Today’s Key Takeaways: Biden blocks petroleum expansion in petroleum reserve. Three things will take a bite out of global oil demand this year. Exxon receives top grade for methane emissions management in the Permian. Ucore Rare Metals Inc. streamlined management, technical teams and secured new feedstock for rare earths separation plant. Democratic Senator Joe Manchin is exploring an energy and climate package aimed at winning enough Republican support to skirt the partisan budget reconciliation process
NEWS OF THE DAY:
US blocks oil leasing expansion in NPR-A
Chris Knight, Argus Media, April 25, 2022
President Joe Biden’s administration has blocked a major expansion of oil and gas leasing in the National Petroleum Reserve in Alaska (NPR-A) that could have allowed drilling on an additional 7mn acres (28,000km²) of federal land.
The administration today issued a final record largely reinstating a development plan from 2013 that allowed leasing on 11.8mn acres of NPR-A, or just more than half of the reserve’s 22.8mn acres. The plan will allow oil development to continue, but without the potential for drilling to expand in ecologically sensitive areas like Teshekpuk Lake that offer habitat to migratory birds and caribou herds.
The NPR-A’s remaining 11mn acres “are closed to oil and gas leasing under this plan in order to protect and conserve important surface resources and uses in these areas,” the US Bureau of Land Management said in its record of decision. The Biden administration proposed reinstating the 2013 development plan earlier this year.
Alaska producers have long pushed to allow drilling near Teshekpuk Lake based on geologic data suggesting it may hold vast amounts of oil. Former president Donald Trump’s administration in late 2020 signed a record of decision opening more than 80pc of NPR-A to oil and gas leasing, but it never had time to hold a lease sale that could have awarded contractual rights to drilling.
OIL:
These 3 Things Will Take a Big Bite Out of Oil Demand in 2022
Andreas Exarheas, Rigzone, April 26, 2022
The ongoing war in Ukraine, Covid-19 lockdowns in China and surging commodity prices are going to take a significant bite out of global oil demand this year.
That’s according to Rystad Energy’s senior vice president of analysis Claudio Galimberti, who made the comment in a statement sent to Rigzone recently.
“Oil demand is set to shed 1.4 million barrels per day, dropping below the highs set in 2019, with a rebound unlikely until at least 2023,” Galimberti warned.
“Additional Covid-19-related lockdowns or geopolitical issues could lead to further GDP growth reductions, applying additional downward pressure to demand forecasts,” he added.
“The global economy is battling surging inflation, additional strict Covid-19 lockdowns in one of the world’s largest economies, and continuing supply chain disruptions, and the impact on oil demand will be significant,” Galimberti continued.
Rystad is now predicting that oil demand will average 99.6 million barrels per day this year, Galimberti highlighted. A pre-pandemic high of 100.2 million barrels per day was set in 2019, the VP outlined.
Tighter Lockdowns, Prolonged War
Galimberti noted that the risk of tighter lockdowns in China cannot be ruled out, although he added that road traffic activity in the country has stabilized lately.
“Market hawks will be closely monitoring Beijing’s decisions regarding lockdowns in the coming days as an indicator of additional oil demand impacts,” he said.
The Rystad VP also noted that a prolonged war between Russia and Ukraine may be accompanied by a significant increase in commodity prices, in particular oil and gas, especially if Europe decides to embargo Russian imports.
“The Russian war worst case for oil demand is premised on Brent prices reaching $180 per barrel in the fourth quarter, triggering a further economic slowdown and outright destruction of oil demand,” Galimberti said.
The Rystad VP highlighted that, in April, the IMF downgraded its 2022 world GDP growth forecast from 4.4 percent to 3.6 percent, citing the impact of global inflation, hawkish monetary policies in the U.S., lockdowns in China and supply chain disruptions worldwide.
“It also cited the war in Ukraine, sanctions against Russia and elevated commodity prices as the other key factors weighing on the global economy,” Galimberti said.
Demand Under 100MM Barrels Per Day in 2022
In a report sent to Rigzone last week, Standard Chartered forecasted that overall 2022 global oil demand will stay below 100 million barrels per day. The company projected that demand will increase from 97.5 million barrels per day in 2021 to 98.9 million barrels per day this year.
The International Energy Agency (IEA) and Energy Information Administration (EIA) 2022 oil demand forecasts, which were highlighted in Standard Chartered’s report, also see overall global oil demand coming in below 100 million barrels per day this year.
The IEA expects this figure to rise from 97.5 million barrels per day in 2021 to 99.4 million barrels per day in 2022 and the EIA expects demand to increase from 97.4 million barrels per day in 2021 to 99.8 million barrels per day in 2022.
Conversely, the OPEC secretariat oil demand forecast predicts that demand will rise from 96.8 million barrels per day in 2021 to 100.5 million barrels per day this year, Standard Chartered’s report highlighted.
GAS:
ExxonMobil Receives Top Certification for Methane Emissions Management for Natural Gas from Permian Basin
Yahoo! Finance, April 26, 2022
- A” grade awarded by independent certifier after review of methane emission management programs
- Certification process expanding to other U.S. shale operations
- Independently certified natural gas helps meet customer demand for energy produced with fewer methane emissions
IRVING, Texas, April 26, 2022–(BUSINESS WIRE)–ExxonMobil said today that approximately 200 million cubic feet per day of natural gas produced from its Permian Basin facilities at Poker Lake, New Mexico have been independently certified and received the top grade for methane emissions management. The certification from MiQ helps the company meet customer demand for energy produced with fewer emissions. ExxonMobil is the first company to achieve certification for natural gas production associated with oil.
This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20220426005091/en/
MINING:
Ucore regroups and advances Alaska SMC
Shane Lasley, North of 60 Mining News, April 22, 2022
In preparation of bringing its Alaska Strategic Metals Complex online in 2024, Ucore Rare Metals Inc. has streamlined its management and technical teams and secured new feedstock for the future rare earths separation plant.
To be developed near the Southeast Alaska port town of Ketchikan, the Alaska SMC is a processing facility that will do the hard work of separating rare earths into the individual elements that are used in a variety of high-tech applications.
Though often referred to as a single entity, rare earths are a group of 17 elements – the 15 lanthanides that make up the second row from the bottom on the periodic table plus yttrium and scandium, a pair of elements almost always found in REE deposits and have similar characteristics – each with its own distinct traits.
Several of the lanthanide elements are used for the permanent magnets in electric vehicle motors, wind turbines, computer hard drives, high fidelity speakers, and other high-tech applications. Other rare earths are used for the color phosphors in televisions and computer monitors, various alloys, lasers, rechargeable batteries, and catalysts.
Rare earth deposits typically contain some mix of all these elements and are mined together. The difficulty is separating these closely related and tightly interlocked elements once they are recovered.
Untangling these elements so that they can be used across a wide span of high-tech and industrial sectors is where Ucore and its Alaska SMC come in.
Reorganizing Innovation Metals
Two years ago, Ucore acquired Innovation Metals Corp., a private Canada-based company that developed RapidSX for the separation and purification of rare earth and other critical metals to be used at the Alaska facility.
RapidSX is basically a modernization and technological upgrade to the conventional solvent extraction method that has been the standard for separating rare earths for more than 40 years.
Traditional solvent extraction, which remains the primary method of REE separation in China, involves running a mixed rare earths product through vats of various solvents that progressively separate the notoriously interlocked rare earths into individual elements – a long process that requires dozens of steps and a relatively large environmental footprint.
Utilizing an innovative column-based platform developed by IMC, RapidSX is more than ten times faster and much more environmentally sound than the mixer-settler units used for traditional SX separation.
“Ucore’s May 2020 acquisition of IMC and RapidSX was a transformative decision for the company,” said Ucore Rare Metals Chairman and CEO Pat Ryan.
Testing of this separation technology was completed last year and is now ready to be upgraded to a demonstration-scale plant before being implemented at the Alaska SMC.
In February, Innovation Metals Chairman and CEO Gareth Hatch, President Tyler Dinwoodie, and COO Kurt Forrester turned in their resignations. This forced Ucore to reorganize the management structure to continue to advance RapidSX and its Alaska SMC project.
To do this, the company turned to partners Kingston Process Metallurgy Inc. and Mech-Chem Associates Inc., which have played key roles in the development and testing of RapidSX.
KPM founders Alain Roy and Boyd Davis have taken more prominent positions in the Kingston RapidSX Commercialization and Development Facility in Ontario, which is where the demonstration plant is being developed.
Under their leadership, the KPM team of scientists and engineers will be working closely with Forrester and Jaan Hurditch, the RapidSX platform development manager at Innovation Metals, on the RapidSX demonstration plant, now scheduled for commissioning in mid-2022.
At the same time, Mech-Chem is working with Ucore to prepare the process designs for the production operations to manufacture commercial-grade rare earth oxides from rare earth concentrates at the new Alaska SMC manufacturing facility.
“This new SMC manufacturing facility will produce high purity REOs to meet the growing North American market demand for these products as the United States shifts toward electrification. Mech-Chem is proud to be a partner in the engineering, design, and construction of Ucore’s US-based rare earth oxide manufacturing facility,” said Mech-Chem President Ralph Cook.
As part of the streamlining process, Innovation Metals will be directed by the Ucore board, which is led by Ryan.
“The RapidSX technology platform uniquely positions Ucore to compete with the world in the most difficult aspect of the rare earth supply chain – the separation of REEs into high-purity individual REOs. And to do so in an efficient and environmentally friendly manner based on industry-established and well-proven chemistry. I am very proud of the team we have assembled to enable this transition to commercialization, and we look forward to delivering for our shareholders and for North America,” said the Ucore chairman.
Securing Alaska SMC supply
Reorganized and ready to move forward, Ucore announced that it has entered into a preliminary agreement to source mixed rare earth carbonate from Germany-based thyssenkrupp Materials Trading for processing at the Alaska SMC.
“Thyssenkrupp Materials Trading is a stalwart in the global critical metals industry and the perfect prospective partner for Ucore’s development of an independent rare earth supply chain in North America,” said Ryan.
Under a memorandum of understanding between the companies, thyssenkrupp will supply Ucore with feedstock for the demonstration plant in Ontario and at least 1,000 tons per year of this rare earth precursor material for the Alaska SMC beginning in 2024.
“Together with our partner, we now have the opportunity to significantly contribute to the establishment of a strategically important and reliable supply chain of rare earth products in North America through the supply of high-quality carbonate,” thyssenkrupp Materials Trading CEO Wolfgang Schnittker said about the deal with Ucore.
The Alaska SMC will be initially designed to produce up to 2,000 metric tons of individual rare earth oxides per year, and then expand to more than 5,000 metric tons per year by 2026.
In addition to the material to be supplied by thyssenkrupp, Ucore plans to process rare earth carbonates produced by Vital Metals Ltd., which has a rare earths mine in Northwest Territories and a processing facility in Saskatchewan.
Under an MOU signed by the parties in October, Vital will sell to Ucore a minimum of 500 metric tons of rare earths oxides, not counting cerium, to Ucore by 2024 and will expand its Canadian operations to supply at least 50% of Ucore’s planned 5,000 metric ton per year capacity at Alaska SMC by 2026.
The agreements with thyssenkrupp and Vital are key to Ucore’s mission of the Alaska SMC part of a complete rare earths supply chain with no links to China.
“Ucore continues to cultivate relationships with potential like-minded upstream and downstream partners in the evolving Western world market; with the ultimate goal of ensuring that original equipment manufacturers transforming to an electrified economy continue to have access to a comprehensive North American raw material and finished goods supply chain,” Ryan said last year.
POLITICS:
Manchin Explores Possibility of Energy and Climate Package With GOP
Ari Natter, Steven T. Dennis, Bloomberg, April 26, 2022
Democratic Senator Joe Manchin is exploring an energy and climate package aimed at winning enough Republican support to skirt the partisan budget reconciliation process that has held hostage hundreds of billions of dollars in potential spending on related priorities.
“If I can find something bipartisan, we don’t need reconciliation,” Manchin, of West Virginia, said in an interview on Monday.
A bipartisan energy package, like the infrastructure bill passed last year, could undercut the broader Democratic agenda but give President Joe Biden an election-year victory on an issue voters care about.
Manchin met with other senators from both parties Monday to “gauge bipartisan interest in a path forward that addresses our nation’s climate and energy security needs head on,” said his spokeswoman, Sam Runyon.
Manchin told reporters after the meeting that one area of common ground could be reform of the federal oil and gas leasing process. The administration, which has sought ways to increase domestic oil production, has called on Congress to make oil drillers pay penalties when they don’t use leases.
“You’re going to have to have a leasing program that works, O.K., and making sure that leases are fair, and people are not sitting on leases,” Manchin said. “We need to look at all that,” he said. “We haven’t done that.”
Manchin also said Congress could focus on increasing domestic production of energy in the near term and provide incentives for climate-related projects in the longer term.
The approach could revive some of the $550 billion in climate and energy spending in the Build Back Better Act, which stalled in December after Manchin declared he couldn’t support it. He has since talked about a possible reconciliation package that would include energy, tax, and drug pricing pieces along with substantial deficit reduction.
In addition to reform on permitting, a potential package could include revisions to federal land policy, aid for domestic pipelines, efforts to bolster production of both liquefied natural gas at home and abroad and critical minerals, a person familiar with the matter said. It’s possible the changes could be paired with hundreds of billions of dollars in new and expanded tax credits for wind and solar power, nuclear plants, biofuels, and advanced energy manufacturing sought by Democrats and the White House and included in earlier iterations of the Build Back Better spending bill, the person said.
Runyon didn’t immediately respond to a request for comment about the possible elements of a deal.
The move could be a long shot. An effort to side-step the budget reconciliation process would require at least 10 Republicans to reach the 60 votes needed for passage, while at the same time winning the support of progressive Democrats in the House.
A bipartisan deal could also provide a path forward for other energy priorities that Manchin has called for in recent weeks, including action on Equitrans Midstream Corp.’s Mountain Valley Pipeline, construction of which stalled in his home state after a federal court in January rejected its permit to cross a national forest.
Manchin last month publicly called on the administration to move forward with a litany of energy requests including increasing oil-and-gas production on both federal and private lands, a new five-year Gulf of Mexico oil-and-gas leasing plan from the Department of Interior to replace one expiring in June, and the construction of new natural-gas pipelines and export terminals.