Today’s Key Takeaways: ConocoPhillips developing hydrogen facility on the U.S. Gulf Coast. Where are oil prices heading? Manchin says, “permitting is in”! EPA sets December 2 as decision day on Pebble Mine proposed restrictions. Gas cut-off in Europe bodes poorly for economic growth.
NEWS OF THE DAY:
ConocoPhillips backs effort to build U.S. hydrogen plant
Carlos Anchondo, Energywire, September 7, 2022
Ammonia would be supplied to other energy companies under long-term agreements, with Europe the main initial export market.
Texas-based ConocoPhillips is teaming up with Japanese power company JERA to develop a hydrogen facility on the U.S. Gulf Coast that would produce “clean” ammonia for export, according to an announcement this week.
The ammonia would be supplied under long-term agreements to JERA and German energy company Uniper SE, those two companies said in a news release. Europe was named as the main initial export market.
The hydrogen announcement comes as some European companies have reduced production at ammonia plants due to elevated natural gas prices, driven higher by Russia’s invasion of Ukraine and hot weather (Energywire, July 28). In August, for example, Norway-based Yara International ASA said it was cutting its ammonia utilization to about 35 percent because of “record high gas prices in Europe,” according to a company news release.
“ConocoPhillips is proud to collaborate with JERA and Uniper to evaluate the development of green and blue ammonia export options from the US Gulf Coast,” Michael Walter, a ConocoPhillips spokesperson, said in an emailed statement yesterday.
On its website, ConocoPhillips identifies blue and green hydrogen as “two types of hydrogen manufacturing which fit into the company’s core competencies and have the potential to grow into a scalable business.”
Blue hydrogen is produced from natural gas, with carbon dioxide emissions captured and stored, while green hydrogen is made using water and renewable energy.
“The companies are collaborating to facilitate the development of an initial production of 2 [million metric tons per annum] of clean ammonia, with expansion potential up to 8 MTPA to greatly accelerate the production and supply of zero-carbon fuels from the US for use in the US, Europe, Japan, and greater Asia,” Walter said.
ConocoPhillips will provide natural gas to the project, Reutersreported, although the energy company declined to confirm that to E&E News.
Most ammonia — a key ingredient for fertilizer — is made by steam reforming natural gas, isolating out pure hydrogen and then reacting it with nitrogen to form ammonia, according to the National Energy Technology Laboratory.
This week’s ammonia news release from JERA and Uniper said an engineering study will be finished by the end of the year to look at developing the project’s initial phase and assessing green and blue hydrogen opportunities.The project is slated to start commercial operations by the late 2020s, according to the release, which said the proposal would include “a complete certified” carbon capture and storage program.
“JERA is committed to providing cutting edge solutions to the world’s energy issues and is actively working to establish both the ammonia and hydrogen value chains,” said Steven Winn, CEO of JERA Americas Inc., in a statement. The company is one of JERA’s overseas subsidiaries.
“The combination of a skilled workforce, plentiful natural gas, abundant renewable resources, deep-water ports, and ideal CCS geology make the US Gulf Coast uniquely advantaged to produce the low carbon fuel to enable the Atlantic and Pacific energy markets transition,” Winn added.
The news release from JERA and Uniper did not disclose a specific location for the project nor a cost estimate.
The inclusion of carbon capture on the project is an attempt to “make the product relevant for the target markets,” said Thomas Koch Blank, a senior principal at RMI, a nonprofit that aims to accelerate a clean energy transition.
Still, he said Europe’s need for energy feedstocks and ammonia is more urgent than when the proposal from JERA and ConocoPhillips would start operations.
“I think what they’re probably trying to secure here is market share in the future, where you have a market which is going to care increasingly about the carbon content of their ammonia,” Koch Blank said.
He said a “question mark” remains about making ammonia in the United States and sending it overseas versus shipping the natural gas to Europe and making the ammonia locally.
OIL:
Where Is the Oil Price Heading in 2022 and 2023?
Andreas Exarheas, Rigzone, September 8, 2022
The U.S. Energy Information Administration (EIA) has released its latest short term energy outlook (STEO), which offers the organization’s latest Brent crude oil price forecasts for this year and the next.
According to the September STEO, the EIA sees the Brent spot price averaging $104.21 per barrel in 2022 and $96.91 per barrel in 2023. Broken down quarterly, the STEO forecasts that the commodity will average $103.89 per barrel in the third quarter of this year and $97.98 per barrel in the fourth quarter of 2022.
In its previous STEO, which was released in August, the EIA projected that the Brent spot price would average $104.78 per barrel in 2022 and $95.13 per barrel in 2023. The EIA’s August STEO forecasted that the Brent spot average price would come in at $105.82 per barrel in the third quarter of 2022 and $98.30 per barrel in the fourth quarter of 2022.
“The monthly average Brent front-month futures price was $98 per barrel in August, about $7 per barrel lower than in July,” the EIA stated in its latest STEO, adding that the lower prices in August “likely reflected overall increases in global petroleum inventories”.
“We estimate that crude oil prices will generally remain near August average levels through the end of 2023. Although we expect average crude oil prices to mostly remain between $90 per barrel – $100 per barrel through next year, the possibility for significant volatility around those averages is high,” the EIA added in the STEO.
In its latest STEO, the EIA highlighted several recent events “contributing to increased uncertainty in the crude oil market and in our forecast”. These included the impact of the recent OPEC decision to reduce crude oil production by 0.1 million barrels per day in October and whether there will be further production cuts in the future, the threat of increasing conflict following the outbreak of violent clashes in the Libyan capital of Tripoli, and uncertainty around the potential expiration of the current coordinated petroleum release from strategic reserves in November.
The potential return to an Iran nuclear deal that could lift sanctions on the country and allow Iran’s crude oil exports into the market and the risk of hurricanes that could result in potential production outages and limited export traffic along the U.S. Gulf Coast were also flagged as recent events contributing to increased uncertainty in the sector and the EIA’s forecast.
At the time of writing, the price of Brent crude oil is trading at $88.18 per barrel. The lowest the commodity has traded this year, so far, was $78.98 per barrel on January 3, while the highest, so far, was $127.98 per barrel on March 8.
Oil soared past $100 per barrel for the first time in years in February as Russian forces escalated a conflict with Ukraine. The commodity closed at $88 per barrel on September 7 after closing at $105.09 per barrel near the
GAS:
R.I.P. Europe’s energy system
Matt Phillips, Axios, September 7, 2022
In what would have been an unimaginable scenario just a few months ago, Russia has halted all natural gas flows to Europe through its Nord Stream pipeline — plunging the continent into a new era of uncertainty that’s reverberating across markets.
Why it matters: The gas cut-off bodes incredibly poorly for economic growth in Europe, as a range of industries dependent on abundant Russian gas are being forced to slash production.
- German chemical giant BASF recently warned of growing cutbacks tied to surging energy prices.
- France’s largest aluminum smelter said Tuesday it would cut production by roughly 20%.
What they’re saying: “This broad and long-term industrial and energy strategy that the government — but also huge parts of the energy intensive industries —have pursued for decades, building entire sectors like the chemical industry around very cheap Russian gas, has collapsed,” Lion Hirth, a professor of energy policy at Berlin-based Hertie School of Governance, tells Axios.
The impact: The euro just plunged to a new 20-year low against the dollar.
- The British pound dove to its lowest against the greenback since 1985.
- Yields on European government bonds — which determine costs of borrowing for national governments — have risen as investors factor in the risk of large amounts of new borrowing to finance crisis responses.
Catch up fast: Russia — which supposedly closed the pipeline for maintenance on Friday — surprised no one by announcing that it wouldn’t restart gas flows.
- Kremlin officials on Sunday claimed Western sanctions have made it impossible conduct needed repairs, suggesting sanctions put in place after its invasion of Ukraine would have to be lifted before gas would flow again.
Zoom out: For decades,Europe — especially the largest European economy, Germany — relied on Russian natural gas for heat and electricity.
- Now, Europe is being forced to rebuild its energy system on the fly, using an untested and expensive mix of price caps, rationing and bailouts to make it through the next few months.
Between the lines: Analysts believe Russia wants to inflict economic and financial pain this winter as a means of eroding Europe’s solidarity and support for Ukraine, which has been crucial to the country’s repulsion of the Russian invasion.
MINING:
EPA to decide next steps on Alaska mine project by Dec. 2
Becky Bohrer, Associated Press, September 7, 2022
The U.S. Environmental Protection Agency is extending until Dec. 2 the timeline to decide whether to proceed with proposed restrictions that would block plans for a copper and gold mine in Alaska’s Bristol Bay region.
The agency, in a recent notice, said this would “help ensure full consideration of the extensive administrative record, including all public comments.” The public comment period ended Tuesday. EPA rules call for a decision on next steps within 30 days after public hearings though not before the end of a comment period, the notice said. Hearings were held in June.
The EPA earlier this year released a proposal that it said would bar discharges of dredged or fill material into the waters of the U.S. within the mine site footprint proposed by the Pebble Limited Partnership, the developer pursuing the Pebble Mine project. It also said it was proposing to restrict discharges of dredged or fill material associated with any future plan to mine the Pebble deposit.
The agency’s regional administrator now must decide whether to withdraw the proposed restrictions or to advance to a higher level in the agency a recommendation on restrictions or prohibitions.
The debate over the proposed mine in a region known for its salmon runs has spanned several presidential administrations. The EPA has said the Bristol Bay region supports the largest sockeye salmon fishery in the world and that it also contains significant mineral resources.
John Shively, CEO of the Pebble partnership, in a statement Wednesday suggested any veto of the project would likely be contested in court.
“The EPA’s proposed veto of Pebble is legally, environmentally and technically unsupported,” he said. What the EPA has proposed is a “massive regulatory overreach,” he said.
The Pebble partnership, owned by Canada-based Northern Dynasty Minerals Ltd., is appealing a decision from the U.S. Army Corps of Engineers during the Trump administration in 2020 that denied approval of a key permit for the project in southwest Alaska. Leaders behind the proposed mine had seen as favorable to the project an environmental review from the corps released several months before the rejection decision.
Mine opponents have been pressing the agency to provide protections against large-scale mining in the region.
“It’s time for the EPA to finish the job that it began over a decade ago to protect this national treasure—and the people and wildlife it sustains,” Joel Reynolds, a senior attorney with the Natural Resources Defense Council, said in a statement.
POLITICS:
Manchin says leadership pledged permitting reform in stopgap funding bill
Rachel Frazin, The Hill, September 7, 2022
(D-W.Va.) said Wednesday that Democratic leadership told him the permitting reform he has pushed for will be included in a government funding measure known as a continuing resolution.
“Permitting is in,” he said.
Asked Wednesday whether he was told by leadership that the reforms would be included in the funding measure, he answered affirmatively.
The Senate swing vote has pushed for legislation that would speed up the process for approving energy and infrastructure projects. When Manchin announced his support for the Democrats’ climate, tax and health care bill, he and Senate Majority Leader Charles Schumer (D-N.Y.) said in a joint statement that they would separately pass a deal to reform the permitting process for these projects as part of the deal.
But the push has come under fire from progressives, led by Rep. Raúl Grijalva (D-Ariz.), who have raised concerns about the potential for undermining environmental reviews and helping the fossil fuel industry.
Grijalva, who chairs the House Natural Resources Committee, has circulated a letter asking leadership to separate the Manchin deal out of the continuing resolution.
His office told The Hill last week that they had more than 40 signatories so far and were still circulating at that time.
He has argued that these measures are largely ones that are supported by Republicans and shared concerns with environmentalists that expedited reviews could harm vulnerable groups.
However, it’s not clear whether or how many progressives would vote against a measure to fund the government, as Democrats would be unlikely to want a government shutdown ahead of the midterms.
Asked about the progressive resistance, Manchin said, “I think people need to see what’s inside and how much good it does for the country.”
A summary released by Manchin’s office said that the reforms will set maximum timelines for environmental reviews and complete a pipeline that runs through West Virginia.