NEWS OF THE DAY:
Industry Set for Worst Discovery Toll Since 1946
Andrease Exarheas, Rigzone, December 21, 2021
The oil and gas industry is on course for its worst discovery toll since 1946, according to new Rystad Energy analysis.
Global oil and gas finds in 2021 will hit their lowest full year level in 75 years if the remainder of December fails to yield any significant finds, the company outlined. As of the end of November, total global discovered volumes this year are calculated at 4.7 billion barrels of oil equivalent (boe), which marks a significant drop from the 12.5 billion boe which Rystad highlighted was discovered in 2020. 2019 saw 15.8 billion boe discovered, 2018 saw 9.9 billion boe, 2017 saw 12.1 billion boe, 2016 saw 7.9 billion boe and 2015 saw 20.3 billion boe, a Rystad chart shows.
Seven new discoveries were announced this November, unearthing around 219 million boe of new volumes, Rystad revealed, adding that the monthly average of discovered volumes this year now stands at 424 million boe. The largest discovery in November was Lukoil’s Yoti West off the coast of Mexico, which is estimated to hold around 75 million boe of recoverable resources.
“Although some of the highly ranked prospects are scheduled to be drilled before the end of the year, even a substantial discovery may not be able to contribute towards 2021 discovered volumes as these wells may not be completed in this calendar year,” Palzor Shenga, the vice president of upstream research at Rystad Energy, said in a company statement.
“Therefore, the cumulative discovered volume for 2021 is on course to be its lowest in decades,” Shenga added in the statement.
Back in July, Rystad released a report which it said dealt a “major blow” for the size of the world’s remaining recoverable oil resources. In the report, the company estimated total recoverable oil resources at 1.725 trillion barrels, which marked a significant reduction of last year’s estimate of 1.903 trillion barrels. From this total, which shows Rystad’s estimate of how much oil is technically recoverable in the future, about 1.3 trillion barrels are sufficiently profitable to be produced before the year 2100 at a Brent real oil price of $50 per barrel, Rystad revealed.
Rystad describes itself as an independent energy research and business intelligence company providing data, tools, analytics, and consultancy services to the global energy industry.
Related:
Without significant investments in oil and gas, price shocks are here to stay
OIL:
What the Manchin roadblock means for oil and gas
Emma Dumain, Heather Richards, ENERGYWIRE, December 21, 2021
Proponents of overhauling the federal oil and gas program saw a path forward in the Democrats’ $1.7 trillion climate and social spending package. But Sunday’s announcement from Democratic West Virginia Sen. Joe Manchin that he can’t support the bill as written has advocates reassessing theirstrategy.
A top progressive in Congress yesterday cited the fossil fuel industry and the need for action on climate change in urging the administration to take unilateral action.
“It is now incumbent on President Biden to keep his promise to us and to the American people by using the ultimate tool in his toolbox: the tool of executive actions, in every arena, immediately,” Congressional Progressive Caucus Chair Pramila Jayapal (D-Wash.) told reporters in a call.
Alan Zibel, research director on energy and environmental issues for Public Citizen, said his consumer advocacy nonprofit would be prioritizing a two-track strategy that would push for congressional action alongside a regulatory ruling.
“The events of the past few days show that we can’t be confident in anything, really, and that it’s two tracks: that we need to proceed on a congressional track of putting these reforms in a new bill, and also in a rulemaking,” said Zibel. “There’s uncertainty with both paths.”
The Interior Department’s November review of oil and gas leasing on federal lands made few substantive recommendations. But perhaps the most significant was that Congress should raise the oil and gas royalty rates.
Congress was on track to do just that in the “Build Back Better Act.” The House-passed bill, H.R. 5376, had a provision echoing the administration’s proposal for raising royalty rates. It would raise royalty minimums from 12.5 to 18.75 percent onshore and set a 14 percent minimum offshore. The Senate Energy and Natural Resources Committee, which Manchin chairs, proposed the offshore 14 percent rate and brought the onshore rate down to 16.75 percent, a concession the environmental community said it could largely live with (Greenwire, Nov. 19).
With legislative action now uncertain given opposition from the Democrats’ key swing vote in a 50-50 Senate, advocates are now underscoring a sense of urgency to secure reforms they say will benefit taxpayers.
Autumn Hanna, vice president of Taxpayers for Common Sense, who oversees energy and natural resource campaigns, said her group’s top priority was locking in new rates “as soon as possible,” pointing out that new rates cannot be applied to existing leases retroactively.
“We have already supported stepping back on leasing until we get these reforms enacted, and urging the reforms to be enacted ASAP,” Hanna said. “This should have been done yesterday; we should have gotten this done a long time ago. We need to get this right, and it needs to be done any way we can.”
Biden could do ‘pretty much everything’
While political infighting surrounding reconciliation continues, the Biden administration could easily address royalty rates in some capacity, along with several other oil program reforms that Manchin’s current posture throws into legislative limbo.
While oil reform actions like halting the oil program in the Arctic National Wildlife Refuge need congressional authority, other crucial reforms don’t need legislative action. Boththe House and Senate reconciliation proposals include an ANWR ban on the oil program.
“If the bill does not get through, or if the oil and gas reforms are stripped out of the bill, [the administration] could still do pretty much everything that was in the bill and could even set more stringent standards,” said Mark Squillace, professor at the University of Colorado Law School and former assistant to the solicitor at the Department of the Interior, under former President Clinton.
Federal law, for example, sets royalty rate minimums but leaves discretion for presidential administrations to raise them. Increasing bonding minimums required of industry to cover the cost of decommissioning oil and gas infrastructure can also be done administratively.
Squillace said the Biden administration could enact these reforms swiftly, likely completing the rulemaking process within two years — well within the president’s four-year term.
“It need not take any longer than that,” he said.
In fact, Biden could take action as early as next year: In a regulatory outlook posted last week, the administration confirmed that federal leasing reforms would be on the docket in 2022, with royalties and bonding given particular attention.
New regulations to curb fossil fuel emissions from the oil patch are also in progress from EPA, and the administration has announced that it will also write new methane regulations for the Bureau of Land Management. The bureau directly oversees oil and gas drilling on federal lands.
But reformists had looked to Capitol Hill for added certainty that the reforms would last past the Biden years.
If Biden were to change royalties on his own, for example, that could be reversed by a later president.
The pro-oil Trump administration did just that, slashing royalties for shallow water oil drilling to tease more industry investment in the federal oil program.
Kathleen Sgamma, president of the Western Energy Alliance that opposes the royalty rate increases, said it appeared the White House had been waiting for the “Build Back Better Act” to pass before moving forward with its regulatory agenda, noting the Interior oil and gas report had scant details.
“Why bother doing the hard work of rulemaking and [the National Environmental Policy Act] if Congress was just going to shut it all down?” she said. “Now that the ‘BBBA’ is even more uncertain, I expect rulemakings to start in earnest early next year.”
In a statement to E&E News yesterday, an Interior Department spokesperson was noncommittal on next steps.
“The DOI will continue to seek out honest and pragmatic paths forward — in concert with communities; Federal, State, local, and Tribal leaders; businesses and labor; and other stakeholders — to bring a common purpose to the management of America’s public lands and waters, and the value they hold,” the spokesperson said.
‘Belts-and-suspenders time’
Ultimately, proponents of updating royalty rates in line with the November Interior review say Congress is still the stronger option, as executive actions frequently don’t survive shifts in presidential power.
And if congressional Democratic leaders and the White House are ultimately able to agree on a scaled-back reconciliation package Manchin can agree to, it could still include changes to the federal oil program.
The fact that Manchin’s reconciliation blueprint included the royalty provision, despite immense pressure from the fossil fuel industry to jettison it, sent a strong signal that this policy proposal was never a dealbreaker for the West Virginian.
Raising royalty rates on federal oil and gas leasing is also a revenue raiser and not something that would cost money. Its status as a pay-for could be a saving grace in the event Manchin and Democratic leaders need to negotiate a more modest reconciliation package at a lower topline number. Taxpayers for Common Sense, a nonpartisan group that advocates against fossil fuel subsidies, estimated that if royalty rates had been set at 18.75 percent over the last decade they would have generated $12.9 billion in additional federal income.
Collin O’Mara, president, and CEO of the National Wildlife Federation, was hopeful that tensions would thaw in the new year and discussions on reconciliation would reconvene.
With oil and gas leasing reform, he said, there are “several things you can do administratively and several things that would be more likely to hold up in legislation. I think we’re in a belts-and-suspenders time, where you proceed on multiple paths but the preferred option for everybody is the legislative path.”
If a deal can’t be reached, however, O’Mara conceded, “it would be irresponsible not to explore administrative actions.”
GAS:
CNOOC To Take First LNG Cargo From U.S. Exporter
Tsvetana Paraskova, OilPrice.Com, December 21, 2021
China National Offshore Oil Corporation (CNOOC), the largest Chinese importer of liquefied natural gas, has signed a deal with U.S. firm Venture Global LNG to buy LNG from a new export facility in Louisiana.
Under the deal announced on Monday, CNOOC Gas & Power Group Co., Ltd., a wholly-owned subsidiary of CNOOC, will buy 2 million tons per annum (MTPA) of LNG on a free on board (FOB) basis for 20 years from Venture Global’s Plaquemines LNG export facility in Plaquemines Parish, Louisiana.
The agreement is the first in which CNOOC, China’s largest importer of LNG, has agreed to buy the super-chilled fuel from a U.S. exporter, Venture Global LNG said.
The deal underscores Chinese importers’ increased interest in American LNG and is the latest such deal companies from the two countries have announced in recent weeks.
Last month, Venture Global LNG signed an agreement with China Petroleum & Chemical Corporation (Sinopec), which, the U.S. firm says, will be “the largest single LNG supply deal ever signed by a US company and will double imports of US LNG to China.” Sinopec will buy 4 million MTPA of LNG from Plaquemines LNG, and UNIPEC, a Sinopec subsidiary, has agreed to purchase 3.5 million tons of LNG from Venture Global’s Calcasieu Pass LNG facility.
Cheniere Energy also announced in November a binding long-term LNG sale and purchase agreement with Sinochem Group of China.
American exports to China started rising toward the end of last year to reach a record high in August 2021, the latest available EIA data shows.
In October 2021, China was the top destination of U.S. LNG exports, the U.S. Department of Energy’s LNG Monthly for December 2021 showed.
The United States will have the world’s largest LNG export capacity next year, exceeding the capacity of the top LNG exporters, Australia and Qatar, the Energy Information Administration (EIA) said earlier this month.
MINING:
From the Washington Examiner, Daily on Energy:
BICAMERAL GOP GROUP BACKS COAL IN SUPREME COURT CASE: A group of 47 Republican senators and 44 House members signed onto an amicus curiae brief in support of petitioning coal states and firms who are in the Supreme Court challenging whether EPA has the authority to regulate power plant emissions.
The amici, led by Sen. Shelley Moore Capito of West Virginia and House Energy and Commerce ranking member Cathy McMorris Rodgers, argue that any regulatory regime like the Obama-era Clean Power Plan (or something even more stringent) is beyond EPA’s authority under the Clean Air Act and that “decisions regarding emissions and the power sector are major policy questions with vast economic and political significance” which “only elected members of Congress” may decide.
Rodgers said separately the lawmakers filed the brief “to remind the Court that when Congress decides to address important issues, it expresses what it wants to do explicitly and deliberately.”
“It’s simply unconstitutional for the EPA to make up sweeping new authorities where none exist just because the President wants to transform our country’s power sector,” she said in a statement provided to Jeremy.
The high court will consider whether the Clean Air Act provided EPA the authority to consider the climate impact of the power sector’s carbon emissions and to enforce “outside the fence” emissions regulations, or those that apply to stationary sources at a regional or national level rather than an individual facility level.
POLITICS:
Yes, then no: Murkowski explains her debt ceiling votes (ktoo.org)
Liz Ruskin, Alaska Public Media, December 20, 2021
As a moderate, U.S. Sen. Lisa Murkowski sometimes votes with the Republican fold, sometimes against. And sometimes she does both on the same issue, as she did this month on raising the debt limit.
Last week, Murkowski broke with most of her party when she voted to make it easier for the Senate to pass an increase in the national debt limit.
“Because it was the right thing to do,” Murkowski told reporters.
Without an increase, the government would run out of money to pay military and civilian salaries, debt payments and other spending Congress has already agreed to.
Murkowski said a credit default would send a bad signal to America’s adversaries. The measure she helped pass last week lowered the voting threshold to a simple majority, eliminating the chance of a filibuster on a debt limit bill.
But this week, Murkowski stuck with her party as she voted no on the debt increase.
Murkowski said she agreed with something Senate Minority Leader Mitch McConnell said a few months ago: if Democrats were going to push ahead with their spending plans, they’d have to pass the debt hike on their own.
“What I was willing to do was to ensure that there was a process to go forward to allow them to do just that,” she said.
She didn’t want a default, but Democrats didn’t need her vote to avoid one, so Murkowski said she used her no vote was a protest of their spending plan.
CLIMATE CHANGE:
Visualizing the climate stakes of Build Back Better’s downfall
Ben Geman, Axios, December 21, 2021
A report from the Princeton-led REPEAT Project examines the scope of Democratic energy legislation in the Build Back Better Act that’s on the brink of collapse.
By the numbers: The analysis projects the impact of the more than $300 billion in expanded tax incentives for deploying low-emissions tech, and other climate-related provisions that push the total even higher.
Why it matters: They would put the U.S almost on pace to cut greenhouse gas emissions by 50% below 2005 levels by 2030.
- That’s President Biden’s commitment under the Paris Agreement aimed at preventing some of the worst effects of global warming.
- But existing policy (which in the chart includes the recent bipartisan infrastructure law) doesn’t create those near-term cuts.
The big picture: The REPEAT analysis is among several — like this via the World Resources Institute — that see the legislation giving the U.S. a quick and hard shove toward its 2030 goal and Biden’s midcentury net-zero target.
The nonpartisan think tank Resources For the Future estimates that under existing policies, U.S. economy-wide emissions only get about halfway toward the 2030 target.
Climate scientists say steeper cuts are needed, pointing to a year filled with unprecedented extreme weather events that are likely to worsen as warming continues.
What they’re saying: “Without such policies [in the legislation], we estimate the United States will fall 1.3 billion tons (CO2-equivalent) short of the nation’s 2030 climate commitment, a yawning gap that is unlikely to be bridged by executive action or state policy alone,” said Princeton’s Jesse Jenkins.
Jenkins, who leads the REPEAT effort, also argues the bill would provide an economic boost and actually counter inflationary trends in energy.
Catch up fast: The $1.75 trillion social spending and climate legislation is on ice at best now that Sen. Joe Manchin (D-W.Va.) has announced his opposition, citing concerns about costs, inflation, and more.
- But there are discussions underway to see if Democrats can salvage something acceptable to Manchin, who has deep disagreements with Democratic leaders over the structure.
- The Washington Post, which has details on Manchin’s goals on child and health provisions, also notes he might back “scaled back” versions of the energy provisions.
- For instance, he sees the electric vehicle subsidies as too expansive, and separately his statement expresses concern about transforming electricity systems “faster than technology or the markets allow.”
The intrigue: The dispute between the White House and Manchin that has dealt a potentially fatal blow to the legislation is rippling through markets.
The share prices of many electric vehicle companies fell Monday, the first trading day since Manchin’s Sunday morning announcement.
“That was a reaction to the uncertainty,” Edmunds analyst Jessica Caldwell tells Axios.
The global fallout
On the international front, keep an eye on what Build Back Better’s demise — if it’s indeed dead — means for Biden administration efforts to convince China to act more aggressively on climate, Ben writes.
What they’re saying: “The U.S. won’t be able to deliver its climate target without the BBB…but at the same time it expects others to ramp up their ambition. How much longer could that game be sustained?,” Li Shuo, a China expert with Greenpeace, said in an email exchange.
“I am afraid when all sides exhaust what’s domestically possible, what’s left at the international level is just a war of words,” he adds.