Today’s Key Takeaways: House Finance committee voted 6-5 to remove funding for state’s takeover of wetlands program. U.S LNG faces worker shortages. Japan and U.S. sign deal to coordinate on critical minerals. 600 trade groups call on congress for permitting reform. Saudi Aramco increases investment in China – building 2 refineries.
NEWS OF THE DAY:
Committee axes funding for Alaska’s effort to take over a federal wetlands permitting program
James Brooks, Anchorage Daily News, March 28, 2023
The Alaska House Finance Committee voted Monday to remove the state’s planned takeover of a federal wetlands program from its budget proposal and redirect the planned funding to the education program Head Start.
The 6-5 vote came as the committee opened debate on more than 80 amendments to a proposed state budget for the fiscal year that begins June 1.
Gov. Mike Dunleavy’s administration has proposed taking over the program, which regulates the dredged or fill material that can be discharged into wetlands.
OIL:
Saudi Aramco boosts China investment with two refinery deals
Florence Tan, Chen Aizhu, Reuters, March 27, 2023
Saudi Aramco (2222.SE) raised its multi-billion dollar investment in China by finalising and upgrading a planned joint venture in northeast China and acquiring an expanded stake in a privately controlled petrochemical group.
The two deals, announced separately on Sunday and Monday, would see Aramco supplying the two Chinese companies with a combined 690,000 barrels a day of crude oil, bolstering its rank as China’s top provider of the commodity.
GAS:
Worker shortage looms over LNG boom
Shelby Webb, Energywire, March 27, 2023
The oil and gas industry is expected to triple its spending on liquefied natural gas projects by 2025. But experts say companies may have trouble finding workers to build and operate export terminals.
The boom in U.S. liquefied natural gas exports could hit a new roadblock in the years ahead: workforce shortages.
Since Russia invaded Ukraine last year, U.S. companies have raced to fill gaps in European natural gas markets. Eight export terminals currently operate along the Gulf Coast of Texas and Louisiana, with five more under construction. Another 11 have received approval from the Federal Energy Regulatory Commission.
That many projects will require thousands of workers, both to build the terminals and then to operate them once construction is finished. LNG executives worry that today’s labor pool isn’t big enough to meet the demand.
“It’s become more and more a topic of discussion in the industry as we’re getting more imbalance on this,” said Wouter Pastoor, chief operating officer of Delfin Midstream. “There’s a limited pool of labor experienced to build such megaprojects, whether it’s LNG or other types of petrochemical, and we think it will be a risk factor for those projects.”
U.S. exports of LNG averaged 10.6 billion cubic feet per day in 2022, a 9 percent increase compared to 2021, according to the U.S. Energy Information Administration. The federal agency estimates that could grow to 14 billion cubic feet per day by 2024, as new LNG export projects come online.
The boom has prompted debate over how increasing natural gas exports fits with Biden’s climate goals. Environmental groups — including the Sierra Club and the Natural Resources Defense Council — have fought approval of new LNG projects, arguing that they will spew more pollutants into communities already suffering from air pollution nearby petrochemical plants and refineries.
But analysts expect the boom to continue. Rystad Energy, a research and business intelligence company, forecasts that construction activity for LNG projects will triple by 2025 in coastal Louisiana and Texas.
That year, capital expenditures could total $15 billion, up from $5 billion in 2022, according to Rystad.
At the peak of construction, 17 new projects could be underway, said Matthew Fitzsimmons, senior vice president of supply chain research for Rystad Energy. That would dwarf the 2017 boom in LNG export projects; at the time, S&P Global reported that companies struggled to hire around 30,000 workers for four projects.
“Now, we’re going to see two and a half times the ramp-up when compared to 2017,” Fitzsimmons said. “You have a much faster pace of acceleration combined with more projects competing against each other for the same people, which exacerbates the issue.”
Venture Global LNG Inc., Cameron LNG LLC and Cheniere Energy Inc., which are building some of the largest LNG projects in the region, did not respond to requests for comment.
Delfin Midstream, which is based in Oslo, Norway, is retrofitting existing natural gas pipelines to feed into a deepwater port, which will support up to four floating LNG vessels off the Louisiana coast.
The vessels are built in Asia, meaning the company hasn’t yet hired many people from the Gulf Coast.
And while Delfin will need to hire between 120 and 150 employees for each vessel, Pastoor said he doesn’t foresee much competition as the U.S. offshore drilling industry hasn’t rebounded from the Covid-19 pandemic.
But for land-based export terminals, companies could face workforce shortages first for construction teams and and then for operators. Fitzsimmons said the LNG industry along the Gulf Coast could struggle to hire enough operators once the surging need for construction workers begins to cool around 2027.
“Operator shortages should really start in toward the back half of this decade,” he said. “As we start to see more operational expenditures in 2026 through 2030, the back half of the decade is when that crunch is going to start manifesting more.”
Some workforce development agencies and lawmakers are hoping to train more people to fill those gaps.
Texas state Rep. Gary Gates, a Republican from the Houston suburb of Richmond, introduced a bill to create a new type of high school diploma for students who take training courses for high-demand jobs, like construction workers, electricians, pipe-fitters and welders. The new diploma would allow students to swap out more of the currently required curriculum for more career and technical education (CTE) courses.
“Now instead of this kid waiting to get out of high school to get a certificate in welding and go into student debt to do it, they can do it while they’re in high school,” Gates said.
A similar bill from Gates passed the Texas House last session but ran into time constraints in the state Senate. Speedy passage during this session, he said, would allow the Texas Education Agency to begin working with industry officials to set up more CTE programs across the state.
“If you don’t have labor, it slows down everything,” he said.
MINING:
U.S. And Japan Close Critical Minerals Deal To Counter China’s EV Dominance
Irina Slav, OilPrice.Com, March 28, 2023
The United States and Japan have sealed a deal to cooperate on critical minerals for batteries that will see the two try and move EV supply chains away from China.
According to the deal, per the Wall Street Journal, Japan and the U.S. will remove export levies on the EV minerals they trade and they will also align their labor standards in the mining department.
This will make Japan a mineral supplier eligible to participate in projects that have won financing under the Inflation Reduction Act.
POLITICS:
Chamber of Commerce leads letter urging permitting reform action this year
Zack Budryk, The Hill, March 27, 2023
A coalition of influential lobbying groups called on Congress to act on the energy permitting reforms championed by Sen. Joe Manchin (D-W.Va.) by the end of the summer in a letter Monday.
While the letter is led by the U.S. Chamber of Commerce, the oil and renewable energy industries are also represented in the letter, with the American Petroleum Institute and the Solar Energy Industries Association among the signers.
The letter calls the current permitting system “the single biggest obstacle” to infrastructure buildouts in the U.S. It does not endorse a specific piece of legislation, but instead calls for reforms that improve transparency, predictability, efficiency and input from stakeholders.