Global Energy Briefing No.181: International Energy Markets and Company Strategies (English/Deutsch)
All you need to know: Global Energy Briefing No 181 (46pp) covers the latest trends in international oil, gas and coal markets, and highlights major energy company news and strategy updates.
Major topics of this edition:
(1) A new CEO for BP (Bernard Looney): Which strategic changes can be expected? We look back at the Dudley era and the challenges ahead for the most “American” supermajor in Europe.
(2) Big Oil or Big Energy? We compare the latest low-carbon investments of oil companies and identify leaders and laggards.
(3) ENI and Equinor: Major strategic steps and missteps
(4) North Sea: Trends in oil/gas ownership
(5) Wind turbine industry: Further steps towards a global oligopoly
(6) Season 4, Episode 11: EDF and Hinkley Point C – The race is on – who can build the most expensive nuclear plant in the world ?
(7) Global oil markets: The latest data, price and market trends. Shale oil trends, OPEC strategy and price outlook.
(8) Global natural gas markets: The latest price and market trends for the European, US gas markets and global LNG.
(9) Global coal markets: Latest trends in global coal prices and market trends.
(10) Electric car markets: The latest numbers for the major EV markets.
Please find more on our newsletter subscription options here, or follow us on Twitter here. The newsletter is available in ENGLISH and in GERMAN. Email to firstname.lastname@example.org to receive a free test copy in English or German (content is identical).
Busy days for Italian oil and gas giant Eni ranging from good to not so good news.
Eni is a second-tier supermajor with 1.9 boe/d oil and gas production and assets worldwide. Three parallel developments have characterized the last few days: new fossil investment, renewable plans and fossil heritage.
Billions for Norway and the Barent Sea: Vår Energi (68.6% ENI-owned) acquires ExxonMobil´s upstream assets in Norway for $4.5 billion. The deal comprises 150.000 boe/d production effectively doubling Eni´s equity production. Eni is now the second-largest oil and gas producer in Norway after state-owned Equinor (Statoil).
ExxonMobil, like other supermajors such as Chevron and ConocoPhillips, is disposing of non-core assets to raise cash and reduce risk. US supermajors are moving capital closer to home to invest in US shale basins, or in global LNG assets.
Eni has entered a far-reaching agreement with global renewables developer MainstreamRP to develop large-scale RE projects in the UK (offshore wind), Asia and Africa. The move mimics similar investments by oil majors.
Eni targets a 1.6GW renewable generation capacity by 2022 and 5 GW by 2025. In the same line: Eni´s JV with General Electric (ArmWind) recently won a 48MW wind auction in Kasachstan.
On a less positive note, Eni´s CEO Descalzi has come under investigation in the Congo and in Italy. Allegedly he did not close that an Eni business partner (Petroservice) is run by his wife. In addition, there are broader allegations of corruption in the Congo. Also, Eni is a defendant in a multi-billion corruption trial in Nigeria. Eni denies any wrongdoing.
High risk has been a familiar and, given the competition with much larger US and British/Dutch peers, almost inevitable concept for Eni (ex Agip) throughout its history: Starting from early groundbreaking arrangements with OPEC countries and Moscow in the 1960s, to high-risk field developments in Kasachstan (Kashagan) and very close links to Libya. Eni has been a dominant player in war-torn Libya since the 1960s producing almost half of its oil and gas. Libya today accounts for 15% of Eni´s total oil/gas production.
Today´s investment in Norway and in low-risk renewable alliances may be seen as a move to counter-balance other high-risk involvements across the globe.
This would be in line with strategies of many of Eni´s peers. Facing a low-price environment in oil and gas markets and fossil divestment demands in Italy, further steps may follow.
Starting today we will regularly report on 100 big energy companies across industries, from oil to gas, wind, solar and batteries: #BigE100 . We will focus on four aspects:
- Company strategies
- Energy transition towards low-carbon solutions
- Shifting value chains across energy industries and beyond
- Capital market indicators (stock performance, investors, benchmarking)
Read short news for free on our twitter account (@energycomment) or here on our website.
Or read systematic news and background analysis, embedded into market and industry developments, in our very affordable, bi-weekly newsletter Global Energy Briefing (English and German version available – subscription details here: newsletter).
All you need to know: Our first newsletter after the summer break, Global Energy Briefing No 180 (32pp) covers the latest trends in international oil, gas and coal markets, including the attack on the oil infrastructure in Saudi Arabia.
We provide a first assessment of the Abqaiq assault and look at the overall oil supply and demand picture. Our second focus is the stubborn weakness of European gas markets and the (related) trends in global LNG markets. Finally, we examine the events in global hard coal markets, China in particular. We conclude with a brief look at the latest surge in European power prices and the downturn in carbon prices.
All you need to know: Our second July newsletter Global Energy Briefing No 179 (32pp) covers the latest trends in international oil, gas and coal markets. We focus on recent oil price movements, OPEC and US shale oil outlook; the second focus is on European gas and global LNG markets as well as the recent coal revival in Asia. We conclude with a look at the latest surge in European carbon prices.
Global Energy Briefing No 178: World Energy Statistics – The Race between Renewable and Fossil Energy
Our early July newsletter Global Energy Briefing (No.178, 14pp) is based on the results of BP´s recent “Statistical Review of World Energy 2019”. The short newsletter presents the most interesting numbers and findings in a limited number of easily comprehensible charts – ideal for presentation or illustration.
Global Energy Briefing No 177: Big Energy Companies – Strategies, Benchmarks, News (deutsch/english)
German + English Edition Available!
Our June newsletter Global Energy Briefing (No.177, 32pp) focuses on our sample of 100 global big energy companies.
Topics are among others:
- Downstream strategies of Western oil majors and NOCs;
- LNG investment news;
- the consolidation of the global wind industry;
- expansion and re-positioning strategies of leading PV cell/module manufacturers;
- transition steps of European utilities;
- latest numbers and trends in global electric car sales;
- the expansion and globalization of large battery makers.
Companies featured in this newsletter:
- Saudi Aramco, OMV, Adnoc, Chevron, Phillips 66, Petrobras, Devon, CNRL, Wintershall DEA, Anadarko, Adani,
- Gazprom, Novatek,
- Xinjiang Goldwind, Siemens Gamesa, Vestas, Suzlon, Ming Yang, SEwind (Shanghai Electric), Brookfield,
- LONGi Solar, URE, GCL Poly,
- Enel, Engie, EDF, Statkraft, Eletrobras, EDP, Iberdrola,
- CATL, SK Innovation, Northvolt
Saudi Aramco is the national oil company of Saudi Arabia and the largest oil producer and oil resource owner of the world. The latest BP Statistical Review of World Energy estimates that the country´s oil resources (2P/50%) are in the region of 290 billion barrels.
Aramco recently published its financial numbers for 2018. They dwarf even the largest Western and Chinese oil majors in some respects:
- Net income 2018: $111.1bn (+46% year on year)
- Revenues 2018: $355.9bn (+35% year on year)
Aramco is clearly an extremely profitable company, thanks to a successful oil cartel (OPEC+) and low costs. Aramco more or less sponsors the entire country single-handedly.
For comparison: ExxonMobil has comparable revenues ($279bn in 2018) but its net income is “just” $31bn before and $21bn after taxes in 2018.
Riyadh was pursuing plans to float a small part of the company in New York or London to raise money. But after lengthy debates about the long-term value of the company and oil resources in general, Riyadh preferred a less complicated way to raise cash through company bonds instead of selling shares.
The capital is needed to diversify and secure future revenues. This happens mainly through downstream integration in petrochemicals and refining in key markets (India, China), and through expanding its natural gas business worldwide.
Sources and more details:
Image: Courtesy Saudi Aramco (Berri Gas Plant)
Read more on this and on related issues in the next edition of our bi-weekly newsletter Global Energy Briefing (more)
An offer by Vestas for a majority stake in leading Indian wind turbine maker Suzlon ended without agreement, media reported. Apparently, the takeover price was the major problem.
Vestas´ package was worth close to $1.1bn for a majority stake in Suzlon. Suzlon´s market cap is just $360m (25bn rupees) today after Suzlon shares falling in Mumbai in the wake of the news.
Suzlon suffers from a heavy debt burden and is working with lenders to find a solution. Over the past years, the largest Indian wind turbine maker had to stop its high-flying global ambitions due to falling turbine prizes and the abrupt collapse of the Indian market. In 2015 it had to sell its German subsidiary (now: Senvion) and left the US market for some time. Suzlon´s market cap sank from 130bn rupees ($1.9bn) in 2015 to just 25bn rupees.
Suzlon´s debt stood at 111bn rupees ($1.6bn) in May 2019. It has defaulted on bond payments as early as 2012 and remained in a debt-restructuring program since. It defaulted again in April on a long-term bank facility repayment obligation. Another foreign-currency, convertible bond ($172m) is due in July this year.
It still has, however, a very strong position in its Indian home market including a strong order book and a 16 GW installed turbine base. This makes the company attractive for Danish turbine giant Vestas who makes another attempt to enter the promising Indian market and to catch up with its global rival Siemens Gamesa.
Vestas is the leading global onshore wind turbine maker with 10.1 GW of new installations and a global market share of 22% in 2018. The Danish giant is followed by China´s Goldwind (6.7 GW), GE (5.0 GW) and Siemens Gamesa (4.1 GW). The quadriga accounted for 57% of all wind turbines deployed last year.
Second and third tier manufacturers have difficulties to stem the investment for new turbine generations for onshore and offshore, strong price competition and global marketing and O&M. They also suffer from stop-and-go policies in their home markets, such as Germany and India.
Further consolidation can be expected. Enercon (Germany), Suzlon (India) and, to some degree, GE (US) and Goldwind (China), mainly rely on their respective home markets but this strategy is under pressure as truly global suppliers like Vestas and Siemens Gamesa are growing faster, have a more diversified portfolio and scale advantages in production.
Sources and more details:
Image: Courtesy Suzlon India
Read more on this and on related issues in the next edition of our bi-weekly newsletter Global Energy Briefing (more)
Italian power giant Enel has announced the sale of Russia´s largest coal plant Reftinskaya (3.8 GW) to leading Siberian power and heat utility Kuzbassenergo, owned by SGC (SUEK), for “at least” RUB21bn (approx. $320m).
Enel is the 2nd largest global utility. It is regarded as the forerunner in the utility world thanks to its fast and successful switch to renewable power in Europe and the Americas, to smart grids and EV infrastructure.
In May 2019, Enel reached its highest market capitalization ever at €58.7bn. It is the largest utility in Europe, ahead of Iberdrola and EDF. Worldwide, the company ranks second only to US-based NextEra (excluding Chinese state-owned conglomerates).
Enel´s CEO Starace recently warned that the EU power sector has reached a “watershed” as cheap renewables will destroy the economic viability of coal production within a decade.
As the outgoing president of Eurelectric, the Europan power industry body, he praised the new-found alliance between the European Commission and the European power sector with both promoting a swift transition to decarbonized power solutions.
In stark contrast to the gloomy appearance of the UK or German power industries, he sees good prospects for the sector in a more and more electrified world.
The IEA concluded in its latest “World Energy Investment 2019” report that utilities focussing on renewables on average show a better financial performance in terms of capital cost (WACC) and returns (ROIC).
Links and Sources:
Picture: Enel power plant in Russia, courtesy Enel.
Our second May newsletter Global Energy Briefing (No 176, 38pp) covers the latest trends in international fossil and renewable markets. From the sell-off in oil and gas markets to the latest EV sales numbers and investment strategies.
Our May newsletter Global Energy Briefing (No.175) covers up-to-date trends in international fossil and renewable markets as well as the latest industry trends.
- a small and independent boutique consultancy in Hamburg/Germany;
- established in 2008 and directed by Dr Steffen Bukold
- services in both ENGLISH and GERMAN (native).
- Strategies in Transition: We track and compare strategies of large energy companies. Our approach is multi-disciplinary and covers all relevant energy industries – from integrated oil & gas companies to utilities, PV module and battery manufacturers.
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Global Energy Briefing:
- Our subscription-based newsletter covers strategies and markets of energy companies across the industries. Focus: Strategies in Transition
- Published since 2009 in German.
- English version available since October 2018.
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