LNG

The United States energy outlook for December has forecast lower benchmark Henry Hub natural gas spot prices for the rest of the winter heating season to March 2024 because of higher production and storage levels.

Saudi Arabia, which is buying LNG assets for the first time through Saudi Aramco, said that recent multi-billion dollar agreed acquisitions during October by US oil majors ExxonMobil Corp. and Chevron Corp. for Pioneer Natural Resources and Hess Corp. respectively for combined sums of more than $112 billion in stock proved that hydrocarbons were “here to stay” in the global energy future.

“Exxon and Chevron didn't buy because they want to have stranded assets,” said Saudi Energy Minister Prince Abdulaziz bin Salman at Riyadh's annual Future Investment Initiative (FII) conference and added that the US combinations for oil and gas could not have come at a “better time” for the industry.

The US takeover deals have drawn criticism from environmentalist activists who regard the merger and acquisition activities as undermining ambitious climate change aims that are increasingly costly and are beginning to affect energy security requirements of nations.

Aramco LNG

Saudi Aramco, the world’s largest oil production group, has signed definitive agreements to acquire a strategic minority stake in a company called MidOcean, a unit of Washington DC-based equity fund EIG for $500 million and thus entering the LNG sector initially in Australia.

Prince Abdulaziz said in the Riyadh's speech that the energy transition would require hydrocarbons including petrochemicals which are vital for sectors such as pharmaceuticals and industry manufacturing.

The International Energy Agency (IEA) argued in its World Energy Outlook issued on October 24 that world fossil fuel demand was set to peak by 2030 as more electric cars were being purchased and China's economy was forced to grow more slowly amid changes centred on renewable energy.

The IEA's forecasts run counter to those of the Organization of the Petroleum Exporting Countries (OPEC), which sees oil demand rising long after 2030 and which would require trillions in new oil sector investment.

Saudi Arabia is the world's biggest oil exporter and intends to increase its oil production capacity by 1 million barrels per day to 13 million barrels per day by 2027 to meet increasing global demand.

Future oil demand

“We are investing not to create a stranded asset. Saudi Arabia would not be investing in raising its capacity if there was not sufficient demand for additional production,” he added.

Analysts noted that the US takeovers by ExxonMobil and Chevron have also focused on US shale oil and natural gas assets and have re-evaluated them upwards.

The Chevron and ExxonMobil deals have increased portfolio assets in premier US shale basins like the Bakken in North Dakota and the Permian in Texas

Other assets that will be acquired when the deals are approved include oil and gas blocks in South America and the Gulf of Mexico.

Hess’s Bakken assets added another leading US shale position to Chevron’s DJ basin and Permian basin operations and will further strengthen US domestic energy security.

In ExxonMobil’s case it agreed to pay an 18 percent premium for Pioneer’s prized assets relative to its share price.

The acquisition of Permian acreage by ExxonMobil provides shale oil, natural gas and liquids for the global and US markets as well as growing LNG feed-gas volumes from associated gas.

ConocoPhillips has increased LNG activities in 2022 and outlined plans for the Port Arthur LNG export plant in Texas and other projects like cargo shipments to Germany and discussed its costs for the Qatar North Field expansion.

Permian Basin activity hit an all-time high in March 2022, with more than 900 permits awarded for horizontal drilling for new wells, driven by increasing oil prices and production demand in the basin with abundant associated natural gas.