February 2024, Vol. 251, No. 2

Global News

Global News February 2024

Imperial Oil Foresees Pipeline-Led Production Surge 

Canadian refiner Imperial Oil has forecast 2024 production of between 420,000 and 442,000 boepd, which would be higher than its 2023 guidance. The Canadian Association of Energy Contractors (CAEC) expects companies to drill 8% more wells in 2024 to take advantage of greater access to pipelines.

BofA Global Research expects oil demand to grow by 1.1 MMbpd in 2024, as emerging markets are likely to benefit from a possible end to the U.S. Federal Reserve’s monetary tightening cycle. 

Imperial added that it expects the coming year’s throughput from its downstream operations to be between 385,000 bpd and 400,000 bpd. Additionally, for 2024, the company said it expects capital expenditure of $1.27 billion (C$1.7 billion), same as its forecast for 2023. 

Crude prices have been volatile through 2023 amid supply tightness and economic slowdown concerns, prompting refiners to keep a tight grip on expenditure. 

Venezuela’s PDVSA, Spain’s Repsol to Revive Joint Venture 

Venezuelan state oil company PDVSA and joint venture partner Repsol signed an agreement amending the original terms of a project in the country, aiming to revive its crude and gas output. 

The agreement for production for Petroquiriquire, which includes the fields Quiriquire, Mene Grande and Barua-Motatan, was signed in Caracas by Venezuela’s oil minister Pedro Tellechea and executives from Repsol, Reuters said. 

“We are going to lift production. We have completed the planning of the agreements we are signing. They all have output forecasts and plans for operation expansions,” Tellechea said. 

The changes to the operating agreement were not disclosed at the time the agreement was announced. The United States, in October, temporarily lifted oil sanctions on PDVSA – a move that allowed imports exports and investments until the end of April. 

The joint venture operates in several areas of the country, including the Monagas North region. Its total production has been about 20,000 bpd) of crude and 40 MMcf/d of gas so far this year, according to independent calculations. 

Tellechea said Venezuela continues working to ramp up crude output towards a 1 MMbpd goal. 

PDVSA has a 60% interest in the venture with Repsol claiming the remaining 40%. 

Kinder Morgan Acquires NextEra’s 462-Mile Texas Pipeline System  

Kinder Morgan closed on its $1.815 billion acquisition of NextEra Energy Partners’ STX Midstream assets, including a set of integrated, large-diameter high-pressure natural gas pipeline systems. 

The new infrastructure connects from the Eagle Ford basin to growing Mexico and Gulf Coast markets. The acquisition includes a 90% interest in the NET Mexico pipeline (MGI Enterprises), Eagle Ford Midstream and a 50% interest in Dos Caminos LLC. 

Dos Caminos recently placed in service a 62-mile pipeline connecting HEP’s existing midstream pipeline and facilities in Webb County, Texas to KMI’s new Eagle Ford pipeline, which was placed in service on Nov. 1. The assets have an average contract length of more than over eight years. Approximately 75% of the business is supported by take-or-pay contracts. 

“We are pleased to add these assets to our natural gas portfolio to serve growing LNG, industrial, Mexico export and power generation demand markets on the U.S. Gulf Coast,” said KMI President of Natural Gas Pipelines Sital Mody. “These assets integrate well with our existing South Texas footprint and extend our direct connectivity in the lean area of the Eagle Ford Basin, allowing us to offer LNG customers greater access to desirable low-nitrogen natural gas supply.” 

Tokyo Gas to Acquire Gas Producer Rockcliff for $2.7 Billion 

A unit of Tokyo Gas will buy Texas-based natural gas producer Rockcliff Energy from private equity firm Quantum Energy Partners for $2.7 billion to expand its overseas business, it said. 

Under the deal, TG Natural Resources – 79% owned by Tokyo Gas – will buy all shares in Rockcliff Energy from Quantum Energy Partners.  

The deal comes as part of the Japanese company’s efforts to expand its North American shale gas operations to meet growing demand for natural gas as an energy transition fuel. 

Tokyo Gas, Japan’s biggest city gas supplier, and other utilities are stepping up overseas expansion to counter falling demand in their domestic market. Japan has an ageing population and a declining birthrate, while energy market reform has spurred competition among old-guard utilities. 

With the agreement, TGNR’s natural gas production will quadruple to 1.3 Bcf/d from about 330 MMcfd, making it one of the largest shale gas producers in Texas and Louisiana, according to Tokyo Gas, according to Reuters. 

“We expect our gas production will be more efficient after the acquisition as Rockcliff Energy’s output area is located adjacent to TGNR’s blocks,” Takashi Nakao, senior general manager of global business development at Tokyo Gas, told reporters. 

The production is also close to new LNG export terminals, which are expected to increase demand for natural gas in the future, Nakao said. He added the current plan is to sell all the gas in the U.S. domestic market, though he did not rule out sending it as LNG to Japan at some point. 

Occidental to Acquire Permian Producer CrownRock for $12 Billion 

In a move to expand its holdings in the largest U.S. oilfield, Occidental Petroleum plans to buy Permian basin-focused energy producer CrownRock in a $12 billion cash-and-stock transaction. 

The CrownRock deal, expected to close in the first quarter of 2024, will give Occidental more than 94,000 net acres in the Midland basin of Texas and is expected to boost its Permian production by 170,000 boepd in 2024. Its third-quarter production from the region averaged 588,000 boepd. 

“We found CrownRock to be a strategic fit, giving us the opportunity to build scale in the Midland Basin and positioning us to drive value creation for our shareholders with immediate free cash flow accretion,” said Occidental CEO Vicki Hollub, in a release to the media. 

Investors have been pushing producers to expand their inventories following Exxon Mobil’s $60 billion deal for Pioneer Natural Resources and Chevron’s $53 billion agreement for Hess in October. 

Houston-based Occidental will finance the purchase of privately-held oil and gas producer CrownRock with $9.1 billion of new debt, the issuance of about $1.7 billion of common equity and the assumption of CrownRock’s $1.2 billion of existing debt, the company said. 

“The CrownRock assets are generally perceived to be of high quality, but investors are likely to question the merits of adding leverage to the Occidental balance sheet at this point in the cycle,” Third Bridge analyst Peter McNally told Reuters. 

Occidental had about $18.60 billion in debt as of Sept. 30, according to a company filing, and the CrownRock deal would be its first major acquisition since a widely criticized and debt-laden purchase of rival Anadarko Petroleum in 2019. 

The company plans to reduce its debt principal by at least $4.5 billion in the next 12 months, as it expects $4.5 billion to $6 billion in proceeds from new asset sales.

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