Daily Energy Standup Episode #239 – Weekly Recap: Climate Crisis in Africa, Hydrogen Challenges, and Chevron’s Strategic Move

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Video Transcription edited for grammar. We disavow any errors unless they make us look better or smarter.

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Stuart Turley: [00:00:14] Why is climate crisis racist where Africa is concerned? Michael this was a hoop of an interview. I got to interview Cyrus Brooks, who’s a humanitarian over there at our BBC, and I thoroughly enjoyed visiting with him. I was live at the Permian and I had all these people in 30 people in this booth at the air compressor solutions, and we were just loving it. And I’m talking to him. He’s live in Africa at the show. And Alex Epstein was there and brought up some great points. The next day, Michael, I got to interview the secretary general of the African OPEC that’s in charge of 18 oil producing countries that carry some heavy weight. He’s a heavyweight down there. Now, let’s go over this article and the in the Energy Monetary Fund, the World Monetary Fund is always tying their money to renewables. In the common theme of the Africa Energy Conference was Africa First. Why are we forced to cover what the the West is forcing on us? When you all pollute, we don’t pollute. We’re trying to survive. And one out of two people in Africa are in energy poverty. This is despicable. So they’re trying to bring why don’t we go ahead and work with them and try to get them elevated out of energy? Think about the markets. And let me tell you what it was in this interview. Here’s the key thing. The West should do this from a business sales perspective, Michael. They’re buying cheap phones now. But think about the iPhone market or the Tesla phone market. If we could get them electricity, they would be hungry for material built out of the West. This is selfish on business thinking they would a love getting elevated out for health reasons. A million people die from smoke inhalation from cooking. This is a new hockey man. [00:02:31][136.6]

Michael Tanner: [00:02:32] And this is something that you specifically have been on for a while. And I think it’s really great that you had an opportunity to interview these absolute heavy hitters. I mean, yes, Dr. Farouk Ibrahim, he’s the secretary general of the Africa OPEC. I mean, that’s to me. Next up is who who’s ever running the real OpEx. So I need to think about big heavy hitter. These are two awesome interviews. I think you’ve done a great job of kind of over viewing, you know, what they’re going to be. I’m really excited to listen. I’ve had an opportunity to listen to the Dr. Ibrahim one. I have listened to Cyrus Brooks great episode and I think he brings up and again, he hits it’s all the hot points that mean you have been on. It’s it really comes down to what’s good. You know, allowing me to do something without you doing it. We were allowed in the United States and in the West to exploit, quote unquote, the fossil fuel, natural resources. But now we’re saying to another part of the world that wants to take that same step and move up from and completely change the standard of living for their entire country. Huge, huge gas reserves in Africa and gas reserves. [00:03:35][62.9]

Stuart Turley: [00:03:35] And energy hypocrisy is that’s where Alex Epstein came up with racism. And I couldn’t agree with. [00:03:43][8.1]

Michael Tanner: [00:03:44] Alex it really excited to keep and covering and keep doing a lot of work with the African Patrol Organization. So look for these two interviews, same feed as would you get this show. You can also check out the article Energy News become. [00:03:56][11.9]

Stuart Turley: [00:03:57] My favorite buddy Bidenomics. And I don’t know if our producer has time to do this, but I love the picture that the editor put on here. Biden with his rhymes. For our podcast listeners, I’ve got my hand over my eyes and he’s kind of pointing like like this. I think he’s pulling a shoulder. [00:04:18][20.9]

Michael Tanner: [00:04:18] I said. [00:04:18][0.3]

Stuart Turley: [00:04:19] I see this. And actually I think he’s trying to say, Don’t tell me I need my depends. I don’t know what he’s doing. Okay, let’s go here. This story is about hydrogen. Hydrogen suffers from the very problem it’s supposed to cure. Part time weather dependent on unreliable wind, solar energy. Hydrogen storage is supposed to function as a part of battery scale, as well as powering cars, trucks and heavy equipment. Michael, I’m busted. I used to really be the hydrogen cheerleader for energy news. Me and I mean, I love me some hydrogen until I. [00:05:00][40.9]

Michael Tanner: [00:05:00] Actually children blue hydrogen you probably at one point I’m sure we ran a story on red hydrogen. We covered them all. [00:05:05][5.1]

Stuart Turley: [00:05:06] We did the rainbow of hydrogen. And here’s the problem with hydrogen. Oh, sorry. And, I mean, the hydrogen is really about 35. Hydrogen requires massive amounts of full time electricity, 35% more energy than the hydrogen contains. And then if the climate activists, the climate folks and the funny thing about the climate folks is think about all the cars. There are some numbers in this article that are about hydrogen. Create generation, creates a lot of water, hydrogen use creates a lot of water. So let’s go in here to more than 5%. You can only pipeline the infrastructure. It’s a smaller molecule. So it escapes, you know, kind of like Steve McQueen in the Great Escape. You know, he’s got a motorcycle over there going over to pipe over the fence. Hydrogen escapes into more greenhouse gases. Then there’s anything else. And you can only run 5% in a natural gas line. So you can’t use the same infrastructure because it escapes. So you get actually less than 1%. Okay. So let’s go down here. Biden nomics, which makes everything more expensive by making energy more expensive, spending our tax money lavishly on unproductive wasteful spending for climate ideology are adding to an estimated $33 Trillion national debt. Interest payments on this is inflationary. Okay this is unbelievable amount of Biden nomics and club and baby seals. This is horrible. [00:06:53][107.2]

Michael Tanner: [00:06:54] Yeah. I mean hydrogen. It never made sense to me. I’m going to fill up my car with hydrogen and create a bomb. I mean, it’s the same plan. They’re like, oh, we’re going to have these small modular nukes that run everything. [00:07:05][10.9]

Stuart Turley: [00:07:05] Maybe I got it. Nord Stream one and two was attacked by people throwing hydrogen cars off of carriers. They didn’t have to do anything. What do you think? [00:07:17][11.1]

Michael Tanner: [00:07:17] I introduce no harm, no foul. So no, no foul. But I think it’s interesting. I mean, could hydrogen be the future of energy? Well, it could be, but there could be a lot of other things that solve it. And I’m always wary when they say, you know, making cool green hydrogen, I love this do there’s this quote in here. You know, making green hydrogen requires massive amounts of water, 35% more energy than the hydrogen created units, a.k.a. if you put a hundred units of energy, whatever, you know, we’ll, you know, say, 100 joules of energy into it, you get 65 back. Well, that’s not a great trade. No, that sounds like a lot of shale oil and gas companies. Okay. We’re going to drill a $10 million well. It’s going to be worth six and a half, but it’ll be fun. [00:08:02][44.6]

Stuart Turley: [00:08:03] The only way you can make hydrogen is if you got lots of water and there’s going to be a water lot. [00:08:10][7.6]

Michael Tanner: [00:08:11] We’ve got lots of that. We’re not in a drought or anything. [00:08:13][2.0]

Stuart Turley: [00:08:13] Oh, no. In fact, the World Economic Forum said they’re going to start controlling water. So, you know, there’s going to be a battle for you. And then if you have to. [00:08:23][10.2]

Michael Tanner: [00:08:23] Bring that up at the next board meeting for the World Economic. [00:08:25][2.0]

Stuart Turley: [00:08:26] Forum. Oh, yeah, me and Schwab, we’re going to really talk to. [00:08:31][4.9]

Michael Tanner: [00:08:31] Larry Fink, right? [00:08:31][0.6]

Stuart Turley: [00:08:32] Oh, yeah. And or the. [00:08:33][0.8]

Michael Tanner: [00:08:33] Saudi CEO or the Aramco CEO. [00:08:35][2.0]

Stuart Turley: [00:08:36] I like him. He’s cool. The Dutch energy minister admits that wind power agenda is pricier than anticipated or course. Okay, Let me give you a couple of bullet. Robert Jensen, he is the Dutch minister of energy, admits that wind power is facing serious financial headwinds. People are expecting their money. Bank and and regulatory agencies are not increasing energy because consumers can’t pay anymore. Consumers should expect substantially higher electricity prices than initially anticipated. Retro. The increased costs are not primarily linked to global market developments, but rather the extra €10 billion in order to connect offshore wind farms at sea to onshore infrastructure. I‘m shocked. Michael, are you shocked that it costs that much to put in a grid? [00:09:39][62.8]

Michael Tanner: [00:09:39] Absolutely. I’m I’m I mean, what’s funny is companies that went all in on offshore wind, in my opinion, are going to see the same type of outcome that companies that went all in on shale oil and gas production in the early 20 tens, you know how many of those companies survived out of there? I mean, gigabyte, you know, we could name a list of 20 MP companies that drilled their way to bankruptcy. And in this case, the companies decided to spin off wind farms. Into bankruptcy. Now, if in a tax in a tax haven or somewhere where taxes are convenient. Sure, you can dump a lot of money into unprofitable CapEx and still makes your money. But the gravy train ones out assume. The Dutch seem to be taking it right now. [00:10:27][47.8]

Stuart Turley: [00:10:28] Absolutely. Let me hear to this one little part here. Dutch offshore wind projects are now joining the global sector in facing negative financial news. Several major offshore wind producers, including Vattenfall in Sweden and Orsted in Denmark, have encountered financial difficulties primarily related to higher cost interest rate issues, PPA constraints or commercial factors making projects fiscally unfeasible. That is not renewable energy when it’s not fiscally capable. [00:11:05][37.5]

Michael Tanner: [00:11:06] It sounds like sounds like for the 40 V program. I was confused, which was who they were talking about in that one. [00:11:12][5.8]

Stuart Turley: [00:11:13] Yeah. And so what I think we’re seeing is the great awakening that I talked about last year, and it is now here what I. [00:11:20][7.3]

Michael Tanner: [00:11:20] Was just saying, Rise up The Great Awakening. [00:11:21][1.2]

Stuart Turley: [00:11:22] Oh, yeah. Oh, yeah. There you go. I thought you were talking about how good I am and intelligent. [00:11:26][3.9]

Michael Tanner: [00:11:27] No, not just for you and not just for you. And Sparks, you go back and forth on. I’ll stay out of that one. The big news in the oil and gas space today, Chevron decides to get in and follow Exxon making a huge all stock purchase of Hess Corporation, $53 billion in stock and assuming about another six, six and a half for about a year of debt for total, about $60 billion. Again, it’s all it is an all stock deal. You know, this kind of came as a shock specifically because Hess, his largest asset, the Guyana field, is one where Chevron is the operator. So Chevron Double Dip basically tells me two things. One, they’re not as bullish on the Permian as ExxonMobil is or there was a bidding war for Pioneer. We’ll never know that maybe somebody’s been involved in the conversations. We’ll know. But either there was a bidding war over Pioneer for the last great Permian Basin Resources or Chevron made a strategic decision or said we’re going to double down on Guyana, which we know very well, and we’re going to double down on the Bakken. I think this is something to be left out. Hess is the one of the larger operators when it comes to the Bakken. We haven’t heard many deals up there in North Dakota. That’s right. A lot of smaller M&A deals. I think the unsung play for Chevron is they looked at the Bakken versus they looked at the Bakken plus Guyana and said we would prefer that over the Permian that or they didn’t want to get involved with Pioneer or they never even talked to Pioneer. But my guess is there was a strategic decision that happened from Chevron that said we’re going to go take double down on what we know. And I mean, for Chevron getting into the Bakken. Interesting. What it tells me to do is that this wasn’t a DNA led venture. They weren’t coming in here thinking synergies is going to help them out. And have you ever seen a merger and acquisitions? You see the word synergies think layoffs, didn’t see the word synergies around here? No reason. You know, the Guyana, yes, there’s synergies, but that’s just picking up an extra operator percentage. Hess is not actually having boots on the ground there. The fact that they’re taking over their Bakken assets means probably most that has steam is going to stay around hop to deals, though. Speaking of this pioneer and has still the real question now, Stu, is one, what do you think of the deal? Second, who’s next? [00:13:36][129.3]

Stuart Turley: [00:13:37] I like the deal. And more importantly, I like the deal for Guyana. Guyana is incredibly important for nat gas in export of capabilities of LNG. LNG, with all these contracts around, are here to stay. And LNG for Africa in that area is the import facilities. It is a long term play and that’s going to put them right at the top of the pile. [00:14:04][27.4]

Michael Tanner: [00:14:05] Chevron CEO Michael Wirth here was his comment on the deal. We’ve got too many CEO’s per barrels of oil. Expect to see. Hope he’s not wrong. He’s not wrong. I think we also have to remember who are these two? You know, John Haas, CEO of Haas, cashing out a lot older, Scott Sheffield, pioneer, retired, the end of the year looking to cash out these. I think, you know, hindsight being 2020, these are probably the two targets in which we should have thought of all along in order because they had motivated management. The real question is who next? I don’t think oxy’s on the table. I think they’re going to stay out of it. I think it’d be really interesting to see what EOG does. Do they allow themselves to merge and finding, you know, an equal among them. Do they go ahead and gobble up some of these smaller Permian players? I think now what you’re going to see is the scraps left in the Permian began to get consolidated up. But guys, you can check it all again, energy news B dot com for all. [00:14:59][53.7]

Stuart Turley: [00:14:59] Of your break. Let me let me ask this news in the Marcellus instead of the Permian, do you see things like AQ and CNN X and others piling into this? [00:15:09][10.4]

Michael Tanner: [00:15:10] I don’t know, because the. Did the economics of natural gas right now, I don’t think don’t favor M&A. [00:15:14][3.9]

Stuart Turley: [00:15:14] That’s what I was like. [00:15:15][0.7]

Michael Tanner: [00:15:15] If you want a cut, you’ve probably have enough scale to where you’re more worried about optimizing your own assets versus trying to go out and make some, you know, deal. I mean, you know, your buddy over at CNN, you call him up. See, I would think they, you know, in that area and can execute space. They stay pat, but you never know And it will be interesting to see. But you’ll have to hit up your contacts over there. [00:15:37][22.0]

Stuart Turley: [00:15:38] Oh, you bet. Jamie Dimon says central bank’s got it forecast 100% dead wrong. And it doesn’t matter what the Fed hikes do. I agree with it. I think there’s a couple paragraphs in here that are pretty important. And it says Fed Chair CEO blasted the Federal Reserve, which has hiked the benchmark federal funds rate between 5.25 and 5.5 on a 22 year high and downplayed the importance of the central bank’s next move. This is him. This is from Diamond. I don’t think quote I don’t think it makes a piece of difference whether rates go up 25 basis points or more, Diamond said during a panel at the Future Investment Initiative in Riyadh, Saudi Arabia. Per Bloomberg, whether the whole curve goes up 100 basis points. Be prepared for it. I don’t know if it’s going to happen. He noted that inflation was at 8.3% in April 2020 to nearing its peak in 2022 of 9.1. Even though the Federal Reserve had requested that Consumer Price index, the inflation gauge would sit between 2.5 and three. And he brings up another good quote here Fiscal spending is more than it’s ever been in peacetime. And there’s this feeling that central banks and governments can manage through all this stuff. They can’t. And I couldn’t agree more with Jamie on this. The next Fed meeting will be October 31st through the first. His other cautious quote from Jamie I’m cautious about what will happen next year, noting the real need for real leadership to navigate the geopolitical concerns. It it’s going to be I have been and called out on a lot of folks by saying that I firmly believe there’s nothing that the Fed can do that will solve inflation unless energy is fixed. The global energy market has to be fixed. It has to be delivering the lowest cost kilowatt per hour to all citizens of the planet with the least amount of impact on the environment through sustainability, fiscal sustainability and being able to continue the low cost. It’s not going to happen. You cannot have low inflation without low cost of energy. The value gap between European, a U.S. oil and majors stubbornly wide amidst Exxon, Chevron Megadeals. This is another story that is from a different source from the ones we talked about yesterday. And when you sit back and kind of talk about total and you take in AI and you take Shell, they took a whole different path and they went all in on renewable energy and they got just whacked by having their investors not happy. Their returns were not there. And now they have had to come around full cycle on this. The moves were dwarfed in P&G by ExxonMobil, Pioneer Resources taking over and then Chevron to Hess. And this is a quote from Alan Good for investors looking to bet on higher oil and gas prices for longer. Exxon and Chevron are better options, said Alan Good, director of equity research at Morningstar. We continue to think the ESG discount for European firms is playing a role. That’s why I wanted to get this article in here that was different than the other article yesterday. My hat’s off to all of our great American oil and gas companies, our privates, our publics, everything else, and shout out to the Oil and Gas Workers Association and all of our great energy workers, whether you’re on the grid, whether you are in the wind farm business or you’re supporting anything for the grid and nuclear, we just really appreciate you providing energy security for the United States. [00:15:38][0.0][904.4]