Headlamp: Did you hear the one about two Crofts and a Crawford?

July 21, 2017 | Posted in : News

Breaking down barriers. In the first regulatory agenda of the Trump administration, the White House’s Office of Management and Budget detailed when and how agencies plan to repeal numerous Obama administration rules regarding air and water pollution, fossil fuel extraction and more.

Freedom of Speech. A judge deciding whether to temporarily shut down the disputed Dakota Access oil pipeline said Thursday that he will allow North Dakota’s main energy trade group to weigh in.

When the free market says no…The Interior Gas Utility announced Thursday that “all meaningful work” at the borough owned utility has stopped. The utility is in dispute over $850,000 in expenses with the Alaska Industrial Development Authority (AIDEA) it’s main partner with the interior energy project, a $300 million effort to bring affordable natural gas to the Fairbanks North Star Borough.

Floating Energy. Qatar Gas Transport Company and Norwegian shipping business Hoegh LNG have embarked on a joint project to open a new market for Qatar to sell its LNG via a floating import terminal.  Work is expected to start on the import terminal in a few months.

When Harry met Chancy. “What’s an initiative without a Harry Crawford attached to it?” asks Curtis Thayer of the Alaska Chamber. “They haven’t been so successful in the past.” Initiative supporters would have to rush to get their proposed language approved by the state in time for next year’s election, and they’d also likely need to raise cash to hire people to gather the more than 30,000 signatures required to get any measure on the ballot.

First Reads:

White House details plan to roll back environmental regs
The Hill, Timothy Cama, July 20, 2017

State trade group can weigh in on Dakota Access pipeline
CNBC, Blake Nicholson, July 20, 2017

Project to bring affordable natural gas to Interior on hold
Fairbanks Daily News-Miner, Amanda Bohman, July 21, 2017

Qatar seeks to open new LNG markets with floating terminals
O&G Links, July 19, 2017

Citing legislative inaction, a few Alaskans might try to raise oil taxes through a citizens initiative
Alaska Dispatch News, Nathaniel Herz, July 20, 2017

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Morning Headlamp: Swanson River 60th Anniversary

July 20, 2017 | Posted in : News

Yesterday Headlamp had the privilege of attending the 60th anniversary of Swanson River. For those who were unable to attend, we want to bring the celebration to you.


Headlamp will return on Friday with your latest news and first reads.

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Headlamp: Russian collusion with anti-shale groups in U.S.

July 19, 2017 | Posted in : News

Hilcorp brings $ and jobs to Kenai. Hilcorp is moving ahead with its $75 million plan to transport oil across Cook Inlet by subsea pipeline and close a tank farm that is close to Redoubt Volcano, according to a permit filed with the US Army Corps of Engineers.

Crying fowl over ANWR?  House republican leaders this week released their budget plan, the first step in funding the federal government for the 2018 fiscal year. The Wilderness Society is crying foul, accusing them of “hijacking the budgetary process,” using parliamentary procedures to open ANWR to drilling through simple majority votes in the House and Senate.

Russian collusion with anti-shale groups in US. Congressman Lamar Smith and Congressman Randy Weber of the House Committee on Science, Space and Technology wrote a letter to Secretary of the Treasury Steve Munchin asking for an investigation into Russian influence against the U.S. shale industry.

Waxing and waning. In part 2 of “Pipeline at 40,” KTUU explores the challenges engineers and pipeline operators are facing as the amount of oil in the pipeline decreases. “The slower it goes, the more difficult and complex the problem is” according to Betsy Haines, senior engineering director for Alyeska Pipeline.

Fairbanks finds 10. The opening day of the filing period for local elections in Fairbanks drew 10 people.  Many first-time candidates for assembly, school board and the borough-owned gas utility board, as well as veterans David Pruhs, Aaron Lojewski and Jack Wilbur have filed.

First Reads:

Hilcorp moves forward on plan to close volcano-threatened oil tank farm
Alaska Dispatch News, Alex DeMarban, July 18, 2017

Congressional budget subtly bores path to Arctic refuge drilling
Arctic Now/The Washington Post, Dino Grandoni, July 19, 2017

Russia’s Capitol is funding Anti-Shale groups in U.S.: House Committees
Oil & Gas 360, July 17, 2017

House budget could lead to Alaska refuge drilling
The Hill, Timothy Cama, July 18, 2017

Pipeline at 40: ‘Cold War’ against lower flow
KTUU, Mike Ross, July 18, 2017

Local election filing period off to brisk start
Fairbanks Daily News-Miner, Amanda Bohman, July 19, 2019

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Morning Headlamp: Construction Pioneers share stories of Pride

July 18, 2017 | Posted in : News

Pipeline at 40: Construction Pioneers share stories of pride. The Trans Alaska Pipeline, which winds across 800 miles from one end of the state to the other, reached a milestone in its history this summer, with its 40th anniversary. “There are few things in Alaska’s history that equals the impact of the magnitude of the pipeline,” said Dr. Stephen Haycox, distinguished professor emeritus at the University of Alaska, Anchorage. “The money that it brought in was unimaginable.”

One giant step. Mike Dunleavy, the socially and fiscally conservative Republican state senator from Wasilla, intends to run for governor next year, according to paperwork he filed Monday with Alaska campaign finance regulators. Dunleavy has for months publicly acknowledged his interest in the job, which is currently held by independent Bill Walker. Dunleavy’s “letter of intent” filed Monday with the Alaska Public Offices Commission is a formal step that allows him to start spending money and accepting campaign contributions.

Lower for Longer.  BP plc (BP-NYSE) CEO Robert Dudley defined his industry’s mantra over two years ago as “lower for longer,” a reference to where oil prices would trade and why oil companies needed to downsize to survive this environment. At last week’s World Petroleum Congress in Istanbul, Turkey, Mr. Dudley may have coined the new industry mantra: “We have to stay on a capital diet.”

Oil could drop below $40 - Goldman Sachs

What if they’re wrong? In a long-term outlook published last month, Bloomberg New Energy Finance predicted that gas’s market share in global power generation will drop from 23 percent last year to 16 percent by 2040, and that gas-fired power generation capacity will start to decline after 2031. BP Plc has highlighted “risks to gas demand” as a key uncertainty, including the possibility that consumption plateaus by 2035, “squeezed out by non-fossil fuels.” If those forecasts play out, it has huge implications for Total, BP and other oil majors already grappling with a possible surge in electric car use. Gas-exporting nations most notably Russia, Qatar and Australia will also be exposed. The global gas industry, based on multi-billion dollar pipelines and export plants, has decades long investment cycles and decisions being made today rely on rising demand until the middle of the century.

AOGCC Supports BP’s Actions.  BP has shut in 14 wells at the Prudhoe Bay field to prevent a replay of the oil and gas release on April 14 that the company now believes was caused by a “mechanical failure” after permafrost, melted from hot production fluids, caused the ground to sink and put extra pressure on the well. Additional details about the incident and BP’s plans to address the problem emerged in a June 27 report from BP to the Alaska Oil and Gas Conservation Commission. The agency said in a statement that it agrees with BP’s conclusion and plan. Another nine wells are also being reviewed.  A key element of the plan is a risk assessment of the potential for similar problems at the 14 “highest risk” wells with similar designs that have already been shut in.

First Reads:

Prudhoe Bay spill in April leads to wider review, suspension of 14 wells
Alaska Dispatch News, Alex DeMarban, July 18, 2017

Conservative lawmaker Dunleavy is first high-profile candidate in 2018 governor’s race
Alaska Dispatch News, Nathaniel Herz, July 17, 2017

Sorting Out Long-term Thinking On Oil vs. Short-term Noise
Oil Pro, Allen Brooks, July 18, 2017

What If Big Oil’s Bet on Gas Is Wrong?
Bloomberg, Jack Farchy and Kelly Gilblom, July 17, 2017

Pipeline at 40: construction pioneers share stories of pride
KTUU, Mike Ross, July 17, 2017










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Morning Headlamp: When is enough, enough? Headlamp thinks now.

July 17, 2017 | Posted in : News

Same song, 7th verse. The Alaska Legislature passed a late-night deal Saturday to end cash payments to oil companies, beating a midnight deadline to end its special session with an hour to spare. The House vote was 33-6 and the Senate’s was 18-0, in actions that both came after 10:30 p.m. Saturday. There was no public or industry testimony on the latest version of the legislation, House Bill 111, which emerged at a joint House-Senate conference committee meeting earlier in the evening after hours of delays.

Uncertainty is the enemy of Investment. With the passing of H.B. 111, it’s now the 7th change in oil tax policy in past 12 years. The bill includes a legislative working group that will monitor Alaska’s oil and gas issues.  Alaska Oil and Gas Association President and CEO Kara Moriarty says the working group, which will keep the oil and gas tax debate going, sends a message to the industry that more changes to oil tax policy could be coming.

Rumor mill is wrong. Rumors about Armstrong and Repsol’s plans for the Pikka unit development being slowed down are unsubstantiated. In fact, operator Armstrong is getting ready to file a permit for the Pikka 2 well, which will be drilled this winter in the southern tip of the Pikka unit a couple of miles from where the Putu 1 well should have been drilled last winter.

Secret Science Soiree. Members of the House Committee on Science, Space and Technology, led by the committee’s chairman, an outspoken climate skeptic, made a secretive trip to key Arctic research sites in May, according to a new report from Buzzfeed News. The congressional delegation was led by Rep. Lamar Smith, a Republican from Texas, head of the science committee and vocal skeptic of climate science. Scientists quoted by the news outlet said that they were told to keep mum about the visit.

Make room for more. ExxonMobil is proposing a dramatic increase in oil production at a North Slope field, under the terms of a 2012 settlement with the state that ended a seven-year legal battle, according to a newly submitted development plan. The oil giant has begun working on engineering studies and seeking regulatory approval to boost the light oil, or condensate, being produced at the Point Thomson field – to more than 50,000 barrels daily from its current capacity of up to 10,000 barrels.

Petroleum Price Pendulum. Oil swung between gains and losses in New York after China’s economic growth in the second quarter surpassed expectations, while OPEC’s commitment to supply curbs weakened. While oil rose last week, prices in New York have been below $50 a barrel on concerns elevated global supplies will offset output curbs by the Organization of Petroleum Exporting Countries and its allies.

Dry hole blues. Statoil has made a smaller-than-expected gas find in the Barents Sea near its Snoehvit gas field, the company said on Monday. The find at the Blaamann well is estimated to hold up to 3 billion standard cubic meters of recoverable gas. No oil was found. “We were exploring for oil and this is not the result we were hoping for,” Jez Averty, Statoil’s head for exploration in Norway and Britain, said in the statement.

State has the means. A top credit rating agency this week downgraded Alaska’s credit, the latest drop the state has seen as its financial problems drag on. Moody’s Investors Service downgraded Alaska’s general obligation debt one notch, from Aa2 to Aa3, the agency said Thursday. Moody’s also maintained a negative outlook for Alaska. “The downgrade reflects the state’s ongoing structural budget imbalance, a small economy with concentration in energy production, large fixed costs, and heavy pension burden,” the Moody’s statement said. Alaska “still has the means” to fix its fiscal problems, Moody’s said, “and our baseline expectation remains that the state will do so before exhausting its still-considerable liquid reserves.”

First Reads –

Alaska Legislature passes last-minute oil tax deal, but capital budget is still pending
Alaska Dispatch News, Nathaniel Herz, July 16, 2017

Latest change to oil tax policy could impact future investment
KTUU, Blake Essig, July 16, 2017

Congressional science committee members secretly visited Arctic research sites
Arctic Now, Kelsey Lindsey, July 14, 2017

Under settlement, ExxonMobil proposes more oil production at Point Thomson field
Arctic Now, Alex DeMarban, July 17, 2017

Oil Snaps Winning Streak as Doubts Over OPEC Cuts Weigh on Price
Bloomberg, Jessica Summers, July 16, 2017

Statoil says Norwegian Arctic gas find disappoints
Reuters, Reuters Staff, July 17, 2017

Pikka development on track, new well in works to replace COP’s Putu
Petroleum News, Kay Cashman, July 16, 2017

Moody’s downgrades Alaska’s credit rating again
Alaska Dispatch News, Annie Zak, July 14, 2017

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Morning Headlamp: Pulling the Wool over our eyes; 100 lawyers and counting

July 14, 2017 | Posted in : News

Pulling the Wool over your eyes. Rep. Adam Wool has an opinion piece in the Alaska Dispatch News discussing Alaska’s “good run” and listing the options before the Legislature to address our fiscal situation, but the piece fails to provide any real insight or solutions. We need action, not op-eds.

$400,000 and counting… So far, Alaska lawmakers have collected $393,340 dollars in per diem during special sessions this year, according to numbers provided by the Legislative Affairs Agency Thursday. The legislature is now likely headed for a third — after negotiations on oil taxes derailed Wednesday. That would cost the state hundreds of thousands more.

Time keeps on ticking, ticking ticking… During a press conference held Thursday afternoon, House Republicans urged Democrats to return to Juneau to finish deliberation on the bill, saying that some Democrats remained in Anchorage was hoping to saving the state travel money. “We could come down here and we could save the state a million dollars a day,” said Rep. Charisse Millett, R-Anchorage. “If you really want to save the state money, let’s talk about cashable credits. To save the state real dollars, this is the opportunity.” Of the 40 sections of the bill, the House and Senate committees agreed on 35 sections, Millett said. Click here to see the “Cashable Tax Credits” calculator on the House Republicans website showing the debt we’re accruing through inaction.

On the up and up? Oil prices rose 1.3 percent on Thursday after much stronger demand in China overshadowed a downbeat report by the International Energy Agency (IEA) that showed higher production by key OPEC exporters. Brent crude LCOc1 settled up 68 cents or 1.42 percent at $48.42 a barrel. U.S. light crude CLc1 settled up 59 cents at $46.08 a barrel. “The market is trying to stabilize,” said Gene McGillian, manager of market research at Tradition Energy.

Did you hear the one about the lawyer? President Donald Trump promised to grow jobs by rolling back Obama-era energy and pollution rules. And he’s fulfilling his pledge, but not how he intended. In just six months, Trump’s policies have resulted in a surge in employment — for environmental lawyers. Abigail Dillen, a vice president of litigation for Earthjustice, a nonprofit organization that filed the Dakota Access lawsuit, said her group and others are girding for years of court battles over bedrock environmental laws, such as the Clean Water Act and Clean Air Act. Earthjustice has increased its staff of lawyers since November to 100, and is planning to hire another 30 in coming months.

Let’s talk ANWR. A delegation from Yukon and Alaska is in Washington D.C., this week, trying to convince U.S. politicians to protect the Arctic National Wildlife Refuge from oil and gas drilling. The refuge, on Alaska’s remote north slope, is home to polar bears, muskoxen and migratory birds, and it’s the calving grounds of the vast Porcupine caribou herd. The area is also rich in untapped oil.

First Reads

We had a good run; now we need to pony up
Alaska Dispatch News, Adam Wool, July 13, 2017

Special sessions have cost nearly $400,000 in per diem, lawmakers likely headed for another
KTVA, Liz Raines, July 13, 2017

Time running out for oil and gas tax bill
Fairbanks Daily News-Miner, Erin Granger, July 14, 2017

Oil rises as robust Chinese demand seen helping drain glut
Reuters, Jessica Resnick-Ault, July 12, 2017

Trump’s ‘drill, baby, drill’ energy policies are being met by ‘sue, baby, sue’
Arctic Now, Stuart Leavenworth, July 17, 2017

Yukon delegates in Washington aim to ‘put a face’ to the Arctic National Wildlife Refuge
CBC News, July 13, 2017

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Morning Headlamp: A tale told by a legislator, full of sound and fury. Signifying Nothing.

July 13, 2017 | Posted in : News

It is a tale told by a legislator, full of sound and fury. Signifying Nothing. Who knew Shakespeare, in Macbeth, would foretell the new oil tax provisions proposed by the House Majority yesterday? Here’s what others had to say about elements of the House Majority’s proposed tax structure:

Every regime, everywhere you go, allows, especially with a development like Smith Bay, everyone who develops to deduct the cost of what it took them to get that production from future revenues from that project. Every regime…To deny that would really move Alaska to the bottom of the competitive scale.” – Rich Ruggiero, Oil and Gas Consultant for the House Majority

“Every jurisdiction I have worked in and every contract I have written allows full recovery of an operator’s NOLs before they pay profit-based taxes.”Rich Ruggiero

“A compromise to end cash payments to oil companies is on thin ice because of the propaganda perpetuated by Anchorage Representative Les Gara and the politics of the House Democrats. The oil and gas industry has always been Gara’s favorite target, and he’s launched a fresh campaign to hold hostage a compromise on cashable credits that will save Alaska a million dollars per day.” – Hal Ingalls, Denali Drilling 

“If you want to put the industry in the freezer and shut it down…this is how to do it…That’s not the avenue we should go down, it would be disastrous…Quite frankly, put it in the shredder.” – Senator Bert Stedman, frequent critic of SB 21 and supporter of oil tax revisions 

“The House Majority has it wrong on cashable oil credits…The main point of the article is they’re misrepresenting the value of deductions vs. credits.” – Matt Buxton, Editor, Midnight Sun AK Blog 

What is driving the House Majority? Their consultant, the Department of Revenue, allies in the legislature, members of the media and Alaskan workers think their bill is bad. Yet they continue, jeopardizing a capital budget and a strong construction season.     

Jobs on the way to Alaska! On Wednesday, the Bureau of Ocean Energy Management said it had approved the plan by Eni US, a subsidiary of Eni S.p.A., to drill four exploration wells into federal submerged lands in the Beaufort Sea. The drilling would start at the Spy Island drill site at the Nikaitchuq field. The site is northwest of Prudhoe Bay, about 15 miles.  Drilling is expected to begin in December 2017, the agency said. Only winter drilling will be allowed, after the Beaufort Sea surface freezes and can support an ice road and surface travel.

ASRC:  Nimble, Aggressive – Alaskan! There are some notable things about the federal government’s approval last week of an offshore lease unitization plan in the Alaska Beaufort Sea proposed by ASRC Exploration Inc., a subsidiary of Arctic Slope Regional Corp. of Utqiagvik. ASRC is the Alaska Native regional development corporation for the state’s northern region. This signals a return, if not by a major oil company, then at least a nimble and aggressive Alaska company, to the Arctic offshore. Since Shell pulled out of the Chukchi Sea two years ago no one has shown much interest in the region. Secondly, it highlights ASRC’s continued evolution toward becoming a full-blown oil explorer and developer from its beginning as a landowner and passive royalty owner. It’s worth noting that Doyon Ltd. and Ahtna Inc., two other Native corporations, are exploring state-owned lands in Interior Alaska.

Our cup runneth over with…LNG. The United States is on track to have capacity to become the world’s second largest exporter of liquefied natural gas (LNG) by the end of 2022, just behind Australia and ahead of Qatar, the International Energy Agency (IEA) said. Overall, global LNG export capacity would reach 650 billion cubic meters (bcm) a year by the end of 2022, compared to less than 452 bcm a year in 2016, the IEA said in its annual report on gas markets. However, the new LNG capacity is being added to an already well-supplied market, while demand is falling in some of the traditionally large importing nations, such as Japan, it said.

Why this matters to Alaskans: The Alaska LNG project faces serious competition to export LNG, in a timely fashion. 

LNG Competition leads to mothballs. In 2016, ConocoPhillips announced that it was putting its liquefied natural gas plant in Kenai on the market. But, the company hasn’t yet found a buyer and a company spokesperson said it’s going to save expenses by mothballing the facility this fall. The facility — under various owners — has been liquefying Cook Inlet gas for sale to overseas markets for nearly 50 years. It is the last piece of infrastructure that ConocoPhillips owns in Cook Inlet. The Kenai LNG facility is competing with a world market that is awash in natural gas.

Exxon enhancing oil recovery at Prudhoe. With the Alaska LNG Project far from a sure thing, ExxonMobil is preparing to stuff natural gas from its Point Thomson field into the Prudhoe Bay oil and gas pool in order to make good on its 2012 settlement with the State of Alaska. ExxonMobil outlined the major, long-term project concept in the 2017 Point Thomson unit plan of development it submitted to the Division of Oil and Gas June 30.

No one is immune. Exxon Mobil Corp.Chevron Corp. and other oil majors could see their credit ratings slashed again if they fail to cut costs and reduce their growing debt loads in the next year, according to an S&P Global Ratings report. The world’s largest drillers failed to take advantage of high prices during the boom years before 2014 to repay debt, according to the report published on Tuesday. Instead they embarked on costly investments in new projects and dividends, leaving them unprepared for the painful downturn that ensued.

One more opinion on oil prices. Despite recent volatility in the price of oil, the CEO of BP believes the market is currently balanced and production is meeting demand on a daily basis. “I think everyone uses the word balanced and they forget that it means different things to different people. To me, it means on a daily basis production and demand is equal. So on a daily basis, the market is balanced, it’s just the inventory levels in the world that are so high,” Bob Dudley, chief executive officer of BP told CNBC on Wednesday.

What’s so bad about a 44% increase? All 11 members of the Anchorage Assembly approved ML&P’s request for half a million dollars in order to provide expert testimony in its rate case currently before the Regulatory Commission of Alaska. “With any rate case that we do, we have experts that deal with a lot of complex and technical issues,” Mark Johnston, general manager for ML&P said. “We don’t necessarily have the staff to be able to do that. “The rate case is over whether ML&P’s new power plant is needed. Some of its top customers, such as Providence Hospital and the Federal Executive Agencies, representing JBER, are arguing it isn’t. Currently, ML&P has the approval to raise its rates by just over 37 percent. That was allowed starting mid-February. However, it wants that number to be nearly 44 percent.


First Reads

State senator says House oil-tax proposal should go in the shredder, suggesting oil-tax deal is far off
Alaska Dispatch News, Nathaniel Herz, July 12, 2017

Drilling from man-made island into federal Arctic leases OK’d
Alaska Dispatch News, Alex DeMarban, July 12, 2017

There’s rich history behind an Alaska Native corporation’s bid to become an Arctic oil company
Arctic Now, Tim Bradner, July 13, 2017

U.S. on track to be world’s No.2 LNG exporter by end-2022: IEA
Reuters, Nina Chestney, July 12, 2017

Oil Majors Face Ratings Cuts Amid Weak Recovery, S&P Global Says
Bloomberg, Giacomo Tognini, July 11, 2017

BP CEO says he’s not expecting big rise in oil price, says market balanced on a daily basis
CNBC, Silvia Amaro & Steve Sedgwick, July 12, 2017

ExxonMobil working on plan for Point Thomson gas at Prudhoe
Alaska Journal of Commerce, Elwood Brehmer, July 12, 2017

Tax credit reform must be fair
Fairbanks Daily News-Miner, Hal Ingalls, July 13, 2017

Wrench in oil tax negotiations derails second special session
KTVA, Liz Raines, July 12, 2017

Lawmakers still gridlocked as oil tax special session draws to a close
KTUU, Austin Baird, July 12, 2017

ConocoPhillips tomothball LNG facility
Peninsula Clarion, Rashah McChesney, July 12, 2017

Anchorage Assembly approves $500,000 contract for ML&P to bring in expert witness
KTVA, Steffi Lee, July 12, 2017

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Morning Headlamp: EPA Clean Water Act – 404 “see” you later?

July 12, 2017 | Posted in : News

Not so fast on methane gas. In a 2-1 decision, the United States Court of Appeals for the District of Columbia Circuit ruled last week that the EPA could not postpone implementing the methane rule for three months, denying the agency’s request. But Justice Department lawyers representing the EPA asked to delay enforcement while the agency considers an appeal. Public interest groups and local stakeholders at a public hearing Monday urged the Environmental Protection Agency to continue to enforce methane regulations.

EPA proposes reversing harmful determination for Pebble Project. The Environmental Protection Agency is proposing to withdraw its July 2014 Clean Water Act propose determination that would have implied restrictions on the discharge of dredged or fill material at the Pebble Project in the Bristol Bay watershed. The agency is beginning a public comment period before making a decision. The rule in question, Clean Water Act Section 404(c) was proposed in 2014. It would have restricted discharges of dredge or fill material into the Bristol Bay watershed. It required a permit specific to the section. The mine’s backers saw it as a pre-emptive veto of the mine. The rule came after a study by the EPA’s Region 10 to assess the Bristol Bay watershed, which feeds one of the state’s largest salmon fisheries. Mike Heatwole, spokesman for the Pebble Partnership, said Tuesday “a lot of Alaskans who work in the resource development community looked at it and said ‘if the federal government can do this to Pebble, who’s next in the queue to get this unfair treatment?’”

Anybody’s guess. Oil rebounded Wednesday to rise above $48 a barrel in response to a drop in U.S. fuel inventories and a reduction in the U.S. government’s forecast for crude output. Oil prices for the last 30 days are shown below:

(Chart from Nasdaq.)


Exporting LNG can harm local markets. Australia has been making many headlines in global news outlets recently, related to the situation of its gas industry. It has been experiencing electricity shortages in cities like Adelaide and there’s a dilemma between policy makers ramping up exports of LNG and internal consumption. What will happen to one of the top gas producers and key ally of the United States, now that other players like Qatar and Russia are experiencing problems of their sort? Could it spell positive news for the U.S. in this regard? Read more from Oil Pro here.


First Reads

Advocates for Methane Rule Dominate EPA Hearing
Morning Consult, Iulia Gheorghiu, July 10, 2017

EPA considers withdrawing Clean Water Act restrictions for Pebble Project
KTUU, Kortnie Horazdovsky and Mike Ross, July 11, 2017

Uptick for oil prices amid fall in US inventories
Oil Pro, Staff, July 12, 2017

How Energy-Rich Australia Exported Its Way Into an Energy Crisis
The Wall Street Journal, Rachel Pannett, July 10, 2017

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Morning Headlamp: Read before you vote? We’d appreciate that.

July 11, 2017 | Posted in : News

Incentives, Investments, Infrastructure. An Alaska state agency will add more money to the $70 million it has already invested toward building an oil-processing plant and related infrastructure on the North Slope as it seeks to move a project that stalled as oil prices and Alaska’s economy took a nosedive. The Alaska Industrial Development and Export Authority on June 29 unanimously agreed to invest another $2.5 million to help support construction of the processing facility, known as the Mustang Operations Center and located southwest of ConocoPhillips’ giant Kuparuk River field. The additional money is meant to help independent operator Brooks Range Petroleum Corp. complete the first well at the Mustang field.

Read it before you pass it? Governor Walker and members of the largely Democratic House majority coalition expressed optimism Monday that lawmakers could agree on a plan to eliminate cash incentive payments to oil companies by the end of the week. But an Anchorage senator who’s a key member of her chamber’s Republican-led majority said she’s still waiting to see details of the House’s latest proposal. “I’m not 100 percent clear on exactly what the proposal is yet. I don’t vote or accept anything until I’ve seen it in writing,” Sen. Cathy Giessel, chairwoman of the Senate Resources Committee, said in a phone interview. “So, my caucus will review it when we get it.” Headlamp applauds Senator Giessel for wanting to read legislation before she supports it and is disappointed that majority members like Tarr and Grenn are out of state instead of doing their job.

And lest we forget, these overtime sessions are costing Alaska real money. Click here for the latest from KTUU’s Overtime Pay Clock. We don’t suggest you linger too long here though, as watching the price of indecision rise can cause high blood pressure. 

FERC Dysfunction threatens infrastructure investment. Rebuilding America’s infrastructure is one of the pillars in President Donald Trump’s plan to generate jobs. But a lack of sitting commissioners at the Federal Energy Regulation Commission (FERC) has sidelined up to 15 energy infrastructure projects valued between $15 billion and $25 billion and an estimated 75,000 jobs. Energy CEOs are warning if FERC is not functional by August break, the private investment dollars for these projects might be gone.  The agency normally has a five-commissioner panel, but has only one currently. Two others are awaiting a vote on their nomination by the full Senate, and another could be nominated soon. Without at least three commissioners, the FERC cannot conduct business, and it hasn’t had that quorum since February. Why this matters to Alaska: The Alaska LNG project is in the hands of FERC. 

Russian sanctions could hurt US oil and gas interests. Congress wants to increase sanctions on Russia for meddling in the 2016 election, and recently passed a bill in the Senate, 98-2. One problem: a provision that expands restrictions on how U.S. energy firms can interact with Russian counterparts. U.S. companies are already prohibited from investing in or advising on oil and gas projects in Russia. The Senate bill would also bar them from taking part in any project anywhere with sanctioned Russian firms.  This could bar U.S. companies from some of the biggest deepwater drilling projects around the world and thus help Russia and China. At issue is a quirk of the oil and gas industry known as “unitization”—a technical term for operating efficiency. Governments will grant leases to many industry players for different blocks of the same oil field. While the leases are stand-alone deals, the government will require all players to jointly create the infrastructure (pipelines, etc.) to efficiently develop the field. The House can fix this provision.

It’s a first! US ships oil to India. A type of U.S. crude pumped in the Gulf of Mexico is proving to be more attractive in the fastest-growing oil market compared with Middle East staples that are on offer.  Indian Oil Corp., the nation’s largest refiner, has bought Mars Blend crude for arrival in October to the South Asian nation, according to Arun Kumar Sharma, the company’s finance director. That’s the processor’s first purchase of American supply. About 1.6 million barrels of the grade will be loaded with 400,000 barrels of West Canadian Select on a very large crude carrier, he said.

Prediction is very difficult; especially if it’s about the future – Niels Bohr. Oil prices fell on Tuesday as global oversupply encouraged several banks to cut their forecasts for crude for this year and 2018. “The fundamental mood has taken a turn for the worse,” Harry Tchilinguirian, head of oil strategy at French bank BNP Paribas, told Reuters Global Oil Forum. BNP Paribas slashed its forecasts for Brent by $9 to $51 a barrel for 2017 and by $15 to $48 for 2018. Barclays also cut its 2017 and 2018 Brent forecasts to $52 a barrel for both years from $55 and $57 respectively. Crude prices are about 18 percent below their 2017 opening levels despite a deal led by the Organization of the Petroleum Exporting Countries to cut production from January. Without a significant fall in oil inventories or a decline in U.S. drilling and production, Goldman Sachs said U.S. crude could drop below $40 per barrel.


First Reads

Are lawmakers near a deal on oil-tax credits? It depends on whom you ask
Alaska Dispatch News, Nathaniel Herz, July 10, 2017

Alaska boosts investment in North Slope oil processing facility to spark new production
Alaska Dispatch News, Alex DeMarban, July 11, 2017

Energy CEOs say investor money and jobs at risk because FERC isn’t functional
CNBC, Lori Ann LaRocco, July 10, 2017

A Russia Sanctions Trap
The Wall Street Journal, Editorial Board, July 10, 2017

U.S. Oil Lures Fastest Growing Guzzler as Arbitrage Opens Up
Bloomberg, Debjit Chakraborty and Serene Cheong, July 11, 2017

Oil jumps almost 2 percent after European storage data
Reuters, Scott DiSavino, July 11, 2017

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Morning Headlamp – Kick us when we’re down? From rags to riches.

July 10, 2017 | Posted in : News

Will the house majority kick Alaska when it’s down? Alaska’s gross domestic product declined for the fourth year in a row in 2016, the longest downward slide since records began in 1963, according to a new report released this week by the Alaska Department of Labor and Workforce Development.  Alaska’s GDP in 2016 fell 5 percent compared to the previous year, down to $50.7 billion. The figure has been on the decline since its peak of $60.9 billion in 2012, according to the report, which uses figures from the U.S. Bureau of Economic Analysis. That drop last year is due to Alaska’s recession, which took hold in late 2015, and “nearly all of the loss has been attributable to the oil and gas sector,” the report said. Alaska has never before had a slide in GDP — the value of goods and services the state produces — that lasted more than a year.

From rags to riches. What were things like in Alaska before oil? They were pretty tough. Taxes were high; jobs were scarce; the economy was dicey, and the young state of Alaska was basically broke.   “Alaska was a wonderful place to live, and you could leave your doors unlocked, but we needed everything: schools, hospitals, roads, sewer, water, power, docks. Mostly we did without, unless the federal government had already built it,” recalls Judy Brady, who arrived in Fairbanks in 1963 from Idaho. She went on: “We had the highest infant death rate in the nation, and the highest incidence of tuberculosis. We had at least 2,000 high school-age rural students with no school to go to, so they just didn’t.”

E Pluribus Unum (aka Out of Many One.) The Alaska Native company, ASRC Exploration hopes to succeed where Shell didn’t. It’s currently asking federal regulators not to cancel a block of leases once held by Shell in federal waters at Camden Bay about 15 miles off the North Slope coast northwest of the Arctic National Wildlife Refuge. ASRC Exploration acquired the leases from Shell in 2016. The company recently cleared one hurdle when the U.S Bureau of Safety and Environmental Enforcement approved its request, combining 20 leases into a unit, Mark Fesmire, the agency’s Alaska region director, said on Friday. The “unitization” allows regulators to treat the group of leases as a single, large lease, so that activity in one lease can keep all the leases alive. “ASRC Exploration is encouraged by the decision to approve the unitization,” said Ty Hardt, a spokesman with Arctic Slope Regional Corp. The exploration company “”remains hopeful” the extension request will be approved.

ICYMI. IMO. The United Nations agency that sets rules for international shipping said Friday it will develop rules about the use of heavy fuel oil by ships in Arctic waters. A committee of the International Maritime Organization, meeting in London, agreed to a proposal submitted by seven IMO members, including Canada, the U.S. and Norway, to start the rule-making process. It will take up the issue at the committee’s next meeting in April 2018, according to TradeWinds.  The use of heavy oil fuel has been targeted by environmentalists and indigenous groups, which hope to see an Arctic HFO ban added to the Polar Code, a list of environmental rules put together by the IMO.

Barron’s sees $60/bbl. in 2017. Accelerating world oil demand and reduced supply from the Organization of the Petroleum Exporting Countries (OPEC) could push crude prices up to $60 a barrel before the end of the year, according to a report from Barron’s. The report cites research from Citigroup senior energy analyst Eric Lee, who previously called for a bear market in oil when the price was above $100. The decline in recent weeks to a low of just over $44 for Brent crude LCOc1, the international benchmark, has made Lee a short-term bull, Barron’s notes.


First Reads

Alaska’s GDP just saw its longest decline on record

Alaska Dispatch News, Annie Zak, July 8, 2017

Before oil, things weren’t that easy in Alaska
Fairbanks Daily News-Miner, Tim Bradner, July 8, 2017

Native Corporation makes move toward exploring for oil in Arctic Ocean, where Shell failed
Alaska Dispatch News, Alex DeMarban, July 10, 2017

IMO says it will address Arctic heavy fuel oil regulation

Arctic Now, Kelsey Lindsey, July 7, 2017

Oil could hit $60 before year-end: Barron’s, citing Citi analyst
Reuters, Dion Rabouin, July 9, 2017

Memoranda won’t get Alaska a gas line
Alaska Dispatch News, Paul Jenkins, July 8, 2017

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