The Market, Energy, And Political Page, T+19 -- June 19, 2018

Shell: cool story. Over at Bloomberg via Rigzone: Shell is getting its "swagger" back in Texas shale. Wow.

Shale oil hasn’t always been Royal Dutch Shell Plc’s best friend, but they’re working on the relationship.

Shell is said to have bid, with partner Blackstone Group LP, on a portfolio of U.S. shale assets BHP Billiton Ltd. wants to sell for about $10 billion. If it wins, the Anglo-Dutch oil major could exceed its goal of doubling its American onshore output, according to JPMorgan Chase & Co.

That would boost the unit’s free cash flow -- currently on track to grow by $2 billion by 2025 -- and turn around a shale portfolio that is currently “mid-lower ranked."
At the heart of Shell’s shale problem has been the lack of a coherent strategy. It has irregularly acquired various bits of U.S. acreage, including a large stake in the low-cost and highly desirable Permian.

In the Permian’s Delaware basin Shell was pumping fewer than 100,000 barrels a day per 1,000 feet (300 meters) of well length in the first 30 days of production -- about 20 percent lower than the industry average at the time. In contrast, shale specialist EOG Resources Inc.’s wells in the same area were about 50 percent more productive.

The company, with partner Anadarko Petroleum Corp., has started improving productivity by drilling longer wells and implementing a technology program called iShale, which has reduced costs by 60 percent since 2015. BHP’s Permian portfolio, which overlaps Shell’s current acreage, could solidify those gains and allow it to take advantage of existing infrastructure.

JPMorgan estimates Shell’s overall shale production would rise to 630,000 barrels of oil equivalent a day by 2020 if it acquires the BHP assets, from 270,000 now. It could emerge into an “upper-quartile” operator in the area.

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Venezuela: tick, tick, tick:

Tracking Venezuela here.

Reuters via Rigzone is reporting that the big Venezuelan refinery is operating at minimum capacity while waiting for new crude shipments to arrive:

The 335,000-barrel-per-day Isla refinery operated by Venezuela's state-run PDVSA in Curacao is working at minimum capacity while awaiting new crude shipments and as a tanker backlog in the country's ports began to ease.

PDVSA's operations this year have been mired by problems ranging from fast-declining crude production and poor refining due to a lack of equipment, to obstacles for exporting oil amid port congestion and financial sanctions.

Only a few units at the Curacao refinery have been operating during U.S. producer ConocoPhillips' moves to seize PDVSA's inventories, cargoes and facilities following a $2 billion arbitration award by the International Chamber of Commerce in April.

No shipments of Venezuelan oil have been sent to Isla since late April and none were planned this month.

Much more at the link. By the way, every Reuters news story about Venezuela imploding seems to imply that Venezuela's government can blame ConocoPhillips as the cause of their problems.

The trade war. The other day I posted a graphic that told me all I needed to know about the trade war with China. From Bloomberg via Rigzone:

In punching back against U.S. tariffs, China included almost all energy-related commodities on a list of its retaliatory actions. The exception: liquefied natural gas.
That’s not surprising, according to a report Monday by Wood Mackenzie Ltd., a U.K.-based research firm. After an aggressive coal-to-gas switching policy was put in place by China’s government last year to fight the country’s smog issues, U.S. LNG supplied 4 percent of that country’s demand.

U.S. President Donald Trump announced $50 billion in tariffs against China on June 15, and China retaliated with a $34 billion list. Oil was included, but not LNG. The reason: China’s LNG demand will grow by 10 million tons this year, and 9 millions tons in 2019, the Wood Mackenzie report said. The U.S., meanwhile, is set to generate 30 percent of incremental supply growth in LNG.

"In the event of an escalation, LNG is likely to remain outside the bounds of any additional tariffs," Nicholas Browne, head of Asia-Pacific gas and LNG at Wood Mackenzie, wrote in a note to clients. "Tariffs on U.S. LNG would increase costs and potentially limit availability of LNG."