FTC flexes muscles over US oil mergers
US antitrust regulator the Federal Trade Commission's insistence that the former chief executive of independent Pioneer Natural Resources, Scott Sheffield, be barred from ExxonMobil's board as a condition of approving their $64.5bn merger serves as a cautionary tale for other pending deals.
The FTC alleged that Sheffield, a long-time industry leader who made Pioneer one of the biggest producers in the Permian, sought to collude with Opec. It cited hundreds of text messages in which he discussed pricing and output with officials from the oil cartel, as well as efforts to co-ordinate with other Texas producers.
The fallout for other transactions still going through the approvals process may be limited, given the specific nature of the allegations against Sheffield, but the FTC's action shows the agency will not hesitate to demand concessions in order to wave deals through. Given heightened political sensitivities to fuel prices in an election year, that should put the industry on notice. At the very least, future reviews are likely to include requests to turn over any records — electronic or otherwise — that involve discussions with competitors or other oil-producing jurisdictions, according to former FTC chairman Bill Kovacic.
"It's a reminder that conversations with your competitors about production levels and pricing levels are exceedingly unwise," Kovacic says. It was significant that the FTC did not tamper with the basic fundamentals of the Pioneer acquisition. "I suspect the former CEO is unhappy about being placed on the sidelines," he says. But it is also a "relatively inexpensive price to pay for getting this done".
Under the leadership of Lina Khan, the FTC has taken a tougher line when it comes to mergers, and second requests for information have become the norm when it comes to oil deals. Chevron's planned $53bn acquisition of US independent Hess has been held up by such a request, even as a dispute over the target company's stake in a giant offshore find in Guyana has cast a cloud over the transaction. Diamondback Energy's announced $26bn takeover of Endeavor Energy Resources was also subject to a second request.
Occidental Petroleum chief executive Vicki Hollub told analysts in February that "some of our teams felt like [the FTC] asked for everything" when going through the approval process for the company's $12bn purchase of CrownRock. But Occidental said this week that its teams are working "constructively" with the regulator, and that the deal is expected to close in the third quarter.
Consolidation over consumers?
The rapid pace of consolidation in the US oil and gas sector since late last year has led to mounting calls for increased scrutiny on antitrust grounds. "Let's not kid ourselves, these mergers aren't just about efficiency or lowering costs," US Senate Democratic majority leader Chuck Schumer wrote in a letter signed by 50 Senate and House Democrats in March. They are about "buying out the competition so the newly consolidated industry can boost profits at the expense of consumers".
Given long-serving company executives' preference to stick around after selling their firms, the FTC's action in relation to Pioneer could theoretically dissuade other ‘big-name' founders from going down the same road, consultancy Rystad senior analyst Matthew Bernstein says. On the other hand, the loss of control for family-owned operators has already served as a big enough obstacle for some companies that would otherwise be seen as takeover targets.
As for Sheffield, Pioneer has said the FTC's complaint reflects a "fundamental misunderstanding" of US and global oil markets and "misreads the nature and intent" of his actions. Pioneer more than doubled its daily production between 2019 and 2023, playing its part in adding to domestic energy supply, the firm said.
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Dangote refinery starts Nigerian gasoline sales
Dangote refinery starts Nigerian gasoline sales
Lagos, 16 September (Argus) — Nigeria's 650,000 b/d Dangote refinery has started selling gasoline to the domestic market with state-owned oil firm NNPC as the sole offtaker. NNPC said earlier today that it is paying Dangote in US dollars for September gasoline loadings. The firm's previously announced crude-for-gasoline swap programme with Dangote will be settled in the local currency and will start on 1 October, it added. NNPC published a Dangote gasoline ex-refinery price of $736/t, or 898.78 naira/litre ($0.55/l), based on spot prices from 13 September. This equates to N842.61/l plus a Dangote premium of N56.17/l. Gasoline prices "are not set by government but negotiated directly between parties on an arm's length", in line with the provisions of Nigeria's Petroleum Industry Act, NNPC said. Dangote provided videos of gasoline loading onto NNPC branded trucks at its gantry on the outskirts of Lagos on 15 September. NNPC issued a statement the previous day saying it had "deployed over 100 trucks, with hundreds more en route" for the start of gasoline sales. Dangote previously said the refinery has the capacity to load 2,900 trucks a day, in addition to three single point mooring (SPM) facilities, 25km offshore, that can load product onto 20,000-130,000t tankers. NNPC has supplied gasoline to the domestic market almost exclusively since 2017, relying heavily on imports from overseas because of the parlous state of its own refineries. The start of gasoline loadings at Dangote will enable Nigeria to significantly reduce its dependence on gasoline imports. NNPC's statement today about gasoline pricing comes against a backdrop of President Bola Tinubu adopting a gradual reduction of the country's longstanding gasoline subsidy instead of his stated policy goal of removing it in one fell swoop. His administration made that decision in response to a cost-of-living crisis and social unrest following last year's initial attempt to remove the subsidy. Based on Dangote's ex-refinery price, regulatory fees of N9.96/l, distribution costs of N15/l and a margin of N26.48/l, NNPC said it has arrived at an estimated retail price of N950.22/l for gasoline in Lagos. That is 11pc higher than the level to which it hiked prices at its Lagos retail stations on 3 September. The company attributed that hike to the government reducing the extent to which it subsidises gasoline. Still ramping up Dangote said previously that it expects to be able to produce 57mn l/d (365,000 b/d) of gasoline at full capacity, more than enough to cover Nigerian demand, which it estimated at about 33mn l/d. But industry sources told Argus the refinery was only able to supply NNPC with 16mn l of gasoline over the weekend. The refinery is still some way off reaching capacity, with crude feedstock supply falling by 34pc on the month to 185,000 b/d in August, according to Argus tracking. Argus reported last week that Dangote is yet to complete the start-up of its residual fluid catalytic cracker (RFCC), which is holding the refinery back from hitting its gasoline production capacity. Test runs may have started on the unit, but it is unlikely to be fully operational until October or November. NNPC said it supplied Dangote with 4.8mn bl of crude in August, down from 5.1mn bl in July. It said it will supply the refinery with 5.4mn bl this month and 11.7mn bl in October. The projected crude supply for October is a slight increase from the 11.3mn bl that NNPC announced on 5 September but a touch lower than the volume outlined by Nigeria's coordinating minister of the economy Wale Edun. "From 1 October, NNPC will commence the supply of approximately 385,000 b/d of crude oil to the Dangote refinery, which will be paid for in naira," Edun said on 15 September. In return, the Dangote refinery will supply gasoline and diesel "of equivalent value to the domestic market to be paid for in naira", Edun said. "Diesel will be sold in naira by the Dangote refinery to any interested offtaker," he said. But gasoline "will only be sold to NNPC. NNPC will then sell to various marketers for now". By Adebiyi Olusolape and George Maher-Bonnett Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
How long can Opec+ play the waiting game?
How long can Opec+ play the waiting game?
Dubai, 16 September (Argus) — The tepid oil price response to the decision by eight Opec+ producers to defer by two months to December the start of a phased return of 2.2mn b/d to the market has prompted many oil market watchers to question whether the producer group did enough. But Opec+ delegates insist that market uncertainties and internal group dynamics mean it was "the most reasonable" thing to do. The mounting data and signals pointing to a slowdown in oil demand — particularly with respect to China, on which most hopes for growth this year were pinned — raise the question of whether the two-month deferral by Opec+was a strong enough move. Speaking at the S&P Global Commodity Insights Appec conference in Singapore last week, trading firm Trafigura global head of oil Ben Luckock claimed instead that the group was sending a "confused message". Opec+ "needs to pick which way it wants to go", because "trying to thread the needle for the next 12 months will not be what the market wants to hear", he said. But Opec+ delegates canvassed by Argus pushed back against that view, insisting that although concerns about the global economy and demand are real and need monitoring, there is still too much uncertainty for Opec+ to have taken any stronger or more long-term action at this juncture. "Nobody is sure where demand is going," one delegate said. "The market is acting and making judgements on perception, anxiety… not facts." This is why "Opec+ had to act in this way, to allow for more time to assess things further". Evidence of this uncertainty came in the form of the latest oil market outlooks from Opec and energy watchdog the IEA, which both made similar-sized downward revisions to their global oil demand forecasts for 2024, but from vastly different starting points. Opec sees growth at 2.03mn b/d, while the IEA sees growth of just 900,000 b/d. Much of the discrepancy lies in their assessments of Chinese demand growth, which Opec sees at 650,000 b/d and the IEA at just 180,000 b/d. Another delegate said the two-month deferral was "the most reasonable response" to help maintain cohesion within the Opec+ group. Argus understands that formally laying out a roadmap for the unwinding of the 2.2mn b/d in June was key to getting all members of the alliance to agree to extending the production cuts in place today through to the end of next year. With that in mind, getting full buy-in for the two-month deferral will not have been easy, with some of the eight increasingly impatient about not being allowed to raise output. Call the compliance department This issue is especially pertinent when other countries — namely Iraq, Kazakhstan and to a lesser extent Russia — appear to be regularly flouting the targets they committed to meet under the deal, while Iran, exempt from production restraints, continues to increase output, despite still being under US sanctions. Iraq and Kazakhstan have been under intense pressure in recent months to not only adhere to their pledged targets but also compensate for past overproduction. Earlier commitments have fallen short, with Iraq in particular failing to show any real improvement. But these latest pledges by Iraq and Kazakhstan "have come from the very highest levels", another delegate said. "This time will be different." If Iraq and Kazakhstan actually deliver, this should blunt the impact of any additional Opec+ barrels coming on to the market. But with balances looking set to flip to a surplus from the start of next year, and concerns around demand looking likely to persist into early 2025, observers question whether there will even be space for the Opec+ eight to begin returning barrels from December. Trafigura's Luckock predicts "further deferrals, absent the price being higher than it is today". Some Opec+ delegates already concur. By Nader Itayim Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Analysts sharply cut oil price forecasts for 2025
Analysts sharply cut oil price forecasts for 2025
London, 16 September (Argus) — Concerns over sluggish demand at a time of rising supply have prompted analysts to sharply lower their oil price forecasts for next year. Atlantic basin benchmark North Sea Dated will average $78.27/bl in the first quarter of next year, an average of analysts' forecasts shows, $7.20/bl lower than forecasts in July (see table). The projection for 2025 of $76.88/bl is more than $6.30/bl below the previous average. US marker WTI prices will average $73.81/bl in the first quarter, roughly $6.80/bl below the previous survey. WTI is expected to average $72.13/bl next year, $6/bl down on the July average. BofA Securities revised its Brent price forecast $5/bl lower for 2025. It expects Chinese oil demand to grow by only 180,000 b/d this year and by 210,000 b/d in 2025, down from record growth of 1.45mn b/d last year. "Several factors dramatically reduced China's appetite for oil this year and could soon cause consumption to peak," the bank notes, citing a rapid adoption of electric vehicles and as LNG-fuelled trucks make inroads against diesel. The bank expects the market to tip into a 730,000 b/d surplus in 2025. This is similar to forecasts of a 700,000 b/d surplus for next year by Goldman Sachs and Morgan Stanley. Higher supply is driven by a ramp-up in output in the Americas, analysts say. Brazil, Guyana, Canada and the US together represent 1.17mn b/d of total growth next year, according to BofA. Holding position On Opec+ supply, eight members of the group — Saudi Arabia, Russia, Iraq, the UAE, Kuwait, Kazakhstan, Algeria and Oman — agreed on 6 September to start unwinding 2.2mn b/d of voluntary output cuts from December, instead of October, over 12 months. Goldman Sachs says "additional delays are plausible" but expects that Opec+ "will go ahead with gradual production increases at some point in the next few quarters because disciplining non-Opec+ supply and supporting internal cohesion and global oil demand is likely the optimal long-run strategy". But BofA says "the market has limited appetite for additional volumes" and suggests that "some of the recent price weakness may be the market attempting to force Opec+ to hold off on any output increases". Ice front-month Brent fell below $70/bl for the first time since December 2021 on 10 September. Concerns about demand look to be offsetting disruption to Libyan supplies and elevated tensions in the Middle East. Over 850,000 b/d of largely light sweet production from Libya is off line. But BofA says the dispute in Libya is "reportedly nearing a resolution that we think will lead to the restoration of output by the end of the quarter". Talks took place on 3 September and 11 September but an end to the impasse in the country has yet to be reached. By Kuganiga Kuganeswaran Crude price forecasts $/bl Brent WTI 1Q25 ±* 2Q25 ±* 2025 ±* 1Q25 ±* 2Q25 ±* 2025 ±* ABN Amro 75.00 -15.00 75.00 na 75.00 -13.00 70.00 -15.00 70.00 na 70.00 -13.00 BofA Securities 74.00 -12.00 76.00 na 75.00 -5.00 70.00 -9.00 72.00 na 71.00 -4.00 Goldman Sachs 77.00 -6.00 76.00 na 77.00 -5.00 73.00 -5.00 72.00 na 71.00 -5.00 Morgan Stanley 75.00 na 75.00 na 75.00 na 70.00 na 70.00 na 70.00 na UBS 87.00 0.00 87.00 na na na 82.00 0.00 82.00 na na na Argus Consulting† 81.61 -1.72 83.00 na 82.39 -0.35 77.84 -2.60 79.24 na 78.63 0.13 Average 78.27 -7.20 78.67 na 76.88 -6.31 73.81 -6.81 74.21 na 72.13 -6.00 *change from previous survey in Jul 2024 †Argus Consulting is a division of Argus Media Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Secret Service foils Trump assassination attempt
Secret Service foils Trump assassination attempt
Washington, 16 September (Argus) — Former president Donald Trump was unharmed on Sunday following a second possible assassination attempt in little more than two months. A suspect is in custody, after US Secret Service personnel opened fire on a gunman near the Trump International Golf Club in West Palm Beach, Florida, local and federal authorities said. "There were gunshots in my vicinity, but before rumors start spiraling out of control, I wanted you to hear this first: I AM SAFE AND WELL!," Trump, the Republican presidential nominee, said. "Nothing will slow me down. I will NEVER SURRENDER." Authorities said they apprehended the suspect after a witness provided a picture of the suspect's vehicle and license plate. Investigators found a rifle with a scope, a pair of backpacks and a camera at the scene. Vice president Kamala Harris, the Democratic nominee, said she was "deeply disturbed" about the incident and thankful Trump is safe. "I will be clear," Harris said. "I condemn political violence. We all must do our part to ensure that this incident does not lead to more violence." President Joe Biden said he was relieved Trump was unharmed. The incident Sunday came little more than two months after a gunman opened fire on Trump on 13 July during a during a campaign event in Butler, Pennsylvania, grazing Trump's ear, and less than eight weeks before the 5 November elections. By David Ivanovich Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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