Member Info for romaron

In EV today there was this headline "Shell’s Victory move highlights ‘clear tax incentive’ from EPL investment allowance"

"Shell (LON:SHEL) could have been motivated to move forward with its plans for the Victory gas field by the “clear tax incentive” for such projects included in the UK’s windfall tax, experts say.

The Energy Profits Levy (EPL) provides tax incentives for any new oil and gas projects until the levy sunsets in March 2028, saving a total 91p for every £1 spent when combined with other tax measures.

The windfall tax measures are set to remain in place until March 2028, covering most of the expect eight-year field life of Shell’s Victory plans which were approved last week.

Shell did not disclose the level of its planned investment in the Victory field nor whether it plans to make use of the EPL investment allowance for the project. However, Energy Voice understands the company will continue to pay taxes in line with the UK’s ringfenced fiscal regime for oil and gas."

First sentence. The use of 'could' and 'experts say'. So a possibility followed by unnamed 'experts'. We're just over a month away from the Spring Budget so I'm expecting this kind of leaking to increase. They're trying to put lipstick on a pig and pretend that the EPL will end as projects come to fruition. The only problem with that is that the Labour ideologs may well have different agendas and where will smaller companies get finance?

I don't do it regularly but from time to time I check out the UT and late trades. I treat the UT the same as FX fixing in the bourse in Milan and Rome that used to happen (may still do, it was a long time ago). The basic idea was that one of the things the fix solved was a rate that most were happy with and hard to manipulate. The banks would get orders throughout the day agreeing to buy or sell 'at the fix'. A kinda Libor for FX as they had in deposits.

I think this goes further than the UT and some of the late trades are on the fix basis. Done through a broker a willing buyer and seller agree to deal at the UT later that day. The rate avoids any shenanigans to an extent and do not affect the price during the day. For me the give away is that the rate is the same as the UT and this is happening more frequently. There was 413k UT at 13.00 today. At 17:59 there were 2 trades at 13.00 166,787 and 594,183. The rate is unknown until the fix and they will always be posted after, always Off-book. Probably means little but mildly interesting.

I think that is undeniable Mansardman. It comes back to the AGM reply you asked about. It wasn't really a good question for an AGM at QA. There is probably no straight answer but one could be is that pressure would be put on any company going for complete COP that prevents that option. The minute production drops below a certain level it becomes unviable commercially and this is an area we have been exploiting since 2010. You would be scooped up at a bargain price by an opportunist and AIM is full of them. You would be unable to raise finance in the current markets (death-spiral finance is more a speciality of the likes of Dabvid Lenigas) and the snowball effect means that running a company into the ground is not possible. You can't get off the merry-go-round; yet! It would be suicidal but some of the drivers that make it attractive in theory can arguably still be applied. I'd say we have a scale of our own. It means a major wouldn't BUY in but will consider us for divestment reasons (I've just talked myself out of Equinor coming back into Bressay). When you think about it a merger is unavoidable.

This needs oversight because detail isn't always my strong point. Please challenge the following.

IMO SQZ is Rhum. I even knew about the situation with Rhum back in 2016 and was told by a NS helicopter pilot that he regularly flew over the biggest gas field in the UK that was idle, mothballed or whatever the term was. It was a political freeze with Iranian involvement (when has anything with Iran ever been simple?).

Napoleon said he "would rather have a general who was lucky than one who was good." I'd say Mitch Clegg, the SQZ CEO, is lucky (he may be good too). BP sold the field to SQZ in late 2017. The company was tiny before this deal. A deal was somehow struck with Iran and holders of SQZ won the jackpot. I'd say they took a high-risk bet.

That is more or less the sum knowledge of this company and I was surprised when I looked at the SQZ website. It said Rhum production was 16,300 boe/d first half 2023 production net to SQZ.

They are still reliant largely on Rhum it seems to me. I can see their need for M&A and diversification. We could easily be involved. Perhaps the veil will be slightly parted on the update in 3 weeks time?

Nothing special but EV had an article with Wood Mackenzie's predictions for firms exiting the NS. Their picks were CNOOC first and then these, “Apache, ExxonMobil and KNOC (Dana Petroleum) are also regularly tipped as exit candidates,” said the research firm.

Exxon Mobil, while no longer an operator in the UK, has various North Sea stakes through its Esso JV with Shell.

Apache has decided not to invest in new drilling – infill or exploration – and analysts have already tipped the firm for a sale.

Dana Petroleum, meanwhile, plans to shut down its Western Isles field in March, eight years ahead of its initial plans, while the FPSO heads to the Buchan field redevelopment operated by NEO Energy.

I am just idling but I guess Neo had a chance to buy more of Golden Eagle when Suncor divested and passed. It must put us as favorite if CNOOC will split the parcel of fields valued as high as $3bn. As you can see, I'm bored.

I cannot see any of the above companies changing their minds if they watched the Licensing Bill 2cnd reading yesterday.

Https://www.scottishdailyexpress.co.uk/news/politics/humza-yousaf-slapped-down-energy-31941881

We were discussing Ithaca and any EnQuest link a few weeks ago following the resignation of the CEO of Ithaca. It now looks like this was the reason. Politicians trump CEO's.

Hi Mansardman - I'm afraid I didn't follow it up but it is definitely a question if they have an AGM this year. Of the many options it seems that rinse and repeat with adding end-of-life fields from the majors and running Magnus and Kraken into the ground is the most likely. As it stands any new developments will have to be overseas. This country prefers to import fossil fuels. Smugness and virtue signalling is more important. It's win win win for Labour and the greens. Lower standards of living, higher energy prices (no O&G subsidies) and offshoring carbon.

That the industry and EnQuest is ignored. If the Telegraph reporting had been accurate then we'd have seen a bigger drop. I always use HBR as my pressure valve to cross check with. HBR is far from perfect but a well run company of substance imo.

I read this bit again and it is pure fluff. No wonder the source wouldn't put a name to the piece. "“Shadow energy secretary Ed Miliband and Labour leader Keir Starmer visited Aberdeen in November 2023 for discussions that were praised by leading industry figures. “Unlike the Conservatives, whose own Energy Bill has been criticised by the industry and led to one of their MPs resigning, Labour has an industry-backed plan to deliver energy security for our country.”"

For a start we don't really know what Labour's plans are other than to oppose new drilling licenses. I can't imagine the industry being praised for that. Perhaps instead of generalising they should say who praised them. Even the renewable sector is asking for more. I doubt they were praised by the O&G industry 'figures'.

The Labour idea of the energy industry's future doesn't include O&G.

From IR today:

"We appreciate your ongoing support and would point out that the article published by the Daily Telegraph on 21 January included an inaccurate reference to a potential impact of a ban on new drilling licenses on the Magnus and Kraken fields. As you will know, such a ban on new drilling licenses would have no impact on the cessation of production dates at Magnus and Kraken. These fields have been in production for many years and their ongoing development, including drilling, is covered by existing production licenses. A ban on new drilling licenses would only impact those fields in the UK not yet approved for development.

We are seeking to have this inaccuracy corrected as soon as possible and expect a correction to be published."

At ease.

And Hunt thought he was being clever conflating the two (correctly imo) but now he has to explain why we are not enjoying cheaper bills in BOTH electricity (renewables) and heating (gas). Something not adding up - time for the public to start asking questions.

Hi Dumbly - my reading is that it just heaps pressure on both parties to defend renewables and we all know that the cost defence doesn't exist unless they use Unicorn horn and angel's tears. The term fantasy is beginning to appear along with magic because that is what the claims are. Remember this anniversary - Davos 2023 when Keir Starmer said "“in the UK renewables are 9X cheaper than oil and gas” Link: https://www.cnbc.com/video/2023/01/19/u-k-prime-minister-rishi-sunak-ashould-have-shown-up-at-davosa-labours-starmer-says.html watch at 1:49

Why worry Dumbly? The overall treatment towards the O&G industry is reprehensible and if the likes of Uplift, juststopoil (demonstrating today with the slogan "No More Death Licenses" and Ed Miliband's outright lies about the efficiency and cost of renewables needs challenging. The gloves are off. The public will hear another narrative based on COSTS. They understand costs. My energy bills the last month were through the roof and I have a modern house (1994) with new boilers.

I doubt it robizm. The truth hurts but what he said is more a statement of fact and combined with the statements from Joe Kaeser of Siemens (who are in the other camp) explains energy to politicians who are either green ideologs or simpletons when it comes to understanding the complexities and importance of energy in its various forms and their interdependence.

Note "On Sunday a party spokesman said: “Labour is proud of our close working relationship with the oil and gas industry." Who was the spokesman? They didn't want to be named.

AB has my backing and it does explain better (for me) his response when I asked at an AGM why doesn't the company just run itself into the ground and he replied "it doesn't work that way".

An interesting day ahead. I hope investors here have been firing off letters and emails to their constituency MPs and others.

Some great info there Modestus. The ST had something similar under editorial comment. Long article but this is a taste:

"Labour has more ambitious net-zero policies than the Tories. Its flag ship idea - at least until recently - was to spend £28 billion a year on renewable energy. It wants to decarbonise the electricity network by 2030 - an unfunded pledge that would cost hundreds of billions of pounds - and has vowed to ban new North Sea oil and gas development if elected. There would be many more Port Talbots on such a journey."

This looks coordinated and AB's intervention is the strongest and most detailed I have seen by any O&G CEO. It also might explain why we have been uninvestable since EPL. Then there is the fact that there are 200,000 jobs at risk in the NS. That's an estimated 70 Port Talbots and £50bn revenue down the swanee.

Throw in the fact that Desantis has dropped out of the presidential race and Biden has bet large on the IRA which doesn't chime with the US love of cheap gas. Even more so in election year.

I've noticed that Ed Miliband has been noticeable by his absence of late and I wouldn't be surprised of a reshuffle there if the fight-back continues.

I'm incentivised by this weekend. The climate emperor really does have NO clothes.

Hi M - tomorrow is the second reading of the Offshore Licensing Bill. I'll try and follow it. There isn't a lot in the media about fossil fuels other than the occasional predictable outburst from Uplift and juststopoil etc.. over some engineered outrage based on wild opinion (there's almost always an absence of fact, data and cost). In fact juststopoil is becoming increasingly irrelevant and trying to conflate themselves somehow into the Palestinian situation. The reason is the politicians are beginning to see that attacking fossil fuels and promoting renewables isn't the vote winner they thought.

There was a hint in AB's Davos interview when he said there was some signs of mitigation from the government to arrest the decline in investment. I doubt they'll do anything between now and the Spring Budget on 6 March. A faint chance of some encouragement then?

I was intrigued by a recent post of yours saying that Canadian oilies were having a tough time. That surprises me against the success of US producers. I have a weak theory that the US don't really understand husbandry of resources and 'drill baby drill' isn't only a Trump mantra. They'll run out of shale O&G as quickly as the gold did in the Californian Gold Rush. There is an air of phoney-war about energy but the US can afford to be frivolous as they have a handy reserve supply on their Northern border.

The only good news I have is that renewables are mentioned less and less and it is becoming accepted that they are not cheaper then fossil fuels. The shutting down of Port Talbot steel making is accepted to be a mixture of pollution and HIGH energy costs. The greens have a problem in that the residents weren't complaining of the pollution and it really is the Left and Green ideologs doing it to them for the benefit of local residents. That'll go down well in the Red Wall constituencies.

The problem with O&G is that it wasn't losing money or requiring government subsidy (unlike steel and renewables). Energy bills are NOT getting cheaper as promised.

You can't fool people ALL of the time.

I'm just throwing ideas around Juan. Port Talbot to lose 2,800 jobs directly and many more as collateral damage but UK CO2 figures look better and it is a win for the greens. The government and Labour are being worked into a corner. We'll import steel in the interim from coal powered furnaces overseas before we rely on the more expensive electric arc furnaces. Labour used to be supportive and friendly towards the workers - but then, many old Labour MPs were once workers themselves. The Unions won't be happy.

I hope the public see that O&G is next but at a terrible economic price and goodbye to Energy Security. I wonder how they'll explain away LNG when it is double the price it is now and with limited supply. Oh how I wish I was born Norwegian.

*Be interested to see how quickly Biden folds if G&R are correct (16:23).

I don't think they will go ahead without a guarantee from the Tories and a MoU from Labour. We are reaching a stage where the politicians need us more than we need them. A further deterioration in conflict zones and stubborn electricity bills will put the pressure on them. We [EnQuest] will be left with NO UK future but an upfront abundance of cash as we run whats left of the UKCS production into the ground.

AB uses it quite often and I prefer the levelling ability of water in a bucket. Oil and gas are cheaper for a variety of reasons throughout the world and interchangeable. 7 gas for 1 oil is a good rule of thumb. Eventually they reach a level but when they go too far out are brought back; eventually. I receive guff from Goerhing & Rozencwajg that I've been ignoring lately because they have remained over-bullish (although that can be a comfort blanket). In today's missive they wrote this: "Henry Hub gas costs $3.00 per mcf while European and Asian gas is $14 and $16.50 respectively." This has been going on for a decade and is due to the abundance of shale gas. 60-80% cheaper is a massive advantage. This is about to END (Art Berman has been saying for some time). Exxon overpaid for XTO by 4X and wrote off half the price ($20bn). The reason is the excessive declines in shale-plays, including Permian. It means that there will be a convergence (process of fungibility) and US gas will quickly rise from $3 towards $9-12. A structural deficit in US NG for the first time in 20 years. They even suggest that Biden may issue an executive order to limit exports to lower (or keep low) domestic US prices. G&R expect this convergence to happen THIS year! Over the next twelve months US gas prices could rise by as much as four-fold. This can do nothing but firm the demand for oil and deepen the base case. Gas & oil are intertwined and even our politicians can't unwind it!

Source: The Great Convergence: North American Natural Gas and the Looming Shift in Global Energy Economics

01/19/2024

Fill yer' boots at these levels

I'm assuming EDP = early production solution.

Enquest RNS - Steve Bowyer, GM North Sea for EnQuest said, "We continue to progress the development of the wider Kraken area, including a Bressay gas tie-back solution to reduce Kraken emissions, as well as an early production solution project at Bressay. We look forward to working with Rockrose, Waldorf (our Kraken JV partner) and the NSTA to move the project forward."

Viaro news - has signed a Sales and Purchase Agreement (“SPA”) with EnQuest to acquire a 15% interest in the Bressay field and its EnQuest Producer FPSO for a total consideration of £46 million. The early production facility development under review has capital expenditure estimated at £600 million, with £90 million being RockRose’s net share.

I was rereading to see if the EP might have been for another project but it appears it is definitely for Bressay. The terminology "early production facility development" interests me. Back in 2015 I asked Neil McCulloch about the claimed $35 b/e by Excite management for Bentley (Kraken was $50 b/e). It elicited this reply from my notes "he didn’t scoff but thought that possibly it was using an Early Development Plan (EDP) which is a short term (cheap) plan and not suitable for the lifetime (kinda throws a spanner in the works of the “do it like a major” quote by Xcite for Bentley."

Now here's my best guess. They are going to progress Bressay to FDP and I suspect both political parties would like to see some positives on Energy Security and keeping industry alive after the unfolding disappearance of jobs in Port Talbot. There is little unknown risk in developing a field (imo) but plenty of political uncertainty. There will be NO real change in the attitude of either party regarding the UKCS as deep down both know its strategic importance and the irreplaceable utility of fossil fuels in many situations. We have a partner for 15%. Get another in for 15% and you're talking. With the equivocation and mixed messages from authorities why would you spend big bucks anyway? I also suspect that Waldorf would love to be part of it but unlikely as they would struggle financially. I wouldn't be surprised to see Equinor involvement either and suspect they might have first refusal rights.

I think Bressay is nearer than people think.