Headlamp – Alyeska makes Prince William Sound safer than ever before. Is gas global yet?

April 6, 2018 | Posted in : News

New tug arrives in Prince William Sound – safer than ever before. On a picture-perfect April day in Port Valdez, Alyeska Pipeline Service Company, the operator of the trans-Alaska pipeline, took a small band of reporters and camera crews on a tugboat. During a spin around the Port Monday — during which reporters were encouraged to wander around, chat with the captain and take photos — Alyeska staff and the boat’s crew eagerly showed off the Commander, a sparkling new, blue tug built by the Louisiana-based company Edison Chouest Offshore. The tugboats, barges and crews now arriving in Port Valdez are the most visible sign of a huge transition taking place in Prince William Sound. Alyeska Pipeline Service Company is bringing on Edison Chouest as a new contractor responsible for oil spill prevention and response. The switch has drawn scrutiny and criticism, so Alyeska is trying hard to reassure Alaskans that Prince William Sound — the site of the 1989 Exxon Valdez oil spill — will be safer than ever before. Nine new tugboats like the Commander will help guide oil tankers. Four new custom-designed response barges are outfitted and crewed to respond to an oil spill

Show us your shocked face – Josephson wants more oil taxes. Rep. Andy Josephson, one half of the chairmanship of House Resources Committee, let it slip Wednesday that the 2018 legislative session will go beyond its 90-day limit and as far as 120 days. Since he has that extra time, his committee will roll out new oil taxes that Democrats have been working on. Rep. Andy Josephson said, “We’ll be hearing other legislation, so that’s sort of the bad news, the good news is uh and I can’t make a promise about this but I think many of us are wondering between day 90 and day 120 uh what this committee will have before it and uh at this point and I may to have to change that in conjunction with my co-chair, it may be that there won’t be lots of burden, um although there may be a bill coming toward uh us that’s imminent and quite absorbing.”

Is Gas Global Yet? Is gas a global commodity, like oil? The question comes up often, and the answer is usually “not yet.” But the changes in today’s market seem profound and transformational. The liquefied natural gas (LNG) trade is expanding rapidly, connecting hitherto disparate markets. There is a growing market for buying and selling LNG on a short-term basis, resulting in more flexibility and liquidity. The barriers to entry have fallen, leading more countries to import LNG. And gas prices are set increasingly on their own terms, weakening a historical link to oil that stretches back decades. By most measures, gas is more global than ever before and is becoming more so daily. But it is too soon to call it a global commodity. The market is being transformed, but the transition toward a global market is slow, uneven, and irregular. And until more profound changes take place in Asia, a global market will remain beyond our reach. What Is a Global Market? In a global market, shocks reverberate globally. Rising gas production in the United States should lower prices in the United States as well as in Japan; a cold snap in the United Kingdom should lift prices in Argentina and Thailand; a drought in Brazil should make it more expensive for India and Poland to buy gas. This is how the oil market works: a strike in Venezuela; an attack in Libya or Nigeria; sanctions against Iran; a surge in oil production in America—all these events affect prices globally, even though their precise impacts might vary from one place to another. But gas is not oil. Oil is a global commodity; gas is still dominated by regional and local forces. Only 30 percent of the gas consumed in the world crosses a border; the equivalent for oil is over 70 percent. The oil market is flexible and nimble; the gas market is rigid, relying on costly infrastructure and often traded via long-term contracts. The price of oil is the same around the world, plus or minus transport costs and differentials to account for differences in quality. Gas prices, by contrast, are all over the place: they vary between and within regions, and they even vary within countries (by supplier). And while oil prices tend to move together, gas prices do not: one price might be rising, another falling. Oil prices moving in opposite directions is a rare exception; in gas, it is the norm.

First Reads:

As oil spill response vessels arrive, Alyeska argues Prince William Sound safer than ever
Alaska Public Media, Elizabeth Harball, April 5, 2018

Josephson: 120-day session will have higher oil taxes — again
Must Read Alaska, Suzanne Downing, April 5, 2018

Is Gas Global Yet?
Center for Strategic and International Studies, Nikos Tsafos, March 23, 2018

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Headlamp – CONSERVATIVES UP PRESSURE ON PRUITT TO APPROVE ALASKA MINE

April 5, 2018 | Posted in : News

“Incoming Scud missiles…” Susan Combs, a former Texas state official who compared proposed endangered species listings to “incoming Scud missiles” and continued to fight the Endangered Species Act after she left government, now has a role in overseeing federal wildlife policy. Combs was selected by Interior Department Secretary Ryan Zinke as acting secretary for fish, wildlife and parks. Zinke made the move after his bid to make her an assistant secretary for policy, management and budget stalled in the Senate. The nomination has been on hold since July because of opposition from Republicans and Democrats for various reasons. At first, the Senate Energy and Natural Resources Committee was preoccupied with a pileup of Environmental Protection Agency nominees who required confirmation. Later, the committee’s chairman, Sen. Lisa Murkowski, R-Alaska, held up hearings for Combs because of a dispute during President Trump’s attempt to repeal the Affordable Care Act. When that ended, Sen. Dick Durbin, D-Ill., held up the nomination over concerns about the administration’s bid to redraw national monument boundaries.

Walker wants to settle debt. Gov. Bill Walker wants to settle a debt with the oil industry – about $800 million worth. Walker wants to sell up to $1 billion in bonds so the state can buy back the outstanding oil and gas exploration credits. Rather than repay the minimum under state law over several years, the state will buy back the credits in full, but it would come at a discounted rate to the companies who hold these credits. The state designed the credit program several years ago to attract smaller companies to explore for oil and gas. It worked, but low oil prices made it difficult to pay off these credits as quickly as the state hoped. The proposal is part of a bigger fiscal plan Walker put forth in December when he introduced his budget. On Wednesday, Revenue Commissioner Sheldon Fisher explained the plan to the House Resources committee. “What this allows is that these companies can clean up their balance sheet,” Fisher said. “They can get a clean audit because they don’t have outstanding debt at that point, and then they can access other sources of capital that they will reinvest. So it won’t necessarily be the exact same money that will come back into the Alaskan economy but it will allow these companies to attract money.” House Rep. Chris Birch (R-Anchorage), who serves on the House Resources Committee, said he was initially skeptical but believes this is the right way to proceed. “I’m one for settling our debts,” he told committee members. “I think the Legislature has a duty and responsibility to do that, and to me, this is a reasonable solution. It provides predictability and closure.” So far, the budget, which was recently passed by the House and sent to the Senate, has the state paying down $49 million based on a statutory formula.

From today’s Washington Examiner, Daily on Energy:

CONSERVATIVES UP PRESSURE ON PRUITT TO APPROVE ALASKA MINE: A coalition of conservative groups told Pruitt it was “disappointed” with him, not because of his condo quarters in D.C., but for not fulfilling the action required to open a copper mine in Alaska.

They want Pruitt to restore the normal process of public comment in considering the mine request, which the Obama administration did not do.

The Obama EPA kept the Pebble Mine from opening by using its special Clean Water Act “veto” authority to stop the project.

Suspended animation: Pruitt was withdrawing the Obama-era action, but stopped midway through the process. And that’s where the groups have a problem.

Oh, the disappointment: “We are disappointed with your action to suspend the withdrawal of the Obama administration’s ‘Proposed Determination’ against mining in Southwest Alaska and urge you to move forward with overturning the ‘veto’ as soon as possible,” reads the letter reads signed by Americans for Tax Reform, Americans for Prosperity, Competitive Enterprise Institute and several others.

Returning due process: “This action would be an important step in returning fair and due process to the EPA,” the letter added.

Open for business: “Rescinding the pre-emptive 404(c) veto will signal to the rest of the world that the United States will re-institutionalize a traditional, rational permitting process — a basis businesses use to make sound investment decisions based on acumen — that would enhance the overall economic growth in the United States.”

First Reads:

A fierce opponent of the Endangered Species Act is picked to oversee Interior’s wildlife policy
Anchorage Daily News, Darryl Fears, April 4, 2018

House committee hears Walker’s oil tax credit bill
KTVA, Steve Quinn, April 5, 2018

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Headlamp – Pruitt takes over all big decisions on America’s Waterways

April 4, 2018 | Posted in : News, Uncategorized

Bellwether lease sales cause worry. The Trump administration heralded the government’s sale last month of U.S. drilling leases in the Gulf of Mexico as a bellwether. If that is the case, a Reuters analysis of the sale’s results shows reason to worry about demand in future offshore auctions. The sale brought in $124.8 million, as just 1 percent of the 77 million acres (31.2 million hectares) offered, found bidders. Reuters examined the acreage offered and leased, and nearly all the purchases show big drillers stuck closest to existing infrastructure, shunning the most far-flung areas. While U.S. crude oil production reached a record last year at more than 10 million barrels a day, most new development is in onshore shale regions. The U.S. Interior Department has said it wants to open all U.S. coasts for drilling, including the Atlantic and Pacific. But the Gulf result indicates limited interest even in already-developed areas, never mind unexplored coasts. The March auction included 9,088 deepwater blocks, each comprising roughly nine square miles. Only 105 of these blocks received bids and all but three of these were close to existing infrastructure and leases. “It kind of looks like they’re just shoring up their existing prospects right now,” said John Filostrat, a spokesman for the U.S. Bureau of Ocean Energy Management, the division of Interior that manages the auctions. Filostrat said the administration is still optimistic about future auctions and believes more auctions are needed to show the current trends.

From today’s Washington Examiner, Daily on Energy:

PRUITT TAKES OVER ALL BIG DECISIONS ON AMERICA’S WATERWAYS: The EPA chief has placed himself in charge of all decisions regarding the nation’s waterways, throwing to the wayside the agency’s regional offices that used to have some say on the matters, according to a leaked memo. In the new directive, Pruitt states he will be making all final critical decisions when it comes to the preservation of streams, ponds and wetlands. The group Public Employees for Environmental Responsibility provided CNN with a copy of the memo, which was dated March 30. The memo states: “With this revised delegation, authority previously delegated to regional administrators to make final determinations of geographic jurisdiction shall be retained by the administrator.”

First Reads:

Oil giants stay in their own backyards in U.S. auction
Reuters, Jessica Resnick-Ault, April 3, 2018

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Headlamp – Keep your friends close and your enemies as partners

April 3, 2018 | Posted in : News

Keep your friends close and your enemies as partners? While much of the United States is contemplating a trade war with China, Alaska is banking on making the nation a closer trading partner — one day, a major buyer of liquefied natural gas. President Donald Trump has threatened to impose tariffs on up to $60 billion in Chinese goods in an effort to rectify the trade deficit with China. In 2017, the U.S. had a $375 billion trade deficit with China, importing more than it exports to the country. But Alaska is barreling forward with its long-held pipe dream: building a pipeline to bring natural gas down from the North Slope and exporting it to Asia, offering the state a fresh chance at a booming natural resource economy. Project leaders and some analysts say that even if Trump’s trade talk escalates to an all-out trade war with China, Alaska’s LNG exports are unlikely to be caught in the crossfire. A trade war wouldn’t immediately jump to China not buying American LNG, said Kevin Book, an analyst with Clear View Energy Partners. “We have gas for export and that is a product that China needs,” Book said. And China wants to “diversify away from its reliance” on gas from Russia and central Asia, he said. “In a few words, China’s energy policy is ‘not running out,’” Book said. “A proximate exporter of a significant resource is going to look attractive to China irrespective to other considerations such as trade,” he said. “Only in the most heightened and economically devastating escalation” of a trade war would he expect a problem for exporting.

We’ve got your back. President Donald Trump called his embattled environmental chief Monday to assure him his job is safe amid mounting scrutiny of Scott Pruitt’s travel, hiring practices and an unorthodox condo rental arrangement last year, according to two administration officials. The president told Pruitt, the Environmental Protection Agency administrator, to “keep your head up” and “keep fighting,” because the White House has “got your back” said one of the officials, who asked not to be identified discussing personnel matters. That message was reinforced by White House Chief of Staff John Kelly in a telephone call to Pruitt on Tuesday morning. Pruitt didn’t respond to questions from reporters at an event Tuesday morning in Washington.

Security before Seismic. Alaska’s Governor Bill Walker has proposed to use $10 million previously earmarked for a seismic study of the Arctic National Wildlife Refuge to update the state’s archaic 911 system. The state administration last month asked the legislature for $10 million to start a seismic survey campaign in the ANWR aimed at encouraging oil and gas companies to consider bidding for the acreage to be offered under the new tax law approved at the end of last year. Alaska is currently struggling with a budget crisis, and allocating the scarce available resources is proving to be a tough task. The state has also seen a consistent decline in its oil production. The Energy Information Administration has projected that the state will produce an average 500,000 bpd next year. That’s down from 2.09 million bpd 30 years ago—a fact which has caused new exploration to be a top priority. Opening up the National Wildlife Refuge was a stipulation in the tax reform bill passed in December, and there were plans to hold the first lease sale there as early as 2019. Given the opposition from environmentalist groups and the Democrats, it was doubtful from the start if the lease sale would take place and, if it did, how much interest it would attract from the oil industry. Still, the Alaska administration evidently wanted to be prepared by spurring interest with up-to-date resource data—the only estimates for oil and gas in the ANWR are 30 years old. In his letter to Alaska’s Congress, Walker said oil and gas exploration in the ANWR is still on the table, but the $10 million is “not needed for seismic work at this time.” Alaska’s emergency system is very out of date, with people in some rural areas having to dial a 1-800 number for help. Under the new proposal, the funds will be used to centralize Alaska’s State Troopers emergency dispatch system. It currently relies on four regional hubs, all of which use different computer systems, the Anchorage Daily News notes.


First Reads:

Here’s what the Trump-China trade negotiations could mean for Alaska’s gas pipeline
Anchorage Daily News, Erica Martinson, April 2, 2018

Trump told embattled EPA Chief ‘We’ve Got Your Back,’ Official Says
Bloomberg Politics, Jennifer A Dlouhy and Jennifer Jacobs, April 3, 2018

Alaska Governor Scraps Arctic Oil Study
Oil Price.com, Irina Slav, April 3, 2018

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Headlamp – Let’s make a deal – 151 years ago today Seward signed the deal to buy Alaska.

March 30, 2018 | Posted in : News

Let’s make a deal. On this day in 1867, after an all-night negotiating session that ended at 4 a.m., Eduard de Stoeckl, the Russian envoy in Washington, signed an agreement with Secretary of State William Seward to sell Alaska — a remote and sparsely populated territory about twice the size of Texas — to the United States for $7.2 million, or about $125 million in today’s dollars. Russians started to settle Alaska in 1784, setting up trading posts and Eastern Orthodox churches, mostly along the coast. By the late 1850s, having lost the Crimean War to Britain, and fearful that Britain would seize Alaska in any future conflict, Tsar Alexander II decided to seek a deal. Authorities in St. Petersburg, the czarist capital, had first approached the United States in a bid to sell the territory in 1859 while James Buchanan was president. But the Civil War put the negotiations on hold. Seward, who was secretary of state under both Abraham Lincoln and Andrew Johnson, favored the deal, snubbing mocking editorials that castigated the proposed sale as “Seward’s icebox” and Johnson’s “polar bear garden.” For successfully carrying out the negotiation, the czar awarded Stoeckl $25,000, a sizable amount at the time, and an annual $6,000 pension. Stoeckl resigned as the Russian minister in 1869, spent the final years of his life in France, and died in Paris in 1892. Gwenn Miller, a historian at the College of the Holy Cross in Worcester, Massachusetts, told The Seattle Times that Washington insiders also thought the purchase would improve American prospects in trading with China while countering any British thoughts of encroachment on the West Coast. “It was really about Manifest Destiny,” she said, “about expanding the U.S.”

Mack says 30 days isn’t adequate. The U.S. Army Corps of Engineers is preparing an Environmental Impact Statement for the proposed Pebble mine, and the Walker administration is asking for more time to comment on it. The proposed gold and copper mine would sit upstream from Bristol Bay. Gov. Bill Walker has said he doesn’t support the mine and believes the priority should be on the region’s salmon. The Corps announced a “scoping” period that would last the month of April. During those 30 days, the Corps plans to identify the areas and concerns it will focus on in its environmental study. Alaska Natural Resources Commissioner Andy Mack is asking that the scoping period be three or four months. In a letter to the Alaska commander of the Corps of Engineers, Mack said a 30-day scoping period isn’t adequate for the scale of the project. Mack described it as “an open-pit mine, a mile across, near the headwaters of the most prolific salmon fishery in the world.” The Pebble Limited Partnership says it’s committed to minimal impact and says its latest design incorporates new environmental safeguards.

More Mitigation Measures – FERC to AGDC. The Federal Energy Regulatory Commission (FERC) has requested more details regarding mitigation measures to protect wildlife and public land during construction and operation of the proposed Alaska LNG project. FERC has requested that the Alaska Gasline Development Corporation (AGDC) submit tangible details on the measures the project would most likely use, even if they might later change. In a statement from Oil and gas news briefs from Larry Persily, FERC’s instructions come as the project team is working with federal agencies to determine how the 870 miles of pipeline, North Slope gas treatment plant and liquefaction plant in Nikiski would affect the environment — and decide on acceptable measures to reduce those impacts. The AGDC and FERC met for almost two and a half hours in Washington, D.C., on March 22 to run through roughly two dozen questions as the state works to finish answering regulators’ requests for details that will be used in preparing the project’s environmental impact statement (EIS). Persily wrote that at this time there is no deadline for the state to submit the missing information, other than AGDC is eager to respond so that FERC can meet its self-imposed timeline to issue the project’s draft EIS in March 2019.

More production helps to end two years of losses for BP. BP Exploration (Alaska) reported a gain in its annual financial statements for 2017 on Thursday. According to the company, the gain is attributed in part to the improved price of oil, the lack of production decline at Prudhoe Bay, and the reaped benefits from the recently revised federal tax code. “On the financial front, I am very proud of the progress that BP Alaska, and indeed the entire Alaska industry, has made in adapting to the lower for longer oil price environment,” said BP Alaska Region President Janet Weiss in a statement. According to the report, BP Exploration Alaska (BPXA) had a profit of $830 million; moreover, the profits include a reduction of the U.S. federal corporate income tax rate of “about $500 million in future federal corporate tax liabilities.” On Jan. 1, 2018, the tax rate changed from 35 percent to 21 percent. Also affecting BPXA’s gains is increased production at Prudhoe Bay, with “over 280,000 barrels per day for three years.” Plus, the price of oil increased from $43.27 per barrel in FY2016 to $54.49 per barrel in FY2017. BPXA’s financial report only represents a portion of BP Alaska, which is made up of several businesses. It does not take into account costs associated with TAPS, Alaska LNG and the marine shipping business. “All in, our entire BP Alaska regional businesses did make a profit of $118 million in 2017, which is lower than the 20-F reports for the BPXA business by itself,” said Weiss. “We also had positive cash flow for the year at about $619 million, following two straight years of losses.”

 

First Reads:

U.S. cuts deal to buy Alaska from Russia, March 30, 1867
Politico, Andrew Glass, March 30, 2018

Walker admin says Corps moving too fast on Pebble
Alaska Public Media, Liz Ruskin, March 29, 2018

FERC Wants AK LNG Project To Submit More Specific Mitigation Measures
KSRM Radio Group, Jennifer Williams, March 29, 2018

BP reports financial gains in Alaska for 2017
KTUU, Sidney Sullivan, March 29, 2018

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Headlamp – Oil Search comes to Alaska in Search of Oil. Tweet of the Day Stand for Alaska

March 29, 2018 | Posted in : News

Tweet of the Day: Stand for Alaska @standforalaska:

“If this ballot measure passes, (YesforSalmon) we believe we should do a public education campaign to tell folks that weren’t needing permits before, that they will now need them. – Ron Benkert, ADF&G Regional Supervisor”

From the South Pacific to Alaska. Before getting in to who’s drilling there and why, let’s make one thing clear about this oil field: the state of Alaska thinks it’s a very big deal. “Literally, if you line up the big fields up on the North Slope, this probably ranks third behind Prudhoe Bay and Kuparuk,” Alaska Department of Natural Resources Commissioner Andy Mack said. Prudhoe Bay and Kuparuk, of course, are the giant oil fields responsible for making Alaska the oil state it is today. And on a chunk of state and native owned land west of Prudhoe Bay called the Pikka Unit, one company thinks there might be over a billion barrels of recoverable oil. Mack said the oil in this area alone could reverse the long-term decline in the amount of oil flowing down the trans-Alaska pipeline. “If all goes well, it could lead to not only flattened production, but also increased production,” Mack said. So last fall, when a company a lot of Alaskans hadn’t heard of moved to take over developing this oil field, it got people’s attention. Oil Search is a company based in Papua New Guinea, a country just south of the equator and just north of Australia, where it also has offices. An oil project in the Arctic may seem like an odd leap for a company from an island nation in the South Pacific. But in a recent interview, the newly-minted president of Oil Search Alaska, Keiran Wulff, said the company is serious about its new venture.

Big Banks bring big money to AGDC? The Alaska Gasline Development Corp. has secured two of the world’s largest banks to help raise funds for the $43 billion Alaska LNG Project. Goldman Sachs and the Bank of China will assist the corporation in raising multiple rounds of debt and equity investment, the Alaska Journal of Commerce reported Wednesday. Equity offerings will be made to Alaska municipalities, Native corporations and all Alaska residents in addition to more traditional private equity investors, as required by the Senate bill that in 2014 set up the initial framework for the project. Goldman Sachs Managing Director Kevin Willens said he is pleased the bank is working with the corporation and the Bank of China on the project. Meyer has said he hopes to have firm agreements in place with the Chinese companies by the middle of the year. The nationalized Bank of China is one of three large Chinese companies to sign a nonbinding framework deal with the corporation last November that in broad terms exchanges 75 percent of the project’s 20 million tons per annum of LNG capacity for financing 75 percent of the $43 billion Alaska LNG price tag. “Joint development agreement parties are advancing the economic analysis of the project in order to lay (a) more solid foundation for investment and financing,” the Bank of China said in a statement. The first rounds of equity solicitation will be used to provide working capital for the corporation until it has secured sufficient funding and regulatory approvals for full-scale development. The Legislature must first give the go-ahead before the corporation can accept any money from outside investors.

On the move – tax credit bill heads to Senate Finance. Gov. Bill Walker’s plan to end the state’s roughly $800 million obligation to small oil and gas industry companies is suddenly on the move. The Senate Resources Committee quickly moved Senate Bill 176 out of committee March 23 with little fanfare, particularly given the consternation the oil and gas tax credit program has stirred in the capitol the past couple years. SB 176, which authorizes the state Revenue Department to issue bonds to pay off the liability in a lump sum rather than continuing to pay it down incrementally over the coming years. It would also require credit holders to accept up to a 10 percent discount on the amount they’re owed to cover the cost of the state’s borrowing and avoid spending additional state money on the all-but defunct tax credit program. Credit holders could also opt for a lesser discount rate in the 5 percent range if they agree with the Department of Natural Resources to negotiate a higher state royalty in future oil and gas production or commit to reinvest a portion of the payment back in Alaska projects. The bonds would be paid off over 10 years. The annual debt payments would be up to $115 million, according to the Revenue Department, and would be smaller than the largest projected payments the state would make paying off the debt under the current statutory formula.

From today’s Washington Examiner, Daily on Energy:

INTERIOR SEEKS INDUSTRY INPUT INTO DRILLING OFF ALASKA’S COAST: The Interior Department on Wednesday asked for public comment about potential drilling in the Beaufort Sea off Alaska’s coast.

Open Sesame: The proposal is part of the agency’s offshore oil and gas leasing program announced in January, under which Interior proposed opening nearly all federal waters to drilling, including 19 sales off the Alaska coast.

The Trump plan has received bipartisan criticism, with almost all coastal governors expressing opposition to allowing drilling off their shores, for fear of spills and harm to tourism.

But local politicians support drilling off Alaska’s coast. The state is heavily dependent on oil and gas revenue to support its budget.

Balancing act: Interior’s proposal to drill in the Beaufort Sea asks companies to nominate areas where they might bid in a 2019 sale, and also mention areas too environmentally sensitive to drill.

The proposal will appear in Friday’s Federal Register, starting a 30-day comment period ending April 30.

‘Fast-track’ process: Environmental groups accused the Interior Department on Wednesday of acting prematurely in announcing the proposal, noting the agency has not finalized the 2019-2024 offshore leasing plan.

“Planning for a Beaufort lease sale this early in the process of crafting Trump’s five-year plan is a clear sign that the decision to include the Arctic has already been made,” said a coalition of environmental groups, including the Alaska Wilderness League, Center for Biological Diversity, Sierra Club, Natural Resources Defense Council and others. “This Beaufort sale is about giving a win to the Alaska delegation by starting the process to fast-track getting leases into the hands of the oil industry without full, fair and open debate.”

First Reads:

Why a Papua New Guinea company is taking over one of Alaska’s biggest oil fields
Alaska Public Media, Elizabeth Harball, March 28, 2018

Goldman Sachs, Bank of China to assist LNG project funding
AP News, March 29, 2018

Oil tax credit bill moves on to Senate Finance
Alaska Journal of Commerce, Elwood Brehmer, March 29, 2018

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Headlamp – AGDC Selects Lead Global Investment Banks to help with financing

March 28, 2018 | Posted in : News

Tweet of the Day from Rashah McChesney:

Where the wind comes sweeping down the plain…Oil and natural gas company employees, executives and trade associations rallied at the Capitol on Tuesday in support of the state’s largest industry. “We came out to have our voices heard,” White Star Petroleum employee Jackie Shaver said in an interview before meeting with legislators. “With as many people who have been laid off in the industry in the past couple of years, you’d think the Legislature would be concerned about hurting the industry and the effect that could have on housing and the economy.” Scheduled several months in advance, Tuesday’s rally had added meaning as it was sandwiched between votes to raise the initial oil and natural gas gross production tax rate to 5 percent, up from 2 percent currently. The House approved the plan late Monday night, and the Senate is scheduled to consider the measure Wednesday. “We will not back down from our very clear position that any increase in taxes on new wells in Oklahoma will result in less wells being drilled. That principle is iron clad,” said Wade Hutchings, chairman of the Oklahoma Oil and Gas Association and senior vice president of exploration at Devon Energy Corp.

Mexico in a race against time to lure oil investment. European oil majors are swarming the shallow-waters of the Gulf of Mexico as the country races to attract investment before an election. Anglo-Dutch giant Royal Dutch Shell Plc, the U.K.’s BP Plc, France’s Total SA, Italy’s Eni SpA, Spain’s Repsol SA, Russia’s Lukoil PJSC and DEA Deutsche Erdoel AG of Germany all won blocks – a number of them in partnership with state-owned Petroleos Mexicanos. Among notable absentees were U.S. majors like Exxon Mobil Corp. and Chevron Corp., which have grabbed deep-water prospects in a previous round. Mexico is trying to lure as much oil investment as possible before the president who overhauled the country’s energy industry, Enrique Pena Nieto, is replaced in December. The country has awarded more than 100 oil development contracts since his 2013 energy reforms, which ended Pemex’s monopoly.

First Reads:

Oil industry rallies against tax increase plan
NewsOK, Adam Wilmoth, March 28, 2018

European Majors Snap Up Mexican Oil Contracts Ahead of Election
Bloomberg Markets, Amy Stillman and Adam Williams, March 27, 2018

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Headlamp – It’s a mining party in Fairbanks; Can Russia and OPEC make it work for the long haul?

March 27, 2018 | Posted in : News

A long-term relationship for OPEC and Russia? Saudi Arabia and Russia are working on a historic long-term pact that could extend controls over world crude supplies by major exporters for many years to come. Saudi Crown Prince Mohammed bin Salman told Reuters that Riyadh and Moscow were considering a longer deal to extend a short-term alliance on oil curbs that began in January 2017 after a crash in crude prices. “We are working to shift from a year-to-year agreement to a 10-20-year agreement,” the crown prince told Reuters in an interview in New York late on Monday. “We have agreement on the big picture, but not yet on the detail.” Russia, never a member of the Organization of Petroleum Exporting Countries, has worked alongside the 14-member cartel during previous oil gluts, but a 10-20-year deal between the two would be unprecedented.

Miners descend on Fairbanks. Miners often work in remote locations of Alaska, staying in our periphery. However, the mining industry’s contributions remain strong, adding to our history, culture and economy since Fairbanks was founded in 1903. These contributions are not slowing down. Consider the following:

  • Kinross’ open pit Fort Knox Gold Mine, which is about 25 miles northeast of Fairbanks, has produced more than 7 million ounces of gold in its 25 years of operation. Fort Knox employs about 600 people. Fort Knox is permitted to continue mining through 2020.
  • Pogo Mine, a subterranean mine about 85 miles southeast of Fairbanks, poured its first bar of gold in 2006 and has since then produced more than 3 million ounces of gold. Many of Pogo’s employees live in the Fairbanks North Star Borough and work the two-weeks-on, two-weeks-off camp lifestyle. Pogo Mine is owned by the Sumitomo Metal Mining Co. and is permitted to operate through 2021.
  • Usibelli Coal Mine, located 115 miles south of Fairbanks in the Alaska Range, has been operating since 1943. It is the only coal mine in the state and provides coal for six coal-fired plants, four of which are in the Interior.
  • Placer mines, the mostly small operations conducted in creek and river beds, are the least visible of the mining projects in our state. These are often family owned businesses or sole proprietorships with a few employees. The most recent data on placer mines’ economic impact on Alaska comes from 2013. This report shows placer mining accounts for 1,700 jobs in Alaska. In Fairbanks, the placer mining industry accounted for 450 jobs, providing $19 million to these employees.

This week, the mining industry will be in plain sight. More than 500 miners and members of the industry have descended upon Fairbanks for the Alaska Mining Association’s biennial conference. On Thursday, the trade show will be open and free to people who are not members of the AMA, from 8 a.m. to 5 p.m. at the Carlson Center.

First Reads:

Exclusive: OPEC, Russia consider 10-20 year oil alliance – Saudi Crown Prince
Reuters, Richard Mably and Yara Bayoumy, March 27, 2018

Mining industry still contributes: AMA trade show provides an opportunity for everyone to learn more
Fairbanks Daily News-Miner, March 27, 2018

 

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Headlamp – Modular LNG plant still in the works for Parks Highway.

March 26, 2018 | Posted in : News

 

Modular LNG plant still in the works for Parks Highway. Siemens is still working on its plan to build a modular liquefied natural gas plant in the Houston area, on the Parks Highway, company officials said in an interview on Thursday. The company is in discussions with the Interior Gas Utility (IGU) in Fairbanks, which needs to expand LNG purchases as it builds out a new natural gas distribution system, said Michael Walhof, Global Sales Director for Siemens’ Dresser-Rand business Distributed LNG Solution. Siemens AG (Berlin and Munich) is active around the globe, focusing on electrification, automation and digitalization, Walhof said. “We are one of the world’s largest producers of energy-efficient, resource-saving technologies. The company supplies power generation and power transmission solutions and is a pioneer in infrastructure solutions as well as automation, drive and software solutions for industry,” Walhof said.

China shakes up the oil futures market. It’s taken a quarter of a century, but China finally has its own oil futures. At 9 a.m. local time on Monday, crude contracts began trading on the Shanghai International Energy Exchange. Futures for September settlement opened at 440 yuan a barrel, up from a reference price of 416 yuan. The world’s biggest oil buyer is offering yuan-denominated futures that foreigners can buy and sell – a first in Chinese commodities. Among the most intriguing questions is whether the traditional benchmarks of Brent crude in London and West Texas Intermediate in New York will face a serious challenger. Here are some of the other key questions. 1. Why is this important for China? Futures trading would wrest some control over pricing from the main international benchmarks, which are based on dollars. Denominating oil contracts in yuan would promote the use of China’s currency in global trade, one of the country’s key long-term goals. And China would benefit from having a benchmark that reflects the grades of oil that are mostly consumed by local refineries and differ from those underpinning Western contracts. 2. Why now? The push for oil futures gained impetus in 2017 when China surpassed the U.S. as the world’s biggest crude importer. The Asian nation’s purchases reached a record high in January.

Let’s encourage investment to come “North to the Future.” On March 12, 1968, Alaska forever changed. That was the day a team of geologists, engineers and drillers confirmed the Prudhoe Bay oil field. The confirmation of a Middle-East sized oil field here, in the United States, made headlines across the globe. Fifty years later, it’s still one of the largest oil fields in North America and one of the 20 largest oil fields ever discovered in the world. Once the oil field was developed and the trans-Alaska pipeline constructed, the state for the first time had the ability to support itself. State oil taxation (including royalties) — $141 billion collected to date — funded transportation infrastructure, schools, public safety and the Alaska Permanent Fund. Those oil dollars, averaging 80 percent of state budgets, are what modernized Alaska. Prudhoe Bay also gave us something maybe even more valuable than oil. It revised what both Alaska and the nation thought it could become by transforming us from a relatively undeveloped state to a land of significant resource-based economic opportunity.

Fairbanks Daily News-Miner editorial: Thumbs down: Alaska labor officials reported a loss of 2,300 jobs in the state from February 2017 to February 2018. The retail sector was hit hardest, with a loss of 800 jobs during that period. The oil and gas industry suffered the second-worse loss with 700 jobs being lost. It shouldn’t surprise anyone that people are migrating out of the state. Hard times indeed.

Smooth sailing for the Alaska LNG Project.” It is full steam ahead for an Alaska pipeline project. The Alaska Liquefied Natural Gas project has cleared a major hurdle. The Federal Energy Regulatory Commission (FERC) has laid down a timeline to get the project started. The Alaska Gasline Development Corporation says it should be smooth sailing to get the project underway. The president of AGDC says he’s looking for support on Capitol Hill for the $43 billion project. Keith Meyer says he expects broad support from officials for his $43 billion dollar project. “All around for Alaska this is a very transformational project. It’s a very large job creator. It’s a very large economic engine,” said Keith Meyer. Meyer says the project will create thousands of jobs in the state. It would span more than 800 miles, from Prudhoe Bay in the north, to Nikiski, producing around 3.5 billion cubic feet of gas per day, much of it for export to China. He says his company should have an environmental impact statement from FERC by the end of 2019, clearing the way for construction and eventually service by 2024 or 2025. “The gas supply in the North Slope is one of the world’s largest concentrations of stranded natural gas. So this has potential for over a hundred years,” said Meyer.

From coal to LNG – China demand will be demanding. China’s shift away from coal will see demand for LNG surpass 300 million tons for the first time ever, raising concerns of short supply. Data from Bloomberg New Energy Finance has forecast a growth of 7.2 per cent in LNG demand, lifting from 285 million tons in 2017 to reach 305 million tons in 2018 as China shifts away from coal-fired power generation to gas and domestic production slows in Europe, putting pressure on producers to meet demand. The BNEF Global LNG Outlook 2018 report predicts demand will stabilize in the short term, at around 314 and 330 million tons between 2019 and 2022 before increasing again. “From 2023, imports will rise at a compound annual growth rate of 5 per cent till 2030,” BNEF said. This rate is slightly more aggressive than that forecast by Shell, which predicts a growth rate of 4 per cent per annum. BNEF forecast demand will hit a peak in 2029 before slowing once more, outstripping supply between 2024 and 2026 unless new projects are brought online.

First Reads:

China Is About to Shake Up the Oil Futures Market
Bloomberg Markets, Grant Clark and Sungwoo Park, March 25, 2018

Alaska’s current oil tax and royalty rates are fair. The Legislature shouldn’t change them.
Anchorage Daily News, Bill Corbus, March 25, 2018

Siemens still planning to build LNG plant in Houston
Mat-Su Valley Frontiersman, Tim Bradner, March 24, 2018

Employment declines statewide
Fairbanks Daily News-Miner, March 26, 2018

Alaska gas official in Washington as LNG Project waits for approval
KTUU, Peter Zampa, March 23, 2018

LNG global demand to hit new record high
The Sydney Morning Herald, Cole Latimer, March 26, 2018

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Headlamp – ConocoPhillips working to add 30,000 barrels of oil per day; FERC & Iranian Hackers

March 23, 2018 | Posted in : News

ConocoPhillips working to add 30,000 barrels of oil per day…The federal government has taken a key step in the permitting process for a new oil development in the National Petroleum Reserve-Alaska, west of Prudhoe Bay. The Bureau of Land Management today released a draft environmental impact statement for the Greater Mooses Tooth 2 project, or GMT2. If it goes forward, GMT2 would be ConocoPhillips’s third oil development inside the boundaries of the National Petroleum Reserve-Alaska. “This [environmental impact statement] will help us look at the best way to develop this project, and it’s a really important step in developing on the North Slope,” Conoco spokeswoman Natalie Lowman said. For Conoco, the permitting process for GMT2 has taken much longer than expected. The company is now aiming for first oil in 2021, a year later than it originally planned. But the company now thinks the project is back on track. “We believe that permitting is now proceeding on a reasonable schedule,” Lowman said. Lowman said the $1.5 billion project could produce up to 30,000 barrels of oil per day.

Pebble review “solid, transparent and workable.” Groups opposed to development at the Pebble copper and gold prospect expressed outrage Wednesday over what they called the federal government’s apparent effort to rush an environmental review of the giant project. Starting April 1, the U.S. Army Corps of Engineers will take 30 days of public comment on the newly filed development plan for Pebble that straddles headwaters of the massive Bristol Bay salmon fishery. Similar comment periods for other big projects in Alaska have lasted more than twice as long, opponents said Wednesday. Alannah Hurley, executive director at United Tribes of Bristol Bay, called the window for public engagement “absurd.” “Such a short time frame will ultimately exclude not only the people of Bristol Bay, but all Alaskans,” she said in a statement. “We will not have a meaningful opportunity to engage and provide critical input on how we will be impacted by the Pebble mine.” Mike Heatwole, a spokesman with applicant Pebble Limited Partnership, said this comment period, a first step known as scoping, is “solid, transparent and workable.”

Yes for Lockup.  The Alaska Division of Elections recently certified a controversial ballot initiative that has many people concerned about its potential consequences. The initiative, sponsored by the ballot group “Yes for Salmon,” claims to strengthen state law protecting wild salmon and the fish and wildlife habitat in Alaska. A close examination of the initiative (previously called Stand for Salmon) reveals it is an environmental initiative that would cause significant negative impacts on community and economic development. Opposition to the initiative has grown rapidly and ranges across a wide spectrum of interests — not just the oil, mining, and timber industries so often targeted by environmental groups. An opposition group, Stand for Alaska, has formed and is comprised of all 13 regional Alaska Native corporations, Alaska State Chamber, Southeast Conference, members of the visitor industry, construction companies, transportation companies, union organizations, and various other industry trade groups.

LNG CEO’s agree – steel tariffs a bad idea. The Trump administration’s planned steel tariffs and a potential trade battle with China could hurt U.S. liquefied natural gas companies just as a new wave of developments in the fast-growing market is gaining steam, company executives say. China is the fastest growing major buyer of LNG, making it an important customer for U.S. producers. It is also a significant exporter of the steel components used in LNG plant construction. With an LNG shortage looming as early as 2022, a rush of offtake deals with China and other buyers had been looking likely, boosting construction prospects, said company executives at the CWC LNG Americas Summit in Houston. But the proposed steel tariffs, which will increase project costs and impact deal pricing, could make U.S. projects less attractive than international rivals. “I think imposing steel tariffs at this juncture in the evolution of the second wave, right as we move into this very critical stage of the commercial process – locking in customer commitments – is a bad idea,” said Patrick Hughes, vice president of corporate strategy with LNG developer NextDecade Corp.

From today’s Washington Examiner, Daily on Energy:

FERC TARGETED BY IRANIAN HACKERS: The Federal Energy Regulatory Commission was a prime target of nine Iranian hackers whom the Justice Department is indicting on criminal charges for “malicious” cyber activity, the agency revealed Friday morning. Sensitive information: Justice Department attorneys pointed out during a press conference that FERC “has the details of some of this country’s most sensitive infrastructure,” said U.S. Attorney Geoffrey Berman. “That is the agency that regulates the interstate transmission of electricity, natural gas and oil.”  The Justice Department said FERC was among federal, state and United Nations agencies targeted, including the Department of Labor, Hawaii, Indiana, the United Nations, and the United Nations Children’s Fund.  Who was targeted: “The defendants were each leaders, contractors, associates, hackers-for-hire or affiliates of the Mabna Institute, an Iran-based company that, since at least 2013, conducted a coordinated campaign of cyber intrusions into computer systems belonging to 144 U.S. universities, 176 universities across 21 foreign countries, 47 domestic and foreign private sector companies,” as well as the agencies mentioned, Justice said.

First Reads:

Feds take key step toward approving another Conoco development in NPR-A
Alaska Public Media, Elizabeth Hardball, March 22, 2018

Army Corps plans mine comment period that Pebble calls ‘workable’ and opponents call ‘absurd’
Anchorage Daily News, Alex DeMarban, March 22, 2018

Salmon initiative should be named Yes for Lockup
Juneau Empire, Win Gruening, March 23, 2018

U.S. LNG firms lament bad timing of steel tariffs and China trade spat
Reuters, Julie Gordon, March 22, 2018

 

 

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