely regarded as the oil and gas industry's most prestigious and high profile global event – returned to Houston, Texas, US this week. It's taking place from December 5-9, 2021. Often described as the "Olympics" of the energy business, the World Petroleum Congress has been held since 1933 when London hosted its first round. 

From 1991 onward, the event has gone on to be held every three years. After a COVID-19 enforced delay in 2020, which pushed the event forward by a year to December 2021, Houston hosted the event for a second time, having previously hosted the 12th WPC in 1987. This blogger is privileged to be here and delighted to bring you some glimpses of this prestigious event. 

The 23rd World Petroleum Congress (23 WPC) floor in Houston, Texas, US

The 1.8m sq ft George R. Brown Convention Center in downtown Houston is the venue of 23 WPC 

Exhibition floor of the 23 WPC

ExxonMobil's stand at the 23 WPC exhibition

NASA's Space Exploration Vehicle on display at the 23 WPC

Sonya Savage, Minister of Energy of Alberta, Canada (left) calls for an honest conversation on the need for oil & gas as the world transitions to a low carbon economy

Boston Dynamics' RoboDog 'Spot' vows visitors at the 23 WPC

It is all about keeping the youth interested & having viable STEM pathways to avert a talent gap crisis in the oil & gas business, as deliberated by this panel

Saudi Aramco CEO Amin Nasser (right) visits the 23 WPC exhibition floor

© Gaurav Sharma 2021. Photo © Gaurav Sharma, December 2021.

Joining Citi Private Bank

Some personal news: After 16 years of scrutinizing #oil, #energy markets, felt I needed a change. Delighted to accept such an opportunity @Citi Private Bank at VP-level. I remain a 'crude' man but broadening analytical scope to EMs, circular economy, impact investing & more #OOTT

— Gaurav Sharma (@The_Oilholic) August 11, 2020

It has been a fantastic 'crude' journey for the Oilholic in the energy market and this blog has been with yours truly every step of the way for over a decade. Thank you all for your support. While long may that continue, commentary here would be a little tempered and slightly irregular as this blogger has taken up a Vice President / Lead Analyst's position at Citi Private Bank. 

Things won't be coming to a close here, but whatever appears on this blog would be in a private capacity only. That also applies to any commentary published here in the past prior to Aug 1, 2020. That's all for the moment folks! Keep reading, keep it 'crude'!

© Gaurav Sharma 2020.

Ten years of 'crude' blogging & a big thank you!

Its a day to say thanks and feel a tad nostalgic, as the Oilholic woke up this Christmas eve morning to the realization that today marks 10 years of this oil and gas market blog's appearance on cyberspace!

Boy does time fly! When yours took this blog live and put his first post up on December 24, 2009, Barack Obama had been in the White House for less than a year; Gordon Brown was still in Downing Street; the global economy was limping back from the financial crisis; the US shale revolution's impact hadn't been felt; OPEC had held its latest minister's meeting in Luanda, Angola instead of its secretariat in Vienna, Austria; and Brent and WTI futures closed at $76.31 and $78.05 per barrel respectively, with a premium in the latter's favour! That's a 10-year decline of $9.84 (-12.9%) for Brent and $17.5 (-22.42%) for WTI versus this European morning's prices in Asia.  

Back then, all this blog had was a handful of readers comprising of mutual acquaintances in the trading community who had been providing tips and invaluable feedback since 2007, when yours truly was working on concepts, and a trail site/domain. The subsequent blogging journey began on Christmas eve of 2009 when the Oilholic registered the www.oilholicssynonymous.com domain, and it has been quite a ride, and more, ever since. 

The blog underwent a complete template overhaul in 2011 as the readership started gaining traction. Well past its millionth pageview, it currently averages 12,000 reads a month. 

Well above average readership points are often brought about by posts on energy sector developments and events such as IPWeek, CERAWeek, OPEC and ADIPEC, where this blogger often takes speaking engagements at, resulting in monthly pageviews jumping above 100,000 reads a month. 

As in previous years, bulk of the readers who browse and read this blog in 2019 have come from the US, UK, Norway, Germany and China in that order, with American and British readers leading the pack by some distance. 

Many have logged in from some 127 countries week in, week out. So a massive thank you to all of you because without your readership, feedback and support this blog wouldn't be here. Alongside regular readers who find this blog via established routes, analytics also reveal the impact of Google, where many of you find your way to the Oilholic alongside LinkedIn, Twitter and Forbes.

What this blog has been about over the last 10 years is what it will be about in the future, carrying the Oilholic's analysis, thoughts, rants, musings and social media flags, about past events, developments and emerging scenarios in the sector, and the comments of fellow market experts one is able to interact with. 

It'll also continue to complement the Oilholic's analysis and media career, speaking circuit engagements, serve as a published clippings portfolio hub, broadcast commentary, work undertaken over the last 20 years (and counting), some favourite photographs and a selection of book reviews.

As the years go by, here's hoping this blog is (and will be) as much fun for those reading it as it is for the one writing it. So keep reading, keep it 'crude' and once again thank you for all your support.

To follow The Oilholic on Twitter click here.

To follow The Oilholic on Forbes click here.

To email: gaurav.sharma@oilholicssynonymous.com

© Gaurav Sharma 2019. Photo: Screenshot of Oilholics Synonymous Report's homepage in 2010 © Gaurav Sharma.

On finite resources and China’s urges

We constantly debate about the world’s finite and fast depleting natural resources; that everything from fossil fuel to farmable acreage is in short supply. Some often take the line that the quest for mineral wealth would be a fight to the death. Others, like academic Dambisa Moyo take a more pragmatic line on resource scarcity and rationally analyse what is at stake as she has done in her latest book Winner Take All: China’s race for resources and what it means for us.

That the Chinese are in town for more than just a slice of the natural resources cake is well documented. Yet, instead of crying ‘wolf’, Moyo sequentially dissects and offers highly readable conjecture on how China is leading the global race for natural resources be it via their national oil companies, mergers, asset acquisitions, lobbying or political leverage on an international scale.

While cleverly watching out for their interests, the author explains, in this book of just over 250 pages split by two parts containing 10 chapters, that the Chinese are neck-deep in a global resources rush but not necessarily the causative agents of perceived resource scarcity.

However, that they are the dominant players in a high stakes hunt for commodities from Africa to Latin America is unmistakable. For good measure and as to be expected of a book of this nature, the author has examined a variety of tangents hurled around in a resource security debate. The Dutch disease, geopolitics, risk premium in commodities prices, resource curse hypothesis have all been visited versus the Chinese quest by Moyo.

The Oilholic found her arguments on the subject to be neither alarmist nor populist. Rather, she has done something commendable which is examine how we got to this point in the resources debate, the operations of commodity markets and the geopolitical shifts we have seen rather than sensationalise the subject matter. China, the author opines may be leading the race for resources, but is by no means the only hungry horse in town.

Overall, it is a very decent book and well worth reading given its relevance and currency in today’s world. The Oilholic would be happy recommend it to commodities traders, those interested in international affairs, geopolitics, financial news and resource economics. Finally, those who have made a career out of future projections would find it very well worth their while to absorb it from cover to cover.

To follow The Oilholic on Twitter click here. 

© Gaurav Sharma 2013. Photo: Front cover - Winner Take All © Allen Lane / Penguin Group UK.

In the Realm of Crude “What Ifs”

Last time I checked the ICE Brent forward month futures contract was trading at US$110.46 per barrel up US$4.68 or 4.43% in intraday trading (click on chart to enlarge). It is my considered belief, since fundamentals do not support such a high price at this moment in time that there is at least US$10 worth of instability premium factored in to the price.

Given the number of “what if” analysts doing the rounds of the TV stations today, it is worth noting with the Libyan situation that not only are supply concerns propping up the price but the type of crude that the country supplies is also having an impact. I feel it is the latter point which is reflected more in the crude price than supply disruption. Light sweet crude is the most cost effective variety to refine and while Libyan crude is not as good as American light sweet crude, it is still of a very good quality relative to its OPEC peers.

Now, if exporters such as Saudi Arabia talk of making up the short supply, not all of the Libyan export shortfall can be compensated for with a type of crude the country exports. This is what the speculators are factoring in, though it is worth stating the obvious that Libya is the world 12th largest exporter of crude.

Furthermore, the age-old “what if” question is also hounding trading sentiment, i.e. “What if the house of Saud collapses and there is a supply disruption to the Saudi output?” The question is not new and has been around for decades. Problem is that a lot of the “what ifs” in Middle East and North Africa have turned to reality in recent weeks. If the House of Saud were to fall, it will be a geopolitical impact on crude markets of a magnitude that we have not seen since the Arab oil embargo.

Elsewhere at the International Petroleum Week, advisory firm Deloitte revealed its second full year ranking of UK upstream independent oil companies by market capitalisation. The top three are Tullow, Cairn and Premier Oil in that order, a result similar to end-2009. Tullow’s strength in Ghana helped it to maintain top spot in the sector. Its £11 billion market capitalisation is more than twice the valuation of its closest rival Cairn Energy, which in turn is more than twice the size of third placed Premier Oil. (Click on table below to enlarge)

Cairn continues to excite after agreeing to sell its Indian interests to Vedanta last year and concentrating on Arctic exploration. However, its drilling off the coast of Greenland has yet to yield anything ‘crudely’ meaningful. Another noteworthy point is the entry of Rockhopper Exploration, which is prospecting for crude off the coast of the Falkland Islands, into the top ten at 9th (up from 26th at end-2009).

“We have seen a great deal of volatility in the ranking showing the transformational growth achievable through exploration success. Overall, 2010 was a year of recovery for the UK upstream independent oil and gas sector, with rising oil prices and greater access to capital improving investor sentiment in the sector,” says Ian Sperling-Tyler, associate partner of energy transaction services at Deloitte.

“The improved environment was reflected in a 28% increase in the market capitalisation of the 25 biggest companies in the sector from £25.3 billion to £32.2 billion. In contrast, the FTSE 100 posted a 9% gain,” he adds.

Moving away from UK independent upstarts to a British major’s deal with an Indian behemoth. Following the BP/Reliance Industries Limited (RIL) announcement about a joint venture, ratings agency Moody's has changed the outlook of the Baa2 local currency issuer rating of RIL from stable to positive. RIL's foreign currency issuer and debt ratings remain unchanged at Baa2 with a stable outlook, as these are constrained by India's sovereign foreign currency ceiling of Baa2.

The rating action follows the company's recent announcement of a transformational partnership agreement with BP that will see the British major take a 30% stake in RIL's 23 Indian oil and gas blocks, including the substantial KG D6 gas field, for an initial consideration of US$ 7.2 billion plus further performance related payments of up to US$ 1.8 billion.

Philipp Lotter, a Senior Vice President at Moody's in Singapore believes the partnership agreement has generally positive credit implications for RIL, both operationally and financially. "The decision to bring on board BP in support of India's domestic gas market development will benefit RIL from BP's deep-water drilling expertise, as well as allow it to share risks and costs of future exploration and infrastructure projects, thus significantly de-risking its upstream exposure," he adds.

However, according to Moody's it is worth noting that the outlook could revert back to stable, if RIL undertakes transformational debt-funded acquisitions, or allocates material liquidity to finance growth that entails higher business risk. A deterioration of retained cash flow to debt below 30% is also likely to reverse any upward rating pressure.

© Gaurav Sharma 2011. Graphics 1: Brent crude oil chart © Digital Look/BBC Feb 23, 2011, Graphics 2: Leading UK independent oil companies © Deloitte LLP

ETFs, Brent's Strength & ExxonMobil's Russian Deal

There seem to be more backers of the theory that Brent is winning the crude battle of the indices. I certainly believe Brent provides a much better picture of the global oil markets over WTI. Back in May 2010, I blogged that David Peniket, President and COO of Intercontinental Exchange (ICE) Futures Europe, gave Brent his backing. SocGen joined the ever-growing chorus last week. In a note to clients, the French banking major noted that Brent is a much better barometer of the global oil markets, where both crude and product demand have been strong.

Regarding premium between Brent and WTI, SocGen analysts note: “First, preliminary Euroilstock data showed a 4.2 Mb crude stockdraw in December. When this month-on-month per cent change is applied to the end-November OECD Europe crude stock figures from the IEA, the result in end-December European crude stocks that are below average; this is in sharp contrast to the near-record high stocks at Cushing.”

Additionally, oil field technical problems have caused some supply losses in the North Sea and planned pipeline maintenance at the Gullfaks field, in Norway, was also announced last weekend. Moving away from the North Sea, news has emerged that Roseneft and ExxonMobil have penned a deal for oil and gas exploration in the Black Sea, though intricacies and value of the deal is as yet unknown.

Finally, SocGen’s Mutual Fund & ETF report published last week makes for interesting reading; a sort of a continuation of trends noted by the wider market in general. It notes that the commodity rally was supported by US$23 billion inflows in 2010 (click on graphics to enlarge). Over the past 6 months, the rally in commodity prices has been significant (CRB index +27%) and directly associated with the expected pick-up in demand, but reallocation to protect against inflation has clearly played a role as well.

However, SocGen observed that Precious metals, and not energy, dominated commodity inflows. Precious metals were by far the largest category in commodity ETPs (including ETFs, ETCs and ETNs) accounting for 76% of US$157 billion assets under management and they continue to attract most of the inflows.

© Gaurav Sharma 2011. Graphics © SGCIB Cross Asset Research, Jan 19, 2011

Of IEA, OPEC and the Hoo-Hah over BP & Rosneft

Both the IEA and OPEC are now more upbeat about the global economic recovery over 2011, which could mean only one thing – an upward revision of global crude oil demand. Starting with the IEA, the agency says it now expects global crude demand to rise by 1.4 million barrels a day in year over year terms over 2011 to 89.1 million barrels per day; a revision of 360,000 barrels per day compared to its last forecast.

OPEC also revised its global oil demand forecast putting demand growth at 1.2 million barrels a day for the year; an upward revision of 50,000 barrels per day from its last estimate. In its monthly report, the cartel also noted that demand for its own crude is expected to average 29.4 million barrels of oil per day in 2011; an upward revision of 200,000 barrels over the previous forecast.

Both OPEC and IEA expect the increase in crude oil demand to be driven entirely by emerging markets, while OECD demand is projected to reverse to its "underlying, structural decline in 2011," according to the latter. Their respective response to the forecasts is one of understandable contrasts.

Nobuo Tanaka, head of the IEA, said a subsequent "alarming" rise in the oil price would be damaging. "We are concerned about the speed of the rising oil price, which can harm the growth of economies. If the current price continues, it will have a negative impact," he added. However, OPEC remains unmoved, as the forward month futures spread between Brent and WTI crude continues to widen to US$5-plus in favour of the latter. Both benchmarks lurk close to the US$100-mark.

OPEC’s position unsurprisingly is that the market remains well supplied. Cartel members UAE, Iran, Venezuela and Algeria say they are not concerned about a US$100 per barrel price. In fact, Venezuela's Energy Minister, Rafael Ramirez, described the price of $100 as "fair value" while speaking to the Reuters news agency. There are no prizes for guessing that an emergency meeting of the cartel to raise production is highly unlikely!

Now to the BP-Rosneft tie-up which sent the markets into a tizzy. In a nutshell, news of BP’s acquisition of a 9.5% stake in Rosneft which in turn would bag a 5% stake in BP was good, but it did not quite merit the response it got. Markets cheered it; environmentalists jeered it (given the open invitation to dig in the Arctic).

Rest of the narrative is a bit barmy. First of all, agreed it is a solid deal but given the involvement of a company 75% owned by the Russian government – I am unsure how it would be instrumental or for that matter detrimental to the UK’s petroleum security. Surely, the jury should still be out on that one. Secondly, this in no way implies that BP has turned its back on the US market in light of recent events as some market commentators have opined.

Finally, it is more of a marriage of convenience rather than a historic deal. Rosneft needed technical expertise and does not care much for political rhetoric in western markets about digging deeper and deeper for crude. BP needs access to resources. Both parties should be happy and it is rumoured in the Russian press that TNK-BP would also like a slice of the potentially lucrative Arctic ice cake. Away from the main event, the sideshow was just as engaging.

Curiously city sources revealed that BP did not use its preferred broker JPMorgan Cazenove, but rather opted to go with London-based Lambert Energy Advisory. It did amuse some in the City. All I can say is good luck to Philip Lambert. Finally, talking of the little guys in this crude world – have you heard of AIM-listed Matra Petroleum?

Last I checked, this independent upstart expects to be producing a rather modest 600-700 barrels per day by H1 2011 and its share price is around 3.52p. So assuming, Brent caps US$100-plus by end of H1 2011 and Matra delivers – the share price could treble in theory. I am not making a recommendation – let’s call it an observation!

© Gaurav Sharma 2011. Photo © Adrian R. Gableson

Final Notes of Crude Year 2010

Recapping the last fortnight, I noted some pretty interesting market chatter in the run-up to the end of the year. Crude talk cannot be complete without a discussion on the economic recovery and market conjecture is that it remains on track.

In its latest quarterly Global Economic Outlook (GEO) Dec. edition, Fitch Ratings recently noted that despite significant financial market volatility, the global economic recovery is proceeding in line with its expectations, largely due to accommodative policy support in developed markets and continued emerging-market dynamism.

In the GEO, Fitch has marginally revised up its projections for world growth to 3.4% for 2010 (from 3.2%), 3.0% for 2011 (from 2.9%), and 3.3% for 2012 (from 3.0%) compared to the October edition of the GEO. Emerging markets continue to outperform expectations and Fitch has raised its 2010 forecasts for China, Brazil, and India due to still buoyant economic growth. However, the agency has revised down its Russian forecast as the pace of recovery proved weak, partly as a result of the severe drought and heatwave in the summer.

Fitch forecasts growth of 8.4% for these four countries (the BRICs) in 2010, and 7.4% for each of 2011 and 2012. While there are ancillary factors, there is ample evidence that crude prices are responding to positive chatter. Before uncorking something alcoholic to usher in the New Year, the oilholic noted that either side of the pond, the forward month crude futures contract capped US$90 per barrel for the first time in two years. Even the OPEC basket was US$90-plus.

Most analysts expect Brent to end 2012 at around US$105-110 a barrel and some are predicting higher prices. The city clearly feels a US$15-20 appreciation from end-2010 prices is not unrealistic.

Moving away from prices, in a report published on December 15th, Moody's changed its Oilfield Services Outlook to positive from stable reflecting higher earnings expectations for most oilfield services and land drilling companies in 2011.

However, the report also notes that the oilfield services sector remains exposed to significant declines in oil and natural gas prices, as well as heightened US regulatory scrutiny of hydraulic fracturing and onshore drilling activity, which could push costs higher and limit the pace and scale of E&P capital investment.

Peter Speer, the agency’s Senior Credit Officer, makes a noteworthy comment. He opines that although natural gas drilling is likely to decline moderately in 2011, many E&Ps will probably keep drilling despite the weak economics to retain their leases or avoid steep production declines. Any declines in gas-directed drilling are likely to be offset by oil drilling, leading to a higher US rig count in 2011.

However, Speer notes that offshore drillers and related logistics service providers pose a notable exception to these positive trends. "We expect many of these companies to experience further earnings declines in 2011, as the U.S. develops new regulatory requirements and permitting processes following the Macondo accident in April 2010, and as activity slowly increases in this large offshore market," he concludes.

Couldn’t possibly have ended the last post for the year without mentioning Macondo; BP’s asset sale by total valuation in the aftermath of the incident has risen to US$20 billion plus and rising. Sadly, Macondo will be the defining image of crude year 2010.

© Gaurav Sharma 2010. Photo: Oil Rig © Cairn Energy Plc