A COP28 Carol
In Charles Dickens’s A Christmas Carol, Ebenezer Scrooge has a chance at redemption. After a chilling visit from the ghost of his former business partner, Jacob Marley, who wanders through the afterlife in chains—punishment for the greed and avarice that characterized his adult life and business dealings—Ebenezer is visited by three spirits, the ghosts of Christmas past, present, and future. His response to these spirits will determine whether he too is condemned like Marley.
The ghost of Christmas past shows Scrooge in more innocent times—as an apprentice to a kind merchant and romantically involved with Belle, who leaves him because his desire for wealth eclipses his ability to love another person. The ghost of Christmas present shows him what he could experience in the here and now if only he opened his heart to relationship with others—a joyous holiday party, gratitude for simple things, kindness to others that is a gift to their soul, and his own. The ghost of Christmas future shows Scrooge the grim reality of his legacy should he choose not to mend his ways. It is this final, frightening vision that triggers Ebenezer’s redemption and the opening of his heart to a full, rewarding, generous life for himself and others.
Would that the grandees, grifters, activists, and angst-ridden attendees of COP28 be so lucky. As they wring their hands and wait, like ancient Hellenes staring at the sky for portents of Zeus’s mood, on news of fossil-fuel phase-outs and 1.5C commitments, one wishes them to be visited by a ghost of energy future who could show them the dark reality they wish for, and, ultimately, a way to avoid it. An activist I follow on Instagram just posted that 2000, pardon me, 2000 plus investors, NGOs, health professionals, scientists, academics, youth, faith leaders, and more are all expecting a historic and unprecedented outcome at COP28. Well, if well over 2000 expect it, then it has to happen, right? What about the other eight billion of us? Do we get a vote? We do.
Just as all the choices, freely taken every second of every day, by the members of a free-market society determine prices and allocate resources far more efficiently than any effort at central planning, so do our everyday choices indicate our energy preferences. Millions upon millions of us vote every day by flicking a light switch and taking it for granted that the lights will turn on. We vote by adjusting the thermostats in our homes and expecting that they warm or cool accordingly. We vote by turning a knob on a stovetop and waiting just a second—click, click, click—for a spark to ignite a cheery blue flame. We vote with our menu choices—beef not bugs. We vote by pulling up to gas stations or charging stations and replenishing our vehicles with fuel or electricity that is readily available and readily affordable. For most citizens in wealthy countries these features of modern life are non-negotiable. They are not to be given up. An economist would say the demand is inelastic.
Citizens of poorer countries want these choices as well. And they want these actual choices, not po-boy green choices like a solar array installed by Greenpeace that won’t run a refrigerator or a television when it’s sunny, and won’t run anything when it’s overcast or raining. Politicians who preach privation and austerity in the name of fixing the weather, and deliver on it, don’t stay elected. Once again, we vote. Listening to the local news today I heard the late-afternoon news anchors gush that 67% of U.S. adults approve of the President’s plan to combat climate change. Those adults may answer a cleverly worded poll question in a way that gives an interpreter latitude to report a particular result, but they act differently than they answer.
The delegates of COP28 are not interested in acknowledging the energy preferences of the billions they purport to represent. But there is a segment of society that listens to those billions. That segment is the oil and gas business.
Our little oil and gas company maintains a subscription with a company called Enverus. Enverus provides industry intelligence, technical data, and expertise to help oil and gas companies in all aspects of their business—merger and acquisition activity, exploration and production, basin and play evaluation, competitor analysis, portfolio management, and market data and analysis. Two of the industry intelligence newletters they publish weekly are titled “The Week in Exploration and Production (E&P),” and “Pulse Report.” Here are some headlines and quotes from this week’s newsletters.
Nearly four years after shut-in, Terra Nova comes back to life: Suncor has finally resumed production from Terra Nova field off Eastern Canada after completing a long-delayed life extension project … The project is expected to extend its producing life by 10 years and unlock 70 MMbo of additional recoverable resources.
Federal court clears the way for Conoco’s Willow development: A federal court upheld regulators’ approval of ConocoPhillips’ Willow oil development in the National Petroleum Reserve in Alaska … Willow will be developed utilizing three pads, rather than the five originally proposed. A central processing facility will be capable of handling 180,000 bo/d and 250 MMcf/d.
Oxy takes its turn in M&A bonanza with $12B CrownRock buy: Oxy expects the acreage to produce 170,000 boe/d (85% liquids) in 2024 and provide 1,700 drilling locations, of which 750 have breakevens below $40/bbl WTI and another 500 have breakevens below $60/bbl WTI.
Exxon plans to more than double earnings over 8-year period: ExxonMobil plans to increase annual earnings and cash flow by $14 billion from YE23 through YE27, following $10 billion in such growth since 2019. During the next four years, the company aims to reduce structural costs and improve its business mix by growing production from low-cost-of-supply, advantaged assets and increasing sales of high-value performance chemicals, lower-emission fuels, and performance lubricants.
Chevron capex to increase about 14% YOY in 2024, for starters: A $15.5-16.5 billion Chevron budget for 2024 will include $14 billion of upstream spending, roughly equivalent proportionately to the $11.5 billion allocation in the U.S. supermajor’s smaller 2023 spending total of $14 billion.
Suncor to grow output 7% in 2024 on consolidation & upgrades: Oil sands major Suncor Energy said it would lift production 7% to 770,000-810,000 bbl/d next year on strong performance at its Fort Hills open pit bitumen mine.
First oil from Talos’ Venice and Lime Rock accelerated to YE23: Gulf of Mexico operator Talos Energy anticipates reaching first production ahead of schedule for its Venice and Lime Rock discoveries in the Viosca Knoll area. Volumes will come online by year’s end rather than in early 2024 as previously planned. The two discoveries, tied back to Talos’ wholly owned Ram Powell facility, are projected to deliver an initial rate of 15,000-20,000 boe/d and bring Ram Powell throughput to levels not seen in 15 years. Venice and Lime Rock are estimated to hold gross resources of 20-30 MMboe (40% oil).
And here’s a few from the international front:
Chevron and Cyprus agree on FPU for giant Aphrodite: The Cypriot Minister of Energy and Chevron appear to have reached an agreement on the future development of the Aphrodite gas field on Block 12. Enverus understands that the development is to proceed under the previously agreed field development plan, which includes a floating production unit, rather than Chevron’s most recent plan to tie the field back to existing infrastructure offshore Egypt.
Australian junior planning offshore Namibian wildcat: Pancontinental Energy is exploring the possibility to drill a new-field wildcat (NFW) on its ultra-deepwater PEL 87 (2713) license. The well would likely target the Saturn turbidite complex prospect and its margins, which lie around 250 km north of the Venus oil and gas discovery.
Eni spuds Omani frontier NFW: Eni is understood to have spudded the Jawhar 1 NFW on the Block 52 (Juzor Al Hallaniyyat) concession in the Arabian Sea, with Northern Offshore's Energy Emerger jack-up, which has been on location since Nov. 27. It is the company's second exploration well on the frontier acreage.
Clearly, the oil and gas business is betting on the eight billion people, rich and poor alike, who aren’t at COP28 right now.
Breaking news! The text of the consensus declaration of COP28 calls for "transitioning away from fossil fuels in energy systems, in a just, orderly and equitable manner ... so as to achieve net zero by 2050 in keeping with the science." These declarations are like watching Lucy hold the football for Charlie Brown. Year after year after year Charlie Brown convinces himself that now is the time he’s going to actually kick the football. And every year Lucy pulls it out of his path. “Aaaugh!”
In early November, 1942, Winston Churchill gave one of his most famous war-time speeches. The occasion was a Lord Mayor’s Day luncheon, and the inspiration was the British victory at the second battle of El Alamein in Egypt. Though Churchill could not have known for certain at the time, this was a turning point in the war, and his famous line makes clear that is his hope:
Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.
In the immediate aftermath of COP28, even in the face of pundits around the world declaring the age of fossil fuel is over, our daily choices, expectations, and aspirations have me thinking the state of the oil and gas (and coal) business is just as Winston said. It is, perhaps, the end of the beginning.