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By David Gaffen, Editor, Energy Markets

Hello Power Up readers! There’s been a lot of consolidation in the U.S. shale industry of late, and it continues apace, with Diamondback buying up Endeavor Energy in a deal that follows other big purchases by the likes of Exxon Mobil and Chevron among others. Let’s talk about that first, and see what else is happening here:  

Today’s top headlines:

• Former Trump, Bush officials urge Congress to reverse Biden’s LNG pause
• Saudi minister says energy transition behind Aramco capacity halt
• Russian billionaire’s Power Machines wins lawsuit against PetroVietnam

That’s a big drilling rig in the Permian. REUTERS/Nick Oxford

Shale producer Diamondback Energy has quietly made itself into the third largest oil and gas producer in the giant Permian basin that spans Texas and New Mexico with its buy of Endeavor Energy Partners, the biggest privately held shale name, as Reuters reports here.  

The deal is worth about $26 billion, including debt, and would pump about 816,000 barrels of oil equivalent per day – which combines oil and gas, and it continues the recent trend of buys by Exxon of Pioneer Natural Resources, as well as deals from Chevron, Devon Energy and Occidental. All of those companies have taken advantage of cash on their balance sheets to further consolidate the giant region that was once dominated by smaller players that aggressively sought to boost output whenever they could but now sits largely on the balance sheets of giant companies. 

The oil and gas producers are taking advantage of high stock prices to buy, and many analysts expect even more deals. 

The entrance to U.S. Marine Corps Base Camp Lejeune in North Carolina. Duke Energy plans to decommission energy-storage batteries produced by China’s CATL at the base and will phase out the company’s products at its civilian projects. (U.S. Marine Corps/Handout)

Under pressure from Congress, U.S. utility Duke Energy will decommission energy-storage batteries produced by Chinese battery maker CATL at Marine Corps base Camp Lejeune and also phase out CATL products at civilian projects, the company confirmed to Reuters here. U.S. officials have been worried about hackers linked to the Chinese government targeting network-linked critical U.S. infrastructure, including the power grid. 

The permanent shutdown – after a decision in December by Duke to temporarily disconnect the storage batteries on the base – comes less than a year after a ribbon cutting that involved U.S. military brass. And it demonstrates how strategic competition between the United States and China is affecting U.S. and Chinese businesses. The United States has been eager to build out battery capacity, boost renewable energy grid usage, and increase its EV supply chain but that often involves mining and the energy storage market that are dominated by China.  

Planned and operational U.S. utility-scale battery capacity reached around 16 gigawatts (GW) at the end of 2023; it could jump to over 30 GW by the end of 2024, according to the U.S. Energy Information Administration, but avoiding Chinese batteries would limit supply. 

That’s a big list of Citgo creditors, with ConocoPhillips the largest, as you can see. (Reuters)

A U.S. court auction for Venezuela-owned oil refiner Citgo Petroleum has gotten bids from oil producer ConocoPhillips, the largest creditor in the case, as Reuters reports here. The company submitted what’s known as a credit bid using its claims, according to sources, but such an award would potentially leave less cash to be distributed in the auction.  

Still, Conoco is the largest creditor, submitting about $12 billion in asset expropriations – which comes from back when Venezuela nationalized energy and mining companies more than a decade ago. Citgo became enmeshed in the case when the court found its parent PDV Holding liable for the South American nation’s debts – leaving the possibility of companies like Conoco to recover assets in the case. 

Other energy companies like Chevron, Reliance Industries, Koch Industries and Valero Energy have expressed interest in the sales process, along with at least one activist investor.  

That’s a flare burning off excess gas in the Permian Basin. REUTERS/Angus Mordant

U.S. natural gas prices sunk this past week, boosting the oil-to-gas ratio, or the level at which oil trades compared with gas, to its highest since May 2012, even as oil prices have dipped. Why is this important? It could spur energy firms to drill for more oil and less gas, and it’s not as if oil prices have been going nuts anyway.  

Despite worries about tight supply and curbs on output from big operators like Saudi Arabia, and the Gaza-Israel conflict, the price of U.S. crude is only up about 6% this year. Meanwhile, natural gas is down 28% this year due to warmer-than-usual weather and high output, forcing utilities to leave more gas in storage. The oil-to-gas ratio jumped to 41-to-1 on Friday; on an energy equivalent basis, oil should only trade six times over gas. 

“I think we postponed this investment simply because…we’re transitioning.”  

Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman, on state oil company Aramco’s plans to halt oil capacity expansion  

Barclays will stop direct financing of new oil and gas fields and restrict lending more broadly to energy companies expanding fossil fuel production, the company told Reuters in this report here. 

Climate groups have been pressing the British lender to pull back from oil and gas lending due as global temperatures continue to rise. The company’s head of sustainability Laura Barlow said the new policy was part of its commitment to reduce emissions linked to the bank’s lending. “It’s about strengthening our focus on the energy transition,” Barlow said. 

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