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By Gavin Maguire, Global Energy Transition Columnist

Hello Power Up readers,

Oil markets were given a bit of a shock this morning after the International Energy Agency trimmed its demand outlook for 2024, due mainly to slowing consumption in China.

As this view is in stark contrast with OPEC’s recent report calling for oil demand to keep rising for decades, markets were a bit befuddled in the wake of the news, with Brent futures chopping around wither side of $81.50 a barrel and U.S. light crude around $76.50.

Deals continue to hog the limelight in the energy corporate arena, with oil major BP and state-owned Abu Dhabi National Oil Company announcing a natural gas joint venture in Egypt, while more details are emerging on why the founder of Endeavor Energy, one of the most lucrative producers in the U.S. oil patch, finally agreed to an acquisition after decades of staying solo.

Oil majors are also adjusting their portfolios by targeting new fields that can be profitable even if prices fall sharply from here. An analysis on what’s going on there is below.

Today’s top headlines:

• Shell’s lofty ambitions for Asian LNG demand face price hurdle
• EU approves $7.4 bln in state aid to boost renewable hydrogen
• Falling power prices threaten debt-laden EDF’s revival

Please note: there will be no issue of Power Up on Monday, Feb 19 due to a U.S. holiday. 

An oil pumpjack in Midland, Texas. REUTERS/Ernest Scheyder

For years, Endeavor Energy founder Autry Stephens’ refusal to entertain acquisition offers for one of the most lucrative producers in the U.S. oil patch vexed some of his peers.

Stephens, who launched Endeavor in 1979 and grew it by snapping up tough-to-drill wells that oil majors snubbed, rebuffed several offers over the years for the company, arguing there was still room to grow it.

Liz Hampton, Arathy Somasekhar and David French dig in to why he finally changed his mind.

What’s your poison? REUTERS/Thomas White

Oil majors are targeting new oilfields that can be profitable even if oil prices fall to about $30 per barrel, using a third year of rising demand to reshape portfolios amid uncertainty over the industry’s future.

Investors have not returned to oil stocks despite recent high earnings. Even the world’s lowest-cost oil producer, Saudi Aramco, has joined the rush to cut costs. The shift to fields with favorable break-even points follows deeper and more frequent boom-cycles in the last decade. It also reflects executives’ belief that current high prices may not last.

Colleague Sabrina Valle in Houston delves into what’s going on. 

LNG tanker Stena Blue Sky is seen at an LNG terminal in China. REUTERS/

Global demand for liquefied natural gas (LNG) is estimated to rise by more than 50% by 2040, as China and countries in South and Southeast Asia use LNG to support their economic growth, Shell said this week.

Shell said demand for natural gas has peaked in some regions, including Europe, Japan and Australia in the 2010s, but it continues to rise globally, and is expected to reach around 625-685 million tons per year in 2040.

The Orenburg gas processing plant of Gazprom in the Orenburg Region, Russia September 1, 2023. REUTERS/Alexander Manzyuk

The European Union sees no need to extend an agreement to transport Russian gas to Europe via Ukraine, ahead of the contract’s planned expiry at the end of the year, the bloc’s energy policy chief said on Thursday.

Energy commissioner Kadri Simson said the EU’s analysis indicated that countries served by the gas transit route – which include Austria, Italy and Slovakia – would be able to source alternative supply.

“Based on our preliminary analytics, there are alternative solutions to supply these countries who still receive some gas through the Ukrainian route,….”

EU energy commissioner Kadri Simson on ending the gas import deal

Mexico’s power firms lifted fossil fuel-powered electricity generation to record highs in 2023 to make up for a drop in hydropower generation to 20-year lows and relatively flat output from wind facilities.

The reversal in momentum for clean electricity generation is a concern for climate trackers, as Mexico is North America’s fastest-growing economy, driven in large part by an expanding manufacturing base geared toward serving consumers in the United States.

If Mexico’s power sector remains overwhelmingly reliant on fossil fuels as industrial output keeps growing, the country’s rising power emissions may offset some of the declines in neighboring nations. That in turn may leave countries such as the United States open to accusations of merely outsourcing emissions-intensive industry, rather than lowering total pollution levels.

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