Today’s Key Takeaways: Biden should authorize more export terminals for US LNG. Surging oil prices may tempt oil and gas companies to change long-term investment strategies. In 2021, Couer invested $13 Million into expanding and upgrading resources at its Kensington Gold Mine north of Juneau. GOP asks EPA to stop its “waters of the United States” rulemaking process now that the Supreme Court will consider its scope.
NEWS OF THE DAY:
Why the Russia crisis matters for U.S. energy
Carlos Anchondo, Mike Lee, ENERGY WIRE, January 27, 2022
The Biden administration said yesterday that it’s working to find alternative supplies of energy for western Europe should Russia cut off the region’s flow of natural gas and oil over growing tensions surrounding Ukraine.
But the administration may have little direct influence since the market for natural gas responds mostly to prices, observers say. There are long-term policy changes by the U.S. and its allies,however, that could reduce Russia’s influence over Europe, which is already grappling with a severe energy crisis, they say.
Russia has signaled it could invade Ukraine, after forcibly annexing part of it in 2014. Russian President Vladimir Putin has used control of gas supplies as leverage to keep European countries from imposing sanctions against it. Russian gas travels to Europe through a series of pipelines, while exports from the United States and other countries have to be liquefied and transported on ships.
This winter, the Russian threat, along with reported shortfalls in renewable generation and shutdowns of nuclear plants, have sent gas and power prices soaring in Europe.
Russia reduced its gas exports to Europe 25 percent in the fourth quarter of 2021 compared with the same period in 2020, according to Fatih Birol, executive director with the International Energy Agency, in a LinkedIn post earlier this month.
“We see strong elements of ‘artificial tightness’ in European gas markets, which appears to be due to the behaviour of Russia’s state-controlled gas supplier,” Birol wrote in the post.
U.S. export terminals are running at full capacity, touching roughly 13 billion cubic feet per day, and most exports — 45 out of 75 cargoes this month — are going to European ports, according to the Center for Liquefied Natural Gas, a committee of the Natural Gas Supply Association.
That’s all happened without any prodding from the U.S. government. In some cases, Asian customers who have long-term contracts to buy U.S. gas exports have turned around and sold the fuel to Europe, according to the trade group. “It’s based off market signals,” Katie Ehly, senior policy director at the Center for LNG, said in an interview.
Once prices fall in their normal range, Russian gas will have an advantage over U.S. exports because it’s cheaper to transport by pipeline than ship.
The Biden administration has not said in detail which countries or companies it has approached about providing more natural gas to Europe. Yesterday, White House press secretary Jen Psaki acknowledged that it will be hard to reroute supplies.
“There’s no question there are logistical challenges,” Psaki said, later adding, “That’s part of our discussion with a lot of these companies and countries, but again, these conversations are ongoing, and we don’t intend to fail on them.”
Biden is hosting the ruling emir of Qatar — one of the world’s largest suppliers of liquefied natural gas — at the White House on Monday. Psaki said this week President Biden and Sheikh Tamim bin Hamad Al Thani planned to discuss the stability of global energy supplies, among other topics.
Paul Bledsoe, a strategic adviser for the Progressive Policy Institute (PPI), said “it’s about time that the U.S., Europe and our allies reduced Europe’s malign addiction to Russian gas, which is funding Putin’s militarism and attempts to undermine democracies around the world.”
The Biden administration should authorize more export terminals for U.S. production, and European nations should build more import facilities, added Bledsoe, a former White House climate adviser in the Clinton administration.
“The EU should prioritize LNG port construction, access, and related infrastructure to spur a competition toward super-low emitting gas, and to displace Russian gas,” Bledsoe said in a PPI report issued last month, in addition to other recommendations.
‘Energy as a weapon’
Separately, Deputy Secretary of State Wendy Sherman said yesterday the United States is “in intensive discussions with European capitals to ensure an energy supply for Europe if indeed Russia uses energy as a weapon,” but she also noted that there are risks to Russia, too.
“They [Russia] need to sell energy,” said Sherman, appearing virtually at a Yalta European Strategy (YES) event. Founded in 2004, YES is a “leading forum for discussing Ukraine’s European future and global context,” according to its website.
“They need to put it on the market in Europe and get payment for it. They need it for their economy; it’s very critical for their economy. So, this is interdependent,” Sherman said.
At the same time, Europe needs to diversify its energy mix, IEA’s Birol wrote. “Much stronger investment in low-carbon energy technologies including renewables, energy efficiency and nuclear power is the way out of this impasse,” Birol said in his post.
“But this needs to happen quickly, or global energy markets will face a turbulent and volatile period ahead.”
The European Union has been considering a carbon tax on imports, including energy products. That proposal would put a dent in Russia’s gas imports since its producers and pipelines are notoriously leaky.
The U.S. oil and gas industry has been promoting itself as a cleaner alternative to Russian and Middle Eastern producers. While the impact of a European carbon tax will depend on the details, it could benefit U.S. gas exporters, Ehly, at the Center for LNG, said.
“The U.S. has a very clean operating system through the value chain,” she said. “I would think that would benefit the U.S. in some ways.”
Higher Oil Prices Could Trigger $500 Billion In Stranded Assets
Irina Slav, OilPrice.Com, January 27, 2022
- Carbon Tracker: oil companies could get caught in a stranded asset trap worth $500 billion.
- Surging oil prices may tempt oil and gas companies to make long-term investment decisions that cost shareholders dearly.
Oil companies could get caught in a stranded asset trap worth $500 billion, environmental think tank Carbon Tracker said in a new report this week.
According to the report, “Surging oil prices may tempt oil and gas companies to make long-term investment decisions that cost shareholders dearly, but a cautious “managed” approach to the energy transition would do most to preserve shareholder value and help society achieve climate goals.”
The authors noted the recent surge in oil prices but cautioned Big Oil about letting it go to their heads because climate commitments made by governments and the assumed wider adoption of EVs will soon reverse the oil demand growth trend.
At the same time, however, the mining and commodities industries are warning of rising prices for metals and minerals, both essential for solar, wind, and electric cars. At the recent Future Minerals Forum in Saudi Arabia, for instance, Barrick’s CEO Mark Bristow projected that the copper market could swing into a shortage, while Christopher Ecclestone, strategist, and principal at Hallgarten & Company, said metals and minerals prices are on a stable upward trajectory and they are not coming back.
The rising costs of raw materials have already begun to affect the renewable energy and EV industry, making their products costlier and reducing the number of people willing to switch to a lower-carbon alternative to fossil fuels. It has also jeopardized the progress of the energy transition, according to analysts, raising the price tag substantially.
Even so, according to the lead author of the Carbon Tracker report, “Companies may see high prices as a huge neon sign pointing towards investment in more supply. However, this could become a nightmare scenario if they go ahead with projects which deliver oil around the time that demand starts to decline. Shareholders could face cat
Because of lower natural gas prices in the first year of the COVID-19 pandemic, U.S. operators reported that proved natural gas reserves in 2020 declined by 4% to 473.3 trillion cubic feet (Tcf), according to our Proved Reserves of Crude Oil and Natural Gas in the United States, Year-End 2020 report.
Proved reserves are operator estimates of the volumes of oil and natural gas that geological and engineering data demonstrate with reasonable certainty to be recoverable in the future from known reservoirs under existing economic and operating conditions.
The decline in natural gas reserves in 2020 was largely attributable to lower natural gas prices. The average annual price of natural gas at Henry Hub fell from $2.56 per million British thermal units (MMBtu) in 2019 to $2.03/MMBtu in 2020.
In 2020, low prices caused many operators to revise their proved reserves estimates downward and scale back development plans for new wells. Higher natural gas prices in 2021 will likely lead to more proved natural gas reserves in 2021.
Operators in Texas reported the largest decrease in natural gas proved reserves in 2020, down 11 Tcf, or 9%. Pennsylvania’s natural gas proved reserves fell by 9.6 Tcf, or 9%, in 2020.
In contrast, proved reserves of natural gas increased in Alaska from 9 Tcf to 36 Tcf. A large-scale liquefied natural gas development project received federal approval in May 2020. This project will include a new pipeline to bring natural gas from the north slope of Alaska to liquefaction and export facilities on its southern coast.
Kensington received good share of Couer’s 2021 exploration budget
KINY, January 26, 2022
Couer Mining invested a record $75 Million into exploration during 2021.
That’s according to a report published by North of 60 Mining News.
Coeur said its elevated level of exploration investment at Kensington over the past two years is intended to extend the life of the mine and generate growth opportunities beyond existing reserves and resources.
From the Washington Examiner, Daily on Energy:
GOP LAWMAKERS WANT WOTUS RULEMAKING SUSPENDED: Congressional Western Caucus Chairman Dan Newhouse and member Rep. Mariannette Miller-Meeks urged the Biden EPA to stop its “waters of the United States” rulemaking process now that the Supreme Court will consider its scope.
The court took the case on Monday in response to an appeal brought by an Idaho couple, which has been in a tug-of-war with EPA for more than a decade. EPA had designated wetlands on their property as “navigable waters,” necessitating a pricey federal permit in order to build a home.
The petitioners asked the court “to provide a clear jurisdictional rule” for the Biden administration as it crafts a new rule, which it plans to do in two parts by restoring the pre-2015 definition and then by crafting a second rule with additional regulations.
From the Washington Examiner, Daily on Energy:
XI DOWNPLAYS CLIMATE GOALS: China’s Xi Jinping told fellow Communist Party leaders the country’s strategy on climate change will “ensure the normal life of the masses,” raising additional questions as to how aggressive the globe’s top emitter intends to be in pursuing greenhouse gas emissions reductions.
Xi said “reducing emissions is not about reducing productivity, and it is not about not emitting at all, either,” also telling party leaders that China must “overcome the notion of rapid success” on lowering emissions.
A change in tone: Remember that climate envoy John Kerry claimed a major agreement between the U.S. and China to work together on climate change mitigation and to collectively “raise climate ambition” following the COP26 conference.
President Joe Biden had emphasized ahead of the conference his view that China (and Russia, too) isn’t doing enough to cut emissions. And the Biden administration maintains that rapid success is what leading emitters must achieve if the Paris Agreement’s global temperature targets are to remain within reach.
Notably, though, in that agreement, China didn’t agree to any concrete pledges, emissions targets, or timeframes for this decade.
Perhaps the most that could be said about it was that China had agreed at least in principle that it was on the same page as the U.S. in terms of reducing emissions. But now Xi appears to be saying that such goals will be subordinate to China’s other ambitions.
China’s commitments versus what the U.S. would want: On paper, China aims to see its greenhouse gas emissions peak before 2030 and to reach net-zero by 2060, and Xi’s pronouncements mesh with that broad strategy, says Lauri Myllyvirta, lead analyst with the Europe-based Centre for Research on Energy and Clean Air.
“The approach that the leadership is taking over this decade is not to pin down a specific emissions pathway, which we of course from a climate standpoint would want to see,” Myllyvirta told Jeremy.
“The fact that these targets still leave space for emissions to increase until late this decade — that’s a very slow start to getting to net-zero emissions,” he said.
The context: Myllyvirta emphasized that Xi’s words were likely motivated by the severe power shortages China faced last fall, when the Chinese economy suffered major disruptions because of ballooning electricity demand with which supply couldn’t keep up.
The power crunch led some manufacturers to shut down operations, and associated blackouts reached beyond the industrial sector into residential homes.
On economic disruption: Biden administration and European officials have framed the necessary transition to green energy as inherently disruptive, one entailing “wholesale transformation” of economies, as Treasury Secretary Janet Yellen has said.
The mandate is to find ways to manage those disruptions with monetary and energy policies, as European Central Bank executive board member Isabel Schnabel said earlier this month.
“Governments will have to protect the most vulnerable parts of society from higher energy prices in a way that does not delay the green transition,” Schnabel said during an American Finance Association-hosted panel on climate change and the financial system.
But avoiding disruption altogether is an impossible task, said Myllyvirta.
“Over the next decade, it’s going to be disruptive, especially in the next two decades. It’s going to be disruptive in the sense that energy structures and industrial structures and so on will change, and in terms of technologies, and cities and enterprises — there are going to be winners and losers,” he said