BP sticks with API. China says “no” to Australian LNG. Shell CEO: You need us.

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What to Know about the Colonial Pipeline cyberattack
Ben Geman, Axios, May 10, 2021

Colonial Pipeline,a huge network that supplies eastern states with gasoline, diesel and other products, is shut down thanks to a major ransomware attack disclosed over the weekend.

Why it matters: Colonial is the largest refined products pipeline network in the country, transporting over 100 million gallons per day.

The company provides roughly 45% of the fuel used on the East Coast, per its website and published reports.

  • “It’s the most significant, successful attack on energy infrastructure we know of in the United States,” veteran energy analyst Amy Myers Jaffe tells Politico.

What’s new: The company said Sunday evening that while the main portions of the pipeline remain offline, “smaller lateral lines between terminals and delivery points” are back up.

  • Gasoline futures are trading higher, but the ultimate effect on prices will depend on the duration of the shutdown.
  • Major price increases are not expected if it only lasts a few days.

The big question: That’s how long the pipeline will remain down.

  • “[An] extended outage would likely see spot retail price spikes and even product shortages in harder-to-resupply middle and southeastern states, especially if there’s hoarding,” Rapidan Energy Group said in a note.

What they’re saying: Via Reuters, “While the U.S. government investigation is in the early stages, a former U.S. official and three industry sources said the hackers are suspected to be a professional cybercriminal group called DarkSide.”

Where it stands: On Sunday the Transportation Department issued a regional emergency declaration in 17 states that enables increased trucking hours to deliver fuel by road.

  • The move is designed to “avoid disruption to supply,” the agency said. More broadly, Commerce Secretary Gina Raimondo told CBS’ “Face the Nation” there’s an “all hands on deck” effort to resume operations.


BP says it will stick with top U.S. oil lobby after climate shift
Ron Bousso, Reuters, May 10, 2021

BP said on Monday it will remain a member of the American Petroleum Institute (API) after the largest U.S. oil and gas trade lobby group addressed some differences with the British energy company over climate change.

BP (BP.L), which plans to sharply cut its oil output and boost its renewable energy capacity over the next decade, said in a report that despite “uneven progress”, the API was “heading in the right direction”.

The API has faced growing pressure from member companies and activist groups to change its policies relating to climate change and drilling regulations.

The trade group started to shift some of its positions as the climate-focused Biden administration came to power this year. In March it said it supports a carbon price as one measure to mitigate climate change risk. read more

BP said it was “encouraged” by the API’s support for federal regulation on limiting emissions of methane, a potent greenhouse gas and its support for carbon pricing as well as improving its transparency.

“API’s progress has been uneven at times but, on the whole, the organization has moved considerably over the past year and is heading in the right direction,” BP said in the report.

“We will continue to make our case – as members – to influence API on climate and many other areas relevant to our business in the US.”

London-based BP, led by CEO Bernard Looney, last year quit the main U.S. refining lobby and two other trade groups but stuck with the API despite saying it was only “partially aligned” with its policies.

BP will publish a comprehensive review of its membership of the API and other associations next year.

France’s Total (TOTF.PA) in January became the first major global energy company to quit the API due to disagreements over its climate policies and support for easing drilling rules, saying it would not renew its 2021 membership. read more

Total’s stance put pressure on other European oil majors that have set out strategies to sharply reduce carbon emissions.

Royal Dutch Shell (RDSa.L) also chose to extend its API membership despite “some misalignment” with its climate stance.

BP’s interim report also reviewed its participation in four other associations which were partly aligned with its policies including the Australian Institute of Petroleum and the Canadian Association of Petroleum Producers.

BP said it was encouraged by progress made by all four groups over their climate stances.


China Bans Some Australian LNG Cargoes
Stephen Stapczynsk, Bloomberg, May 10, 2021

At least two of China’s smaller liquefied natural gas importers have been told to avoid buying new cargoes from Australia, a further example of the impact on trade from souring ties between the two countries.

The firms have received verbal orders from government officials to avoid purchasing additional LNG from Australia for delivery over the next year, according to people with knowledge of the directive, who asked not to be identified as the details aren’t public.

Larger state-owned importers that carry out almost 90% of purchases haven’t received any guidance and plan to continue buying Australian LNG, separate traders said, signaling that the impact on imports may be limited.

A fax seeking comment from China’s National Development and Reform Commission, the nation’s top economic planning agency, wasn’t answered.

China’s second-tier LNG buyers account for about 11% of the Asian nation’s total imports, according to BloombergNEF. Large state-owned firms — China National Offshore Oil Corp., China Petroleum & Chemical Corp., and PetroChina Co. — make up the rest.

An array of commodities imports from Australia have been targeted by Chinese tariffs or curbs as relations between the two nations have deteriorated in recent years, particularly after Canberra sought a probe into the origins of the coronavirus pandemic. China last week announced it was suspending a ministerial economic dialog, while Australia is reviewing whether to force a Chinese company to sell a lease to a strategically important port used by the Australian and U.S. militaries.

China imports more than 40% of its LNG from Australia, one of the world’s biggest suppliers, and there aren’t any signs that deliveries are being diverted, according to ship-tracking data compiled by Bloomberg. Australia last year shipped A$13 billion ($10 billion) worth of LNG to China, which would be challenging to replace.

Smaller LNG buyers plan to continue imports of previously purchased or contracted Australian cargoes, the people familiar said. Impacts from restrictions will be limited as the companies are less active in the spot market than larger rivals, while a recent rally in prices has also curbed their appetite for shipments.

Chinese end-users have been reluctant to sign long-term LNG supply contracts with Australian exporters or invest in new projects since tensions escalated last year.

The verbal directive echoes the order given to Chinese power stations and steel mills last year to halt Australian coal imports. Beijing has also targeted LNG before, adding tariffs on U.S. imports in 2018.


Low carbon world needs $1.7 trillion in mining investment
Reuters, May 10, 2021

Mining companies need to invest nearly $1.7 trillion in the next 15 years to help supply enough copper, cobalt, nickel and other metals needed for the shift to a low carbon world, according to consultancy Wood Mackenzie.

The United States, Britain, Japan, Canada and others raised their targets on cutting carbon emissions to halt global warming at a summit in April hosted by US President Joe Biden.

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Meeting those targets will need large-scale deployment of electric vehicles, storage for power generated from renewables and electricity transmission, all of which require industrial materials, such as lightweight aluminum and metals used in batteries such as cobalt and lithium.


Wood Mackenzie analyst Julian Kettle calculated miners needed to invest about $1.7 trillion during the next 15 years to “deliver a two-degree pathway — where the rise in global temperatures since pre-industrial times is limited to 2°C”.

“At an industry level, there seems to be reticence around investing sufficient capital to develop future supply at the pace and scale demanded by the energy transition (ET),” he said.

Mining firms are wary of making heavy investments after their experience of the last decade when they invested in new capacity just as demand peaked, leading to a collapse in prices and revenues. They also need to please investors, who are unlikely to want to see dividends diverted to capital spending.

Rising demands of investors related environment, social and governance (ESG) issues further add to the challenge.

Australia, Canada and Western Europe carry a low ESG risk but some of the best resources are in high-risk areas, such as Democratic Republic of Congo, which sits on about half the world’s cobalt reserves according to the U.S. Geological Survey. “Given the need to meet tough decarbonization and ESG targets, Western governments, lenders, investors and consumers will need to get comfortable operating in jurisdictions where ESG issues are more complex,” Kettle said.

Kettle said government support was needed to help miners comply with ESG issues to ensure production from high-risk areas was conducted in an acceptable way to consumers.

“Then, and only then, will the West be able to secure sufficient volumes of the raw materials needed to pursue the energy transition in the timescales envisaged.”


Speaker: House to pass budget Monday, special session likely
Peter Segall, Juneau Empire, May 10, 2021

 Lawmakers are confident a budget will be passed before the end of the Legislative session, but a special session seems likely, according to Speaker Louise Stutes, R-Kodiak.

Members of the Alaska House of Representatives will be back on the floor Monday morning to debate two budget bills sent back to committee last week, Stutes said.

“We’re going to start early Monday. My anticipation is to finish her on Monday,” Stutes said Friday in a meeting with reporters. “It should be all of the amendments.” 

House members had day-long sessions last Saturday and Sunday debating two budget bills, but procedural disagreements led to those bills being sent back to committee. Stutes told reporters members would hear all amendments that have been submitted. The House is scheduled for 9:30 a.m. Monday.

The House passed 14 bills this week, but none of them were the crucial budget bills lawmakers are hoping to finish before May 19. If lawmakers are unable to pass a budget before the 121st day of the session, a special session will have to be called either by the governor or lawmakers.

Sen. Bert Stedman, R-Sitka, proposed calling a special session later in the year, and Stutes said there have been conversations with Gov. Mike Dunleavy about a special session specifically focused on a Permanent Fund Dividend.

[As budget work continues, PFD question remains]

Alaska has more than $1 billion in federal relief money from the American Rescue Plan Act, but guidance on how that money can be used won’t be released until May 11. A special session would allow lawmakers the time to plan how to best allocate the money, Stedman said in an opinion piece published on the Must Read Alaska blog, a position Stutes said there may be support for.

“Once we get the guidelines it could take up to 90 days to get those monies distributed,” Stutes said. “There’s still a lot of unknowns on that.”

Federal relief money is allowing the state to pass a largely flat budget, Sen. Jesse Kiehl, D-Juneau, previously told the Empire, and budgets being crafted in both the House and Senate are similar to Gov. Mike Dunleavy’s proposed budget.

Critical issues like the amount of the Permanent Fund Dividend remain unsettled, and members of the Republican House Minority have complained about being shut out of the process. A bill to allocate a PFD of $500 was supposed to be heard in the House Finance Committee this week, but those hearings were canceled.

Legislative Finance Director Alexei Painter has told lawmakers that with no PFD or one of $500, the state would have no budget deficit.

The Majority Coalition only has 21 members, just enough to pass bills by a simple majority but Rep. Grier Hopkins, D-Fairbanks, has been absent all week. There was an agreement within the caucus to vote affirmatively on the budget, Stutes said, but members were free to vote how they choose on amendments.

But even with a razor-thin majority, Stutes said she remains confident the Legislature would finish by the 19th.

“That’s what we’re aiming for, and I’m an optimist,” she said.


Shell CEO: You need us on climate change
Hope King, Axios, May 9, 2021

Royal Dutch Shell CEO Ben van Beurden wants a seat at the table to fight climate change and wants the public and policy makers to believe the oil and gas company is serious about shifting its massive business. 

Why it matters: The problem is, “in many parts of society, everything we say is wrong,” he tells “Axios on HBO.”

What he’s saying: “Many governments do not want to be seen listening to us,” he said. “I don’t like it, but it’s nevertheless a reality.”

  • “What quite often I think is insufficiently understood is that companies like us are absolutely needed for the solutions that the world needs.”
  • “If you believe that the energy transition is going to be solved by start-ups or companies that have yet to be invented, then I would say dream on.”

Driving the news: Shell’s multi-decadeplan to move away from oil is being put to a shareholder vote later this month.

  • This is the first time that an oil “supermajor” is asking its investors to endorse a transition and to start to hold regular progress reviews. 
  • Some investor groups and activists don’t believe the goals go far enough, and say they fall short of aligning with goals from the Paris climate agreement. 
  • But van Beurden says Shell’s approach is to focus on how its oil and gas products are used versus how the company supplies them.
  • “We sell four times as much as we produce ourselves, [so] it would be a bit pointless if we would just say … we will produce a little bit less, but we will buy it from somebody else then and still put it into the market.”

The big picture: “The pandemic has shown how hard it is to do this energy transition,” he said.

  • Emissions dropped dramatically during the pandemic (and have already resumed their climb) but he says it’s not realistic to replicate that impact after the pandemic subsides: “That is just not going to happen.”

Be smart: Van Beurden acknowledges that fighting climate change is in Shell’s interest, too.

  • The company itself is vulnerable to climate impacts — operations in the Gulf of Mexico getting hammered by hurricanes, liquified natural gas terminals in the Middle East experiencing extreme heat — and demand for clean energy is already growing, pushing the market in that direction.
  • “Our actions are in light of self-interest more than I think a lot of people believe, [which is that] it’s all greenwash.”
  • “If we do not adjust our operations, if we do not adjust our product mix, we will be caught out at some point in time by other realities.”

The bottom line: Shell is trying to build the foundation for a future version of itself that extinguishes its current identity.

  • Van Beurden has been CEO for the past seven years, but he has beenwith the company his whole professional life — 38 years.
  • He has four children, the youngest 11, and by the time they go to college and see the Shell logo, he wants them to think and “believe that this brand stands for progress … for solving solutions that the world needs to solve one customer at a time.”
  • “My mantra is, if you don’t shape demands, you are going to be shaped by it one way or other.”