Today’s Key Takeaways: Banks providing sustainability loans looking for legal cover. OPEC deepens supply cuts. Lots of gas in Cook Inlet – why aren’t more companies drilling? AK Energy Metals sells data on Alaskan property to Silicon Valley company. COP28 establishes climate aid fund – will “voluntary contributions” work?
NEWS OF THE DAY:
ESG loan bubble close to bursting
Oil and Gas 360, November 28, 2023
The first sustainability-linked loan was the work of Dutch ING Groep and was closed in 2017. Since then, sustainability-linked loans have become the second-largest ESG market in the world, after so-called green bonds.
The essence of SLLs is that the borrower can benefit from a slightly lower interest rate in exchange for undertaking commitments in the environmental department—a principle that’s pretty similar to how ESG investment funds operate. But just like ESG investment funds, regulators—and investors—have now started to question the validity of sustainability-related claims by bond issuers and bank borrowers.
In a recent article on the issue, Bloomberg noted that the situation has reached a point where banks that provide SLLs are looking for legal cover in anticipation of greenwashing lawsuits. This anticipation could prove legitimate because banks did not check their clients’ ESG commitments in detail before granting loans, nor did they check whether these clients were using the money for environmental, social, or governance improvements.
OIL:
OPEC+ TO DEEPEN SUPPLY CUTS: OPEC+ agreed to deepen their oil cuts by 1 million barrels per day today, matching Saudi Arabia’s production cut of the same size as they look to prevent a feared supply surplus in 2024.
Riyadh agreed to extend its voluntary supply cut of 1 million bpd, which it first announced in July, sources told Bloomberg. The news comes as OPEC members look to use their collective producers’ power to keep prices between $80 and $100 per barrel.
“If those numbers get confirmed it shows OPEC+ wants to keep their hands on the oil wheel,” UBS Group analyst Giovanni Staunovo told the outlet. The oil cartel, he added, is “continuing to apply a proactive stance considering likely seasonally weaker demand at the start of 2024.”
Oil prices edged higher on the news, with futures for international benchmark Brent crude rising past $84 per barrel as of mid-morning, a 1.4% jump, while futures for U.S-based West Texas Intermediate saw a 56-cent rise from the previous day of trading, rising to at least $78.42 per barrel.
…MEANWHILE, THE GROUP ADDS BRAZIL AS NEWEST MEMBER: OPEC+ confirmed today that it has accepted Brazil into its influential group of oil producers. Brazilian Energy Minister Alexandre Silveira said today that their membership had been approved by OPEC President Lula da Silva, and will begin next year.
It remains unclear whether Brazil would need to comply with the expected supply cuts agreed to today, as it will not join the cartel until January. Read more from CNBC here.
From the Washington Examiner, Daily on Energy, November 30, 2023
GAS:
There’s lots of gas in Cook Inlet. Here’s why some companies aren’t drilling. (substack.com)
Nathaniel Herz, Northern Journal, November 29, 2023
Leaders of Alaska’s biggest gas and electric utilities say they don’t want to risk customer money to invest in uncertain drilling efforts, when imported LNG appears reliable and competitively priced.
One way out of Alaska’s impending natural gas shortage could sit under the ocean floor, a few miles north and offshore of the Kenai Peninsula community of Anchor Point.
There, a company says it’s sitting on an enormous pool of natural gas, equivalent to years of supply for Alaska’s power plants and home heating systems.
In fact, the company, BlueCrest Energy, has already brought numerous, productive wells online there, using a rig that drills horizontally from land out under the water. But the wells have been used mostly to pump oil from deep below the seafloor; the big pool of gas, BlueCrest says, sits higher up, between the oil and the ocean bottom
BlueCrest says extracting the gas will require wells drilled vertically, from a new offshore platform it wants to build in the water. But even though Anchorage-area policymakers and utilities are girding for an impending crunch in natural gas supplies, the company has failed to find investors willing to front the money for what could be a $350 million project.
“This is a sure deal,” Benjy Johnson, BlueCrest’s chief executive, said in an interview. ““The issue is, simply, the funding for the development. We are literally, every day, talking to investors, to try to convince them that Alaska is a safe place to come back to.”
There’s plenty of gas left in Cook Inlet — the aging basin offshore of Anchorage and the Kenai Peninsula — where BlueCrest says an engineering firm has validated its discovery with at least 90% confidence, using data from a decade-old test well and other past drilling efforts. A second company with holdings in the Inlet, Hex, also says it has similar amounts of untapped natural gas.
State experts agree that the deposits are significant, even if their exact scale remains unknown.
MINING:
Alaska Energy Metals sells exploration data to KoBold Metals
Jane Bentham, Global Mining Review, November 30, 2023
Alaska Energy Metals Corporation has announced the partial sale of its previously purchased exploration data to a subsidiary of KoBold Metals Company, an exploration and mining company out of Silicon Valley known for its innovative use of machine learning and artificial intelligence in mineral exploration.
The data pertains to KoBold’s Skolai Project, which runs adjacent to AEMC’s Nikolai Nickel Project in the Interior Alaska region.
Alaska Energy Metals Corporation President and CEO commented: “We are pleased to recover some of our costs from the large exploration data set we bought earlier this year. KoBold owns claims that neighbour our Nikolai Nickel Project and I am confident they will put the data to good use. With it, it should accelerate their exploration efforts. We wish KoBold success in their search for magmatic nickel-copper sulfide deposits on their claims. Any discovery success in this emerging nickel district will benefit Alaska Energy Metals and Alaska generally.”
Earlier this year, Alaska Energy Metals acquired an extensive data package produced by prior explorers of the district, some of which now pertains to claims held by KoBold. AEMC has sold the relevant data to KoBold for US$175 000. The data has been clipped approximately to the boundaries of KoBold’s Skolai claim block and includes:
- Rock sample assay results (>1000 samples).
- Soil sample assay results (>2300 samples).
- Stream sediment samples assay results (>250 samples).
- Drill core assay results and core logs (13 drill holes).
- ZTEM and VTEM airborne geophysical surveys.
- Geological maps.
KoBold Metals Chief Strategy Officer, Daniel Enderton, added: “We appreciate completing this data purchase with Alaska Energy Metals Corporation to further work on our Skolai Nickel Project. We similarly wish Alaska Energy Metals success in their search for magmatic nickel-copper sulfide deposits on their neighboring Nikolai Nickel Project.”
POLITICS:
Climate aid fund established on first day of COP28 after 30-year controversy
Andrew Freedman, Axios, November 30, 2023
COP28 climate summit head Sultan Ahmed al-Jaber notched a win on the first official day of talks in Dubai, with the adoption of an agreement to set up a “loss and damage” fund to help developing nations.
Why it matters: The fund has been highly contentious for decades, once thought of as the third rail of international climate talks. It would use voluntary contributions from mainly wealthier countries and direct those funds to developing nations to help them withstand climate impacts.
- “The responsibility now lies with affluent nations to meet their financial obligations in a manner proportionate to their role in the climate crisis,” said Harjeet Singh, head of global political strategy for the Climate Action Network International.
Details: The agreement establishes the “Climate Impact and Response Fund,” which will be housed within the World Bank on an interim basis.
- Many developing countries opposed this structure during multiple rounds of negotiations, in part because industrialized nations like the U.S. exert more influence over that institution.
- The U.S. has emphasized all contributions to the fund are voluntary and not an admission of legal culpability for causing climate-related damages.
Flashback: This move completes work conducted last year, at COP27 in Egypt.
- At the time, countries agreed to create a fund but did not make decisions about how it would be structured, where it would be located, who would contribute and other key details.
- The steps taken Thursday spell out those details, but leave the pledges, or deposits into the fund, left to each nation to decide.
State of play: Developing countries have said these pledges should total at least $100 billion per year, but what was initially offered Thursday fell well short of that figure.
- For example, Japan pledged $10 million. The U.S., which is the biggest historical emitter in the world, proposed $17.5 million. Germany offered $100 million.
- The European Union pledged €200 million for the fund, and the UAE said they would contribute $100 million.