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When reports emerged that India and China are in talks about forming an oil buyers’ club, OPEC was probably too busy with its upcoming June 22 meeting to concern itself with that dangerous alliance. Now, it may be time for it to start worrying.
“The timing is right. The boom in U.S. oil and gas production gives us greater leverage against OPEC,†the Times of India quoted an Indian official as saying last month after the formal start of said talks. The two countries, after all, account for a combined 17 percent of global oil consumption and they are the ones that would be the hardest hit if prices rise as a result of OPEC’s actions.
What’s more, they might not be alone in this attempt to curb OPEC’s clout on the global oil market. According to Bloomberg’s Carl Pope, Europe and Japan, previously reluctant to take part in any anti-OPEC projects, may now join in. The reason they are likely to join in is that unlike in previous oil price cycles, now there are alternatives to fossil fuels. Electrification is where OPEC may have to face off with a future oil buyers’ cartel.
India, China, and Europe are all very big on EV adoption. Japan is a leader in battery manufacturing. If they set their minds to it, these four players could upend the oil market and effectively cripple OPEC. Of course, this is a best-case scenario of the kind that rarely unfolds in reality.
Let’s take India, for example. A recent survey suggested that as many as 90 percent of Indian drivers were willing to switch to EVs if the government built the necessary charging infrastructure, reduced road taxes, and increased subsidies. Another survey identified price and range as additional roadblocks towards the mass adoption of EVs in India. Because of these challenges, New Delhi recently amended its ambitious goal of having an all-EV fleet on the roads of the country by 2030 to having 30 percent of the fleet electric. (continued on page 2)
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China, for its part, is the undisputed leader in global EV adoption: the country accounted for more than 50 percent of global EV sales last year in case you were thinking, “Wait, wasn’t that Norway?†However, this was in large part made possible by generous government subsidies for EV manufacturing. These subsidies are due to be wound down to 0 by 2020, and carmakers are already beginning to brace for a future without the support of the state. It’s safe to say it remains uncertain if the EV boom will continue after 2020.
This precarious situation with EVs is reason enough for China and India to seek more clout on international oil markets dominated by OPEC and would justify the formation of a “buyers’ club.†Europe, for its part, is, as a whole, a top performer in EV adoption and it is also very big on environmentalism. At the same time, it still imports crude and quite a lot of it, so it cares about oil prices as a large buyer.
China and India are facing challenges in EV adoption. Europe could help and benefit from it. After all, taken together, Europe, China, India, and Japan account for the manufacturing of as much as 65 percent of the world’s cars, and a lot of these are manufactured in Europe. These four also consume 35 percent of the world’s crude oil and would like to reduce this number.
According to Pope, if they get together, they would be able to negotiate either a more gradual or a faster shift to EVs. It would all depend on whether OPEC would agree to maintain lower prices or not.
A more skeptical view would note the challenges in EV adoption such as subsidies and infrastructure. These would take time to be overcome even if everyone played together. Yet long-term, an oil buyers’ alliance could be a force to be reckoned with by the oil producers, and the latter need to start paying attention now.
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Valaris Limited announced new contracts awarded subsequent to issuing the Company’s most recent fleet status report on February 21, 2023. Three-year contract with Petrobras for drillship VALARIS DS-8. The rig will be reactivated for this contract. The total contract value is approximately $500 million, including a $30 million mobilization fee. 100-day contract with a TotalEnergies affiliate for drillship VALARIS DS-12. The contract is expected to commence in second quarter 2023. 70-day contract with Beach Energy offshore New Zealand for heavy duty modern jackup VALARIS 107. The contract is expected to commence in third quarter 2023. The total contract value is approximately $26 million. President and Chief Executive Officer Anton Dibowitz said, “We are particularly pleased to have secured the award for preservation stacked drillship VALARIS DS-8, for a contract that is expected to generate a meaningful return over the firm contract term, and we remain focused on exercising our operational leverage in a disciplined manner. This most recent award represents the sixth contract awarded to one of our high-quality stacked floaters since mid-2021, and speaks volumes about our demonstrated track record of project execution when reactivating rigs.” Dibowitz added, “Following the reactivation of VALARIS DS-17 and DS-8, we will have ten floaters working across the golden triangle, including four drillships in Brazil, a market where we expect to see continued growth over the next several years.” Updated Guidance As a result of the contract awarded to VALARIS DS-8, which will require the rig to be reactivated from preservation stack, we are updating our first quarter 2023 and full-year 2023 guidance provided on our fourth quarter 2022 conference call on February 21, 2023. First Quarter 2023 Contract drilling expense is expected to increase by approximately $5 million to $385 million to $395 million. Adjusted EBITDA is expected to decrease by approximately $5 million to negative $5 million to breakeven. Adjusted EBITDAR, which adds back one-time reactivation expense, is expected to be $25 million to $30 million, unchanged from the guidance provided on our fourth quarter 2022 conference call. Full-Year 2023 Revenues are anticipated to be $1.8 billion to $1.9 billion, unchanged from the guidance provided on our fourth quarter 2022 conference call. Contract drilling expense is expected to increase by approximately $60 million to $1.49 billion to $1.59 billion. Adjusted EBITDA is expected to decrease by approximately $60 million to $180 million to $220 million. Adjusted EBITDAR, which adds back one-time reactivation expense, is expected to be $280 million to $320 million, unchanged from the guidance provided on our fourth quarter 2022 conference call. Capital expenditures are expected to increase by $60 million to $320 million to $360 million. Source: Valaris Join our mailing list here We are #1 on Google and Bing for the "Largest Mobile Energy Network" Come join our community! Download the Rig Lynx app here
Seadrill Limited announced that the West Neptune has executed approximately six months of term extensions with LLOG Exploration Offshore, L.L.C in the US Gulf of Mexico. The extensions will commence in direct continuation of the existing term, and will keep the rig busy until Q3 2024, furthering Seadrill and LLOG’s long-term association. Total contract value for the extension is approximately $79 million. Source: Seadrill Join our mailing list here We are #1 on Google and Bing for the "Largest Mobile Energy Network" Come join our community! Download the Rig Lynx app here
Semisub rig owner Dolphin Drilling has inked a new contract with Peak Petroleum in Nigeria for its 1974-built Blackford Dolphin. The firm contract, which follows the letter of award in January, gives the Euronext Growth-listed owner of three rigs the potential to extend the unit’s backlog by a minimum of 120 days and up to 485 days. The deal adds to and will be a direct continuation of the previously announced 12-month contract with General Hydrocarbon Limited (GHL). Øystein Stray Spetalen-backed company said the effective dayrate associated with the minimum firm period of the contract is $325,000, including the mobilisation fee. “The final award of the contract for Blackford Dolphin shows the opportunities in Nigeria at a strong dayrate, in addition to building on the backlog for the rig. It also underlines the attractiveness of our assets, and we look forward to returning to revenue-generating operations in 2023,” noted Bjørnar Iversen, CEO of Dolphin Drilling. Source: Dolphin Join our mailing list here We are #1 on Google and Bing for the "Largest Mobile Energy Network" Come join our community! Download the Rig Lynx app here
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