The days of oil are numbered but as Mark Twain famously and we shamelessly paraphrase, rumours of its demise are exaggerated. And for some decades to come.
In fact, there are signs that the perfect storm is brewing that could send oil prices up to US$100 per barrel or more, a point we were last at in mid-2014.
Maglan Capital president David Tawil told Fox Business that a combination of strong demand, inflation and shareholder pressure on big oil to slash emissions could result in an oil crisis within three years.
His point has received support from independent commodities traders with oilprice.com quoting executives from Trafigura, Vitol, and Glencore as saying that prices still have room to grow from current levels because of strong demand rebound and expected tightness in supply.
Vitol chief executive officer Russell Hardy did warn that while US$100/bbl oil was possible, OPEC+ still had some 5.5 million barrels per day to bring back to the market by April 2022.
If you haven’t already bought into the electric ecosystem, it might be time to do so, or start stockpiling petrol.
Coal power or lack thereof
Just weeks after the explosion at the Callide Power Station in central Queensland that caused mass power outages in May, another coal-fired plant has slashed power generation following massive storms that caused flooding in Victoria.
Energy Australia was forced to shut all but one generating unit at the ageing Yallourn power station last week amid flooding concerns.
It got worse from there with the Victorian government then declaring a state energy emergency with state energy minister Lily D’Ambrosio saying that cracks identified in the accompanying mine had put it at risk of flooding.
The operator has admitted that the cracks in the Morwell River Diversion do indeed put it at risk of flooding and has started work to seal them.
Yallourn has up to 1,480 megawatts of generation capacity and typically supplies 20% of Victoria’s electricity demand.
Despite this, the Australian Energy Market Operator has noted that there is sufficient supply of power for the state.
Energy small caps
Strike Energy (ASX:STX) has confirmed that a large, high-quality gas resource is present at its West Erregulla field in the Perth Basin, Western Australia, after its West Eregulla-5 well intersected gas.
Initial logs and petrophysics across the target Kingia sandstone indicated that the top was intersected at a depth of 4,771m, which is considerably shallower than prognosed, while 32m of net pay is present with gas porosity of up to 15%.
Notably, the Kingia reservoir at West Erregulla-5 is interpreted to be above average for the play across various discoveries at the Waitsia, Beharra and West Erregulla fields, confirming the quality of the deep Permian Gas Fairway across the region.
Wireline logging will be carried out to recover fluid samples and pressure before Strike prepares the well for production testing.
Meanwhile, Po Valley (ASX:PVE) has raised about $7.5m through an institutional placement and the institutional component of its entitlement offer.
This is part of a broader $10m capital raising to fund development of its Selva Malvezzi onshore gas project in Italy, which represents a low capex opportunity to generate strong earnings.
Selva Malvezzi has proved and probable reserves of 44.9 billion cubic feet of gas net to Po Valley.
Development costs net to the company’s 63% stake in the field are expected to be about €1.5m ($2.37m), which is likely to be paid back quickly given that Selva Malvezzi is forecast to deliver earnings before interest, taxes, depreciation, and amortisation of €4.7m net to Po Valley per annum.
88 Energy (ASX:88E) has sold its Alaskan Oil and Gas Tax Credits to an unnamed large oil and gas company for US$18.7m.
The sales accelerates the value realisation of the Tax Credits for the company as they wouldn’t have been fully paid out by the State of Alaska until 2026.
Proceeds from the sale will be used to repay 88 Energy’s outstanding debt of US$16.1m.
It’s not all positive news out with Montem Resources (ASX:MR1) warning that the Canadian Government’s decision to deny Hancock Prospecting subsidiary Bena Mining’s application for the Grassy Mountain coal project could impact on its own operations.
Due to the close proximity of Grassy Mountain to the company’s assets in Alberta, Montem has reached out to the Alberta Energy Regulator to determine whether the decision will have any impact on its Tent Mountain Mine restart project.