Global energy players converge on Washington as China trade war lurks
Reuters, Julie Gordon, June 25, 2018
The world’s biggest oil and gas players are gathering for a summit in Washington D.C. this week that will be overshadowed by the specter of shifting trade patterns due to a trade dispute between the United States and China. The uncertainty comes at a historic moment for the United States, which has become the world’s biggest natural gas producer, one of the top crude oil producers, and a growing exporter of both. It will host the triennial World Gas Conference for the first time in 30 years. “The timing is unfortunate,” said Charlie Riedl, executive director of the Center for LNG, noting the U.S.-China trade scuffle has ramped up uncertainty just as the next wave of U.S. liquefied natural gas producers are trying to finalize offtake deals needed to start construction.
Our Take: Timing is everything. The U.S. has become the biggest producer of natural gas and China is the largest consumer. Deals as large as the one AGDC is trying to negotiate are hard to make without a trade war. Headlamp would like to tip our hat to both Keith Meyer and Frank Richards who are speaking at the conference. Hopefully good things will come from it.
Future of Big Oil Increasingly Shaped by Fate of Global Gas
Bloomberg Markets, Kevin Crowley and Kelly Gilblom, June 24, 2018
Big Oil’s fortunes are becoming tied more closely to natural gas than ever before. Majors including Royal Dutch Shell Plc and BP Plc have boosted their proportion of gas output in recent years, helping them trim Exxon Mobil Corp.’s lead as the world’s most valuable oil company. Meanwhile Chevron Corp. added two giant Australian liquefied natural gas projects and Exxon is punching back with two major projects of its own, in Papua New Guinea and Mozambique. “We see the market growing rapidly, with gas demand growing faster than overall energy demand,” said Steve Hill, executive vice president for gas trading at Shell, the world’s biggest LNG producer. “We don’t see renewables as being a threat to gas.”
Our Take: Natural Gas is a more affordable energy and is easy to transfer. However, the high upfront costs make the “payback periods” much longer. Again, Alaska take note, stability is key for projects that have long term returns on companies’ investments.
EPA Is Said Ready to Propose Biofuel Quotas After Backlash
Bloomberg, Jennifer A. Dlouhy and Mario Parker, June 25, 2018
Oil industry opposition prompted Trump administration officials to at least temporarily abandon a proposal that would force larger refineries to use more biofuel to make up for exemptions granted to smaller facilities, according to two people familiar with the plans. The Environmental Protection Agency is on track to issue a slate of biofuel quotas without the contentious proposal as soon as Friday, said the people, who asked not to be named to discuss private negotiations. The move follows intense deliberation over the biofuel quota redistribution plan as two key Trump constituencies — the oil industry and agricultural interests — clash over the U.S. renewable fuel mandate.
From today’s Washington Examiner, Daily on Energy:
TRUMP’S ‘AMERICA FIRST’ TRADE POLICY DISRUPTING HIS OIL AND GAS AGENDA: President Trump’s “America First” initiative is going to war with his “energy dominance agenda, as his protectionist policies and expected intervention in competitive markets are putting up barriers to the oil and natural gas industry.
More than dominance: It’s a perilous time in U.S. policy as the natural gas industry convenes in Washington this week for the World Gas Conference, the first time the U.S. is hosting the triennial event since the Reagan administration.
“You can rightly ask how an administration focused on energy dominance can be pursuing policies that interfere with energy dominance, and the answer is energy dominance is not the only goal of the administration,” Kevin Book, managing director for research at ClearView Energy, told Josh.
Unwarranted complaints? Many of Trump’s policies under his “energy dominance” agenda are helping the oil and gas industry. His administration is pursuing an aggressive deregulatory agenda, beginning the long process of rolling back environmental regulations and not imposing new rules. It is easing permitting for energy infrastructure projects, such as natural gas pipelines, to transport the shale revolution to the rest of the country. It is pushing for more liquefied natural gas terminals to export around the world.
Real barriers: But the Trump administration is imposing barriers on its effort to dominate world markets with U.S.-produced natural gas and crude oil.
Tariffs on imported steel are raising costs for pipeline producers that can’t obtain the unique grade of steel they need domestically.
Trump’s $50 billion tariffs on a variety of Chinese imports was met with a counterattack on U.S. energy from Beijing. China has said it will slap penalties on U.S. crude oil, though it will spare liquefied natural gas, because Beijing needs the cleaner-burning fuel source to weed itself off coal and reduce smog.
The Trump administration is also spooking natural gas businesses, and most everyone else in the energy industry, by promising to bail out coal and nuclear power plants as the legacy power sources struggle to compete with cheaper natural gas and renewables.