by wp_sysadmin | Jun 30, 2020 | News
OIL
Will New Funding Rules Kill Alaska’s Oil Boom?
Nikos Tsafos, Center for Strategic & International Studies, June 29, 2020
In early 2020, several banks announced they would no longer directly finance projects in the Arctic, part of an effort to align their lending portfolios with new environmental and social priorities and risks. The announcements triggered diverse reactions: cheers from environmentalists, protests from Alaska’s politicians, and relative indifference from analysts who often discount Alaska’s oil fortunes anyway (due to high costs). In reality, the tightly worded policies will not halt Alaska’s oil boom, but they might slow it—depending on how broadly or narrowly these policies are interpreted.
Alaska’s (Underappreciated) Oil Boom
Oil in Alaska often means the Arctic National Wildlife Refuge (ANWR) or the federal offshore, two places where drilling remains controversial for environmental reasons. But there is more to Alaska than these areas. From 2010 to 2019, companies invested almost $30 billion in the North Slope, and that money has reshaped the state’s prospects, a change evident in the annual 10-year forecast for oil production released by the state’s Department of Revenue. Production has been near or above the forecast lately, and the state now expects production to stay flat to 2029 (after a small dip), driven by several projects in and near the National Petroleum Reserve in Alaska. At no point since 1988, when oil production peaked, has the state managed to keep production flat for that long.
GAS
Alaska Voices: LNG project economics still challenging
Larry Persily, The Peninsula Clarion, June 29, 2020
An updated cost estimate for the state-led Alaska LNG project has trimmed about $5 billion from the construction price tag, down to $38.7 billion. Though the new estimate, released at the Alaska Gasline Development Corp.’s June 25 board meeting, is 12% below the number of several years ago, it’s still significantly higher per tonne of output capacity than most other proposed LNG developments around the world.
MINING
Copper Prices Close at $6,000 [per ton] on Supply Concerns
Madurihma Das, Zacks, June 30, 2020
Over the month of June, copper prices have gained 11% and currently trending close to the level of $6,000 [per ton]. This uptrend can be attributed to optimism over financial stimulus and strong demand in China, which is the top consumer, amid growing fears of disruption in copper output in Chile. LME Copper prices closed at $5,957 per ton on Jun 29. Copper, whose demand is linked to global economic growth and activity, fell prey to the impact of the COVID-19 in the first quarter and suffered a decline of 22%. However, the red metal has made a dramatic comeback in the second quarter with a gain of 25%.
POLITICS – From the Washington Examiner, Daily on Energy:
MURKOWSKI AND MANCHIN AREN’T GIVING UP ON THEIR ENERGY BILL: Passing the bill, which would be the biggest update to energy law in over a decade, is even more important now in the pandemic and economic downturn, said Sens. Lisa Murkowski and Joe Manchin, the top Republican and Democrat on the Senate Energy Committee, in remarks on the floor Monday.
The senators are aiming to bring their bill back to the Senate floor this year, after a fight over separate legislation to limit greenhouse gas refrigerants known as HFCs sank the bill in March. Lucy Murfitt, chief counsel for the Senate Energy Committee Republicans, said Monday that Environment Committee senators fighting over the HFC provisions are making “real progress,” and if a deal is reached, the energy bill could be back up for a vote as soon as July.
Murkowski and Manchin aren’t waiting until then, though: Murkowski has offered two pieces of the broader energy bill — legislation on advanced nuclear energy and on critical minerals — as amendments to the defense bill the Senate is considering this week. She did so to provide a “second pathway” in case the whole bill can’t come to the floor, but it isn’t her preferred option, she said.
“My clear, clear, clear and undeniable preference is that we engage all of these measures as part of the energy package,” Murkowski said. “We are not taking our foot off the gas.”
She added the worst-case option would be to punt the issue to next Congress (it’s worth noting Murkowski will no longer be chairman of the Energy Committee then because she is term-limited). “It would be a mistake, a significant mistake for Congress to simply give up on energy policy for yet another year,” she said.
by wp_sysadmin | Jun 29, 2020 | News
OIL
Crude oil prices rise on improving economic data but virus case jump caps gains
ET Markets, June 29, 2020
NEW YORK: Oil prices edged higher on Monday, after bullish data from Asia and Europe, but sharp spikes in new coronavirus infections around the world tempered gains.
Oil prices inch higher as the industry weighs pandemic-related demand uncertainty
Myra P. Saefong and Mark DeCambre, MarketWatch, June 29, 2020
Oil futures moved cautiously higher Monday, buoyed by some recovery in energy demand, even as cases of COVID-19 top 10 million world-wide, raising the possibility of renewed shutdowns in parts of the world to contain the spread. “As global demand recovers, oil’s natural inclination is to go higher, since current prices are below the economic threshold for most producers,” Manish Raj, chief financial officer at Velandera Energy, told MarketWatch. The market saw upbeat economic data over the weekend from China, the world’s biggest importer of crude. Industrial profits in China for May were up 6% from a year earlier, representing the first increase in 2020, official statistics released over the weekend showed. There are also signs of further slowdowns in oil production. “To sum up the American producers’ standpoint, domestic rig count is down 73% from last year,” so oil has resumed its trend upward, said Raj.
GAS
U.S. LNG Industry Needs Prices To Double
Irina Slav, OILPRICE.COM, June 28, 2020
Last week, Tellurian said it would make the final investment decision on the Driftwood LNG project next year. On the one hand, the news is good: Tellurian had stopped making updates on the project after its long-term supply deal with India’s Petronet fell through. On the other hand, the announcement makes it the latest in a string of LNG companies pushing their FIDs back by a year, and this does not bode well for the industry. It is enough to look at the reason why Tellurian postponed its final investment decision, as explained by the chief executive: the company needs gas prices–specifically, Asian spot market prices–to be over $5 per million British thermal units (mmBtu). Right now, LNG trades at about $2 per mmBtu. Can it climb more than 100 percent within a year?
MINING
The federal review process for Pebble is working
Tom Collier, Anchorage Daily News, June 28, 2020
The Chairman of Bristol Bay Native Corporation, or BBNC, recently penned an op-ed about Pebble. The general tenor was that the U.S. Army Corps of Engineers, or USACE, the lead federal agency in charge of reviewing our plan, was ignoring scathing comments from other cooperating agencies like the Environmental Protection Agency, aka EPA, and the U.S. Fish and Wildlife Service, or FWS, as it crafts the final Environmental Impact Statement, or EIS, for Pebble. The implication was that the Corps of Engineers is rushing a decision about Pebble over the strong objections of those agencies. In order to make his point, he selected the most negative statements from lengthy comment letters from the agencies. These are complex, nuanced letters. It is disingenuous to suggest an honest debate about Pebble by relying on only a few sentences that do not reflect the tenor of the letters in their entirety. Just to prove that point, let me highlight select, positive quotes from the same letters quoted by BBNC’s chairman.
POLITICS – From the Washington Examiner, Daily on Energy:
TOP HOUSE REPUBLICANS BACK AMERICAN CLIMATE CONTRACT: GOP Leader Kevin McCarthy, along with several other top House Republicans, lent their support Monday for the American Conservation Coalition’s climate framework.
The conservative youth climate group unveiled their American Climate Contract in April with grassroots support. The framework calls for the United States to advance policies that “move toward a goal of global net-zero carbon emissions by 2050,” and focuses on four policy areas: investing in energy innovation, modernizing infrastructure, supporting conservation measures that store carbon, and engaging globally to reduce emissions. “Prior to this, the conversation continued to be so defined by the Green New Deal being the benchmark, and I think this is the next step,” said Quill Robinson, the ACC’s government affairs director.
by wp_sysadmin | Jun 26, 2020 | News
Dear Mr. Brena:
I just lost my job on the Slope, and don’t know when or if I’ll get back on. I used to feel lucky that I survived the support industry layoffs that happened from 2015-2018, when more than 6,000 Alaskans lost their jobs. I don’t feel so lucky anymore. Because of what’s happening with oil prices around the world, it will be at least a year before I get a chance to go back to work on the Slope. If you have your way, I may not have any work to go back to.
A friend of mine showed me a column you wrote, asking people to raise taxes oil companies pay. At first, I thought it was a joke, that someone would be thinking about raising taxes during a global oil crisis, but then I saw your website and realized that it is no joke.
This made me wonder who you really are. Here’s what I found in a 5-minute internet search.
- You made “a fortune” suing oil companies, according to Alaska public radio.
- You own a law firm and raised a lot of campaign money for Governor Bill Walker, another person who has always wanted to raise taxes on the oil industry.
- You’ve made more than $500,000 in campaign contributions.
- You own somewhere between 10-15 commercial and residential rental properties in Anchorage.
- According to the muni website – your house on the water in South Anchorage has 9000 square feet, 8 bathrooms, an elevator, and an indoor swimming pool. It looks like a castle to me.
So, I guess no matter what happens with oil taxes, I don’t have to worry about you Mr. Brena. You’ll be just fine.
It’s the working people, Alaskans like me, who have a lot to worry about if you get your way.
by wp_sysadmin | Jun 25, 2020 | News
OIL
From the Washington Examiner, Daily on Energy:
PRICE RECOVERY FALLS SHORT: The oil price recovery of recent weeks is not sufficient for a significant chunk of producers. Nearly a third of executives (27%) from 165 oil companies polled by the Dallas Fed said oil prices would have to rise to between $41 and $45 per barrel for the majority of producers in the U.S. to restart production. A slightly higher percentage, 30%, said they expect production to return at $36 to $40 per barrel oil, the range where oil prices currently sit. The Dallas Fed conducted the survey between June 10–18.
Iffy long-term forecast: Producers don’t expect drilling activity to return to normal levels for at least a year. Forty-one percent of executives expect drilling to return to pre-pandemic levels sometime in 2021, while 39% expect a return in 2022 or later. Sixteen percent of them don’t ever foresee a return to prior levels.
Oil executives have a similar outlook for the demand side. More than half of executives — 54% — expect global oil consumption to return to pre-pandemic levels sometime in 2021. But 36% expect a return in 2022 or later, and 5% don’t foresee a return to prior levels at all.
GAS
ALASKA LNG PROJECT ANNOUNCES UPDATED $38.7 BILLION PROJECT CONSTRUCTION COST
$5.5 Billion (12.4%) Cost Reduction Enhances Ability to Deliver Competitively Priced LNG
ANCHORAGE, AK (June 25) – Today the Alaska Gasline Development Corp. (AGDC) released an updated $38.7 billion cost estimate for the Alaska LNG Project, which will increase the project’s ability to deliver natural gas to Alaskans and LNG to export markets at competitive prices. The updated cost estimate was presented during today’s AGDC board meeting.
The updated estimate reflects a $5.5 billion (12.4%) cost reduction off the previous $44.2 billion cost estimate, which was compiled in 2015 by the project’s previous joint venture leaders, which included BP Alaska, ExxonMobil Alaska, ConocoPhillips and AGDC. The new estimate will enhance the competitive price of LNG from the Alaska LNG Project versus similar projects vying to serve major Asian markets. Long-term LNG demand is forecast to exceed available supply as consumers seek the environmental benefits of LNG over other energy sources.
Alaska LNG Project cost reductions capitalize on technology and process improvements developed in the LNG industry over the past several years, reflecting maturation of the LNG industry. These improvements include advancements in gas liquefaction technology and modular construction techniques, lower engineering costs, and a streamlined project management team. The cost estimate validates the efficiency of the Alaska LNG project’s design and major components, including a North Slope gas treatment plant, an 800-mile pipeline, and a Nikiski, AK-based LNG plant. AGDC President Frank Richards said, “These updates improve the competitive position of the Alaska LNG Project and its ability to deliver LNG and natural gas at favorable prices. We are incorporating these results into our discussions with potential partners as we work to transition to a new market-led project team and maximize project benefits for the State of Alaska. While today’s results strengthen the case for developing this project, it will ultimately be the market that determines the best path forward.”
AGDC obtained federal authorization to construct and operate the Alaska LNG project on May 21, 2020.
MINING
Alaska investment board approves summer work for controversial Arctic mining road
POLITICS
Biden signals willingness to use ‘unfettered discretion’ to reject pipelines
Josh Siegel, Washington Examiner, June 25, 2020
Joe Biden is signaling he would make it difficult for developers to obtain federal permits to build fossil fuel infrastructure such as pipelines and liquefied natural gas export facilities, delivering on a key priority of environmental groups. “There is virtually unfettered discretion there, so long as procedural safeguards are observed,” said Glenn Schwartz, director of policy at Rapidan Energy Group, a consultancy firm. As his chief tool to curb pipelines and LNG export terminals, Biden could require thorough and lengthy reviews to determine whether a project’s economic value is outweighed by its contribution to climate change.
by wp_sysadmin | Jun 24, 2020 | News
OIL
How the worst oil price crash in history changed the upstream industry
Wood Mackenzie, June 24, 2020
2020 capital expenditure will be US$130 billion lower than our pre-crash view. In total, we have cut US$530 billion of investment (2020 terms) from our outlook for 2020-25 – led by reduced activity in North America:
Alaska
- 2020 budgets have been slashed, production has been shut-in and nearly all drilling activity suspended. Almost US$3 billion of investment has been lost between 2020 to 2022.
- This year’s exploration season has come to a halt with 50% of wells deferred and several pre-FID projects now delayed. 2020 had been cast as the year North Slope production would grow after decades of decline – how things can change.
GAS
Technologies advance on path for cleaner and efficient LNG plants around the world
LNG Journal.Com, June 24, 2020
Most major liquefied natural gas export projects around the world are using tried and test liquefaction processes developed by a handful of companies over the years, though new market entrants are coming forward with floating LNG and mid-scale solutions. The liquefaction Trains that began operations in the past 18 months have used a variety of technologies, but the Air Products process remained the most widely used, accounting for more than 70 percent of operational capacity globally, according to a recent report from the International Gas Union. However, other well-known processes continue to take their market share of liquefaction ventures and among the most recent Trains to come on stream.
Cheniere Energy’s Sabine Pass Train 5 in Louisiana and Corpus Christi Train 1 in Texas employed the Optimized Cascade Process developed by US major and LNG pioneer ConocoPhillips.
MINING
Murkowski: Mineral Supply Chains Critical to Energy – and Health, Economy, and Security
“The pandemic has brought home that we don’t produce many goods important to our country,” Murkowski said. “Over the past several months, that has become clear for a range of crucial medical items—including personal protective equipment for doctors and nurses, as well as individual Americans. But it also extends to a much wider range of health care, electronic, industrial, defense, and energy technologies.” Dr. Nedal Nassar of the U.S. Geological Survey (USGS), Joe Bryan of the Atlantic Council, Simon Moores of Benchmark Mineral Intelligence, Dr. Thomas Duesterberg of the Hudson Institute, and Mark Caffarey of Umicore testified during the hearing. “China’s growing control over many basic materials, and its history of using that control as leverage for its own economic and political goals, makes this a cause of concern,” Dr. Duesterberg testified. Demand for lithium, graphite, and cobalt will increase 500 percent by 2050 to meet global clean energy needs, according to the World Bank. “Countries such as the United States have become increasingly import-reliant for their mineral commodity needs, thereby increasing their exposure to foreign supply disruptions,” testified Dr. Nassar. According to the agency, the U.S. imported more than 50 percent of at least 46 different minerals, including 100 percent of 17 of them, in 2019.
U.S. mining lobby in push to preserve tax break repealed by Democrats
Oil & Gas 360, June 24, 2020
The U.S. mining industry is spearheading a lobbying effort to protect a $160 billion pandemic tax break after congressional Democrats largely repealed the provisions in their recent stimulus bill, according to emails and a letter seen by Reuters.
On Monday, more than 70 industry associations wrote to Chuck Grassley, chairman of the Republican-led Senate finance committee on taxation and his Democratic counterpart Ron Wyden, raising concerns that “some in Congress are seeking to reverse these changes” and urging the senators to leave them in place. “The tax and liquidity provisions in the CARES Act are helping to ensure that the severe economic situation created by COVID-19 do not become even worse,” the groups wrote.
POLITICS
From the Washington Examiner, Daily on Energy:
REPUBLICANS FAVOR POLICIES TO ADDRESS CLIMATE CHANGE: Most Republicans support a number of government policies to address climate change, according to a Pew Research Center survey out Tuesday, even as they still expect the private sector to do the heavy lifting.
The strongest support is for policies championed by Republicans in Congress.
About 90% of people polled favor planting a trillion trees around the world to absorb carbon emissions, including 88% of Republicans and Republican-leaning independents (President Trump favors this idea too).
Support is nearly as high for providing tax credits to businesses that capture their carbon emissions, with large majorities of Democrats (90%) and Republicans (78%) backing the idea.
Most of those polled also support tougher restrictions on power plant emissions (80%), imposing a carbon tax on businesses (73%), and tougher fuel-efficiency standards for cars and trucks (71%).
