NEWS OF THE DAY:
Exxon Makes Satellite Methane Emission Detection Deal
Andreas Exarheas, Rigzone, December 29, 2021
ExxonMobil has announced that it has agreed to work with Scepter Inc to deploy advanced satellite technology and proprietary data processing platforms to detect methane emissions at a global scale.
The agreement has the potential to redefine methane detection and mitigation efforts and could contribute to broader satellite-based emission reduction efforts across a dozen industries, including energy, agriculture, manufacturing and transportation, ExxonMobil noted in a statement posted on its website.
In the first phase of the project, ExxonMobil said the companies will design and optimize the plan for satellite placement and coverage, adding that this will initially be focused on capturing methane emissions data from ExxonMobil operations in the Permian basin. Scepter will deploy satellites in 2023 and increase coverage to more than 24 satellites over three years, forming a large constellation network capable of monitoring operations around the world, ExxonMobil highlighted.
In addition, ExxonMobil noted that it and Scepter are pioneering a proprietary data fusion system that reconciles information collected from multiple detection methods, including ground-based, stationary, and mobile monitoring devices.
“This collaboration will enable multiple industries to identify the sources of methane emissions around the world in real-time, so that leak repairs or mitigation solutions can be deployed rapidly,” Bart Cahir, the senior vice president of unconventional at ExxonMobil, said in a company statement.
“This is another example of how ExxonMobil is investing in technology with leading innovators to align with the Global Methane Pledge to reduce methane emissions by 30 percent by 2030, compared to 2020 levels,” Cahir added in the statement.
Philip Father, the chief executive officer of Scepter, said, “we’re excited to work with ExxonMobil to develop a system that goes beyond methane detection.”
“Our data fusion platform will be central to a broader capability to detect quantify, abate and certify,” he added in the statement.
“This approach is rooted in our mission of providing comprehensive observations on a real-time basis and global scale, therefore meeting various environmental, social and governance reporting needs,” Father went on to say.
Earlier this month, ExxonMobil announced that it plans to achieve net zero greenhouse gas emissions from operated assets in the U.S. Permian Basin by 2030. The plans are said to be part of its corporate-wide effort to reduce upstream greenhouse gas emissions intensity by 40 to 50 percent by 2030, compared to 2016 levels.
Also in December, ExxonMobil said it had finalized corporate plans which increase spending to $15 billion on greenhouse gas emission-reduction projects over the next six years. The company also announced in December that it was on track to meet its 2025 greenhouse gas emission-reduction plans by year-end 2021.
Here’s Why OPEC+ Didn’t Respond To U.S. Calls For More Oil
Irina Slav, OilPrice.Com, December 29, 2021
- Russia’s Deputy PM and top OPEC+ negotiator Alexander Novak explains in a recent interview why the group decided not to heed the U.S. call for more production
- Novak: Oil production companies must plan their investments ahead of time in order to secure production growth
- Novak, like many observers, downplayed the effect of the SPR release
An ambition to provide the global oil market with clear guidance on future production plans and discipline in sticking to already agreed policies is the reason OPEC+ did not respond to U.S. calls to boost oil production, Russia’s Deputy PM, and top OPEC+ negotiator Alexander Novak said.
In an interview with news outlet RBC, Novak explained that it was more important for the extended cartel to indicate how much oil it will be producing in the medium term as demand increases rather than boosting output in the near term in response to a large consumer’s call.
“We cannot secure fluctuating production,” Novak said. “Oil production companies must plan their investments ahead of time in order to secure production growth,” he added, noting that during the winter, there is usually a decline in the demand for oil.
‘For some reason,” the official said, “The U.S. is not asking its own shale oil companies to boost production, which has fallen considerably over the last two years. On the contrary, they are deliberately reducing their production. I believe there is a certain contradiction in these actions.”
U.S. President Joe Biden called on OPEC+ repeatedly to boost production by more than 400,000 bpd because prices at the pump were becoming too high for American drivers. When the calls failed to produce a response, Biden blamed OPEC+ for hurting poor working American families. This failed to work, too, which is when the Biden administration announced a release of up to 50 million barrels from the strategic petroleum reserve.
The news has served to moderate prices, especially as it coincided with the news of the emergence of the omicron variant, which prompted worry about new movement restrictions that would, as usual, hurt oil demand.
Novak, like many observers, downplayed the effect of the SPR release along with the planned releases of other countries.
“Plans are for a total release of 50-60 million barrels,” he told RBC. “Of this, the U.S. will release about 30 million barrels in January and February. But the world consumes 36 billion barrels annually,” he explained, noting that in this context, the release of 50 or 60 million barrels will have only a temporary effect.
U.S. liquefied natural gas exports grew to record highs in the first half of 2021
U.S. Energy Information Administration, December 29, 2021
U.S. exports of liquefied natural gas (LNG) continued to grow in the first six months of 2021, averaging 9.6 billion cubic feet per day (Bcf/d). This average marks an increase of 42%, or 2.8 Bcf/d, compared with the same period in 2020 (according to the U.S. Department of Energy’s LNG Monthly reports and our estimates for June 2021, based on shipping data from Bloomberg Finance L.P.). During the summer months of 2020, U.S. LNG exports fell to record lows, but they set consecutive record highs in November and December.
U.S. LNG exports increased in the first half of this year as international natural gas and LNG spot prices increased in Asia and Europe due to cold weather. Rising global LNG demand once COVID-19 restrictions began to ease, as well as continuous unplanned outages at LNG export facilities in several countries (including Australia, Malaysia, Nigeria, Algeria, Norway, and Trinidad and Tobago), also contributed to increased U.S. LNG exports.
In Asia, colder-than-normal winter temperatures led to increased demand for spot LNG imports. Natural gas demand in the spring continued to rise amid low post-winter inventories, which contributed to unseasonably high natural gas prices. The high prices prompted a higher demand for more flexible LNG supplies, particularly from the United States.
In Europe, natural gas storage inventories were also low following a cold winter. Increasingly hot temperatures in May and June and greater natural gas demand from the electric power sector contributed to high natural gas spot prices. Europe’s natural gas spot prices have historically been lower than prices in Asia; however, this year, Europe’s natural gas prices are tracking Asia’s spot LNG prices more closely to attract flexible LNG supplies from around the world to refill storage inventories.
IEA Coal Report Says Coal Increasing: A Wish And A Prayer?
Seeking Alpha, December 29, 2021
- IEA indicates a small increase in absolute coal power generation in the period 2021-2024, but coal makes essentially no contribution to increased global power consumption in the same period.
- Reliance on China and India for coal expansion to 2024, but evidence provided by the IEA coal report fails to document the context of massive renewable energy expansion.
- IEA’s recent “Renewables 2021” report paints a different picture and considers a longer time horizon. IEA’s “Net Zero by 2050” is unambiguous about the need to exit coal urgently.
- IEA report “Coal 2021” takes the position that Net Zero by 2050 isn’t happening.
- Investors might tread warily and review other literature about the coal markets. Peabody Energy investors might be particularly affected.
I’m on the record that come 2024, Peabody Energy (BTU) is likely to be confronting a number of challenges to its business. A new report from the IEA “Coal 2021” posits increasing coal consumption between 2021 with coal demand plateauing by 2024 at record levels. The report stops at 2024 and gives little guidance about where the coal industry will go beyond that time. Here I review IEA’s Coal 2021 report, along with other reports by the IEA (e.g., “Renewables 2021”, “Net Zero by 2050”) to get a sense of where the “Coal 2021” report fits and how limiting analysis to the period 2021-2024 gives a misleading impression of the prospects for the coal industry in general and Peabody Energy in particular. This is a time to pay attention not only to short term coal industry events, but to take a longer perspective of coal investment and the context surrounding it.
IEA coal report strategically stops at 2024
As sophisticated investors appreciate, timing is a crucial part of any revolutionary change and the switch from fossil fuels to renewable energy is no exception. The IEA has contradictory timelines in assessing the exit from fossil fuels. Recent IEA reports emphasize how critical the results for 2030 are on the path to net zero emissions by 2050. The just out IEA “Coal 2021” report curiously focuses on the period from now to 2024. This gives a misleading impression that after COVID (and it isn’t over yet), coal consumption will revert to growth before plateauing in 2024. Investors who are not paying attention to long-term trends might be reassured in their coal investments that there is a continuing role for coal far into the future.
Firstly, it is important for investors to be aware that coal and gas will provide only a very small fraction of new power generation in the period 2021-2024. Indeed, of a predicted 2,099 TWh increase in power demand from 2021-2024, 89% is predicted to come from renewables & nuclear power, with 10.5% coming from gas and coal, with coal’s contribution to increased power generation being negligible. Hence coal is essentially irrelevant to new power generation in the period 2021-2024. This provides a different view to the IEA Coal 2021 report headlines, which focus on record coal consumption. The point is that coal decreases significantly in the period 2021-2024 as a percentage of global power generation.
The basis for the absolute increases predicted by the IEA in the period 2020 through 2024 rely almost entirely on prediction of increases in two countries and one region: China (up 4.1%), India (up 11%) and some countries in SE Asia (up 12%). Note that these predicted increases in coal consumption are a small fraction of new power generation from new renewables, and they are not predicted annual increases, but an increase over three years. In China most of the increase (4.3%) comes in 2021, with just 0.5% annual increases in the following years, while India is expected to increase 3.9% annually.
It is interesting to see the basis on which the IEA concludes that these three markets are going to sustain global coal production to 2024. The plateauing of coal consumption to 2024 relies largely on two countries, China, and India, expanding their coal consumption as the rest of the world actively reduces coal consumption. The assumptions made about India and China do not address the context of coal exploitation in these countries, especially with respect to competition with renewables.
China is a huge country that has brought 100’s of millions of its citizens out of poverty in a very short time period. It became the world’s manufacturing center in the process and hence many countries effectively transferred their manufacturing emissions to China in this period. A lot is happening in China, much of it scarcely believable in terms of scale and timing of implementing change.
I am skeptical of the claims made by the IEA about China’s plans for expanding its coal use; the IEA conclusions partly arise because China is notable in promising less than it ultimately achieves. There are a number of big changes afoot, including a goal to expand renewables (wind and solar PV) to 1,200 GW by 2030. This must have an impact on coal consumption because China is very clear about reducing emissions from burning coal. Many things are happening to address coal consumption. For example, 15% of China’s steel production uses an EAF (Electric Arc Furnace) and scrap steel today, but there are plans to increase EAF-produced steel to 50% of China’s steel production although the timing is unclear. Steel made using EAF doesn’t use coal. Indeed, the protected status of coking coal used in steelmaking is under attack from various directions.
The Coal 2021 report goes into some detail about major programs to expand coal production in India, but not a lot of the planned expansion outlined is going to happen before 2024.
Meanwhile the latest announcement from PM Modi at COP 26 was for renewable energy production to be increased from a planned 450 GW to 500 GW by 2030. This will be a sizeable increase in India’s renewable power capacity, which surely is going to compete with coal developments. Indeed, recent information from India suggests that an expert committee has been tasked by the Union Power Ministry to update the National Electricity Policy so that no new coal-based capacity be considered. It seems that a proposal is also being considered to allow replacement of old coal-based units only if it is convincingly established that it is not viable to meet the projected demand from alternate non-fossil fuel sources. It is noted that the expert committee recommendation is a significant change from the ministry’s recent position that more power capacity would be sourced from fossil fuels.
The IEA Coal 2021 document covers, in some detail, plans for various coal expansions, but many seem like plans rather than executable projects. There is no discussion of the context in India of huge expansion of renewable energy. I remain skeptical about major coal expansion in India, and I note that expansion in India is core to the IEA claim that global coal production will increase until 2024.
Until very recently, Southeast Asia was where major coal expansion was planned to take over from Chinese and Indian coal expansion. The Coal 2021 report is quite circumspect about the situation for several countries that have had big coal expansion plans recently curtailed. The fact that funding coal projects is becoming impossible is likely to be a significant issue throughout Southeast Asia as major funders refuse to continue funding coal-related projects.
COP 26 focused on 2030
Two issues dominate the future of coal (and other fossil fuels). These are dramatic cost reductions for the cost of renewables and the need to reduce emissions because of the climate crisis. Until very recently the fossil fuel industry has been successful in making the climate issue a long way into the future by keeping focus on 2050 net zero targets. The recent COP 26 climate meeting broke that tradition and instead the focus was on 2030 and what needs to be achieved to have a hope of net zero emissions by 2050.
Had the “Coal 2021” report considered a horizon to 2030, I suggest that coal investors would be confronting a much more challenging investment thesis. Indeed, the IEA report “Renewables 2021” (which addresses the period to 2026, but also has a longer view towards 2030), makes clear that 95% of new future energy needs will be met by renewables.
China and India are singled out for their dramatic renewable’s development plans, with China’s goal of 1,200 GW of wind and solar PV capacity by 2030 predicted to be reached four years early (by 2026). New renewable power in India is growing faster than in any country in the world.
Even the Coal 2021 report has lots of bad news for coal production and consumption after 2024, especially in the Southeastern Asian markets that formerly have been the basis for massive, expected expansion of global coal consumption. The details of the Coal 2021 report mention a lot of this bad news if one looks at the fine print.
Impact on Peabody Energy
The Coal 2021 report has special significance for Peabody Energy because the markets identified for expansion by the IEA are not big customers for Peabody Energy. The 2020 Peabody Energy Annual Report (Note 25) indicated revenues from different geographies as the following: US 56.2%, Japan 13.3%, Taiwan 7.7%, Australia 6.9%, with China 3.8%, India 2.6%, and Vietnam 2.4%. China has been made more complicated as the whole Australian coal market has been boycotted by China for more than 12 months. Although there have been a few shipments accepted recently, the consensus is that there is no end in sight to the China ban.
The US coal market is followed closely by Jay14150, and he indicates that there are difficulties everywhere.
Investment is about identifying opportunities. If coal doesn’t make sense in the US and Europe, I have difficulty understanding why it would make sense in China, India, and Asia. The point is that there is a climate emergency, and the world needs to decarbonize. China and India have the world’s most acute emissions problems. Secondly, renewables are now a cheaper source of energy, not only in actual cost but also in their provision of energy independence. Why send money to buy energy when you can make it yourself?
With the IEA Coal 2021 report, the IEA has become schizophrenic about how it views the future of coal. On the one hand it accepts the urgent need to decarbonize, and that coal is the first fossil fuel needing to be exited. On the other hand, the Coal 2021 report overlooks that the key outcome of the COP 26 conference was to refocus emission reduction efforts in 2030, not 2050. This means urgent exit from coal. Events in the coming three years are important, but the environment in which coal companies like Peabody Energy operate are much more affected by overall difficulties for coal companies at many levels. Another recent IEA report “Net Zero by 2050” is an important and highly relevant document for coal investors.
Coal finance is disappearing, markets are exiting coal so coal companies, which operate in a technically challenging environment, have a whole range of problems around selling their commodity. There is money to be made by agile short term focused investors, but for investors who are looking for safe long-term investing, companies like Peabody Energy are hard work for an uncertain reward.
Trump again endorses Dunleavy for Alaska governor — but only if he doesn’t back Murkowski
James Brooks, Anchorage Daily News, December 28, 2021
Former President Donald Trump issued a conditional endorsement of Gov. Mike Dunleavy for reelection on Tuesday, saying the incumbent governor has his support — but only if he doesn’t back U.S. Sen. Lisa Murkowski in her bid for reelection.
Dunleavy, who has five challengers to date, thanked Trump for his support.
“He has my Complete and Total Endorsement,” said Trump’s message, sent by email from the former president’s political action committee, “but this endorsement is subject to his non-endorsement of Senator Lisa Murkowski who has been very bad for Alaska, including losing ANWAR, perhaps the most important drilling site in the world, and much else.”
“ANWAR” appeared to be a reference to ANWR, the Arctic National Wildlife Refuge, which Murkowski helped open to drilling with a provision she inserted into federal law in 2017.
A spokesperson for Murkowski’s campaign could not be reached Tuesday. Murkowski, generally considered among the most moderate Republicans in the Senate, was appointed in 2002 by her father, former Sen., and Gov. Frank Murkowski, and was subsequently elected in 2004, 2010 and 2016.
Asked whether he will accept the endorsement, Dunleavy issued a written statement thanking Trump for his support.
“I want to thank President Trump for his endorsement,” Dunleavy said. “We had a very good working relationship on the issues that are important to Alaska, in particular resource development. No president has done more for Alaska than President Trump and I appreciate his support.”
Andrew Jensen, a spokesman for Dunleavy’s campaign, said he doesn’t believe the governor has any intention to get involved with the U.S. Senate race.
“The governor is focused on his race,” Jensen said.
Trump endorsed Dunleavy — without any conditions — in the 2018 gubernatorial election.
Several of the president’s former aides are now working on the campaign of Murkowski’s principal Republican opponent, former state Department of Administration commissioner Kelly Tshibaka.
Tshibaka has criticized Murkowski for voting to confirm several Biden administration appointees, including Interior Secretary Deb Haaland. Under Haaland, the Interior Department suspended oil and gas leases in the refuge.
Murkowski has continued to support drilling in the refuge, and an ongoing lawsuit could overturn the suspension.
Asked about the conditional Trump endorsement, Tshibaka campaign spokesman Tim Murtaugh said, “We certainly don’t believe Lisa Murkowski deserves anyone’s endorsement.”
Murtaugh was communications director of Trump’s national 2020 re-election campaign.
When asked whether the Tshibaka campaign requested the condition attached to Trump’s endorsement of Dunleavy, Murtaugh said, “we decline to comment on that.”
Murkowski was one of seven Senate Republicans who voted to convict Trump of inciting the Jan. 6 attack on the U.S. Capitol. Fifty-seven votes were cast in favor of conviction, nine short of the two-thirds majority needed. The day after the attack, Murkowski said in a video that it was “incited from the highest level.”
Since then, Trump has urged Alaskans to reject Murkowski. “I do not know where other people will be next year, but I know where I will be — in Alaska campaigning against a disloyal and very bad Senator,” Trump told political news site Politico in March, after Murkowski voted to advance Haaland’s nomination.
Trump unconditionally endorsed Tshibaka in June, following a meeting between the two at Trump Tower in New York City. (Her campaign in November announced plans for a Trump-hosted fundraiser at Mar-a-Lago in early 2022.) The Alaska Republican Party’s central committee also endorsed Tshibaka in July.
Before those endorsements, Murkowski received the support of her fellow Alaska incumbent, U.S. Sen. Dan Sullivan. Both senators declined to endorse Trump for president in 2016, but Sullivan backed him in 2020.
As of Tuesday evening, six candidates, including Dunleavy, had registered as candidates for the governor’s race with either the Alaska Division of Elections or the Alaska Public Offices Commission. The deadline to enter the race is June 1.
Ten candidates have registered with the Alaska Division of Elections to run for Alaska’s Senate seat in 2022, and that figure does not include Tshibaka. The deadline to register for that race is also June 1.
In both races, four candidates will advance from the August primary to the November general election, where winners will be chosen with ranked-choice voting.
California’s Great Climate Fail
The Editorial Board, The Wall Street Journal, December 29, 2021
A left-leaning policy shop documents the state’s emissions bust.
President Biden has made California his green-energy model, so it’s noteworthy that a new study shows that the Golden State is failing to meet its greenhouse-gas emissions goals in part because of its climate obsession.
State law gives the California Air Resources Board (CARB) sweeping power to reduce statewide emissions 40% below 1990 levels by 2030. The anti-carbon czars have used this mandate to implement a cap-and-trade program, low-carbon fuel standard, electric-vehicle, and renewable electricity mandates, among other regulations that raise costs for residents and businesses.
Yet the state is still falling far short of its climate goals, according to a report by the left-leaning policy shop Next 10—and that’s with soft grading that ignores the enormous emissions from wildfires and renewable fuels.
“Assuming the same three-year average rate of reduction from 2017 to 2019 (-1.3%), California will reach its 2030 and 2050 goals in 2063 and 2111, respectively,” Next 10 writes. “Slowing renewable energy growth, underwhelming transportation sector gains, and a worrisome cross-sector over-dependence on natural gas pose major challenges for the state.”
Last year the state added more natural gas power capacity than solar. The reason: Fossil fuels are needed to back up unreliable renewables, especially as nuclear power plants are forced to shut down and drought limits hydropower. It also has to import power from other states, some of which is generated by coal.
Emissions from businesses and homes are also rising in part due to population growth, especially inland. Environmental and zoning regulations jack up housing prices on the coast, so middle-class families are settling inland where winters are colder and summers are hotter. This requires more heating and air conditioning. Longer commutes also increase emissions.
Another rich irony: Measures to protect the ozone layer under the 1987 Montreal Protocol are contributing to global warming. One of California’s fastest growing sources of emissions is “high-global warming potential gases” from “Substitutes for Ozone Depletion Substances” that are used in refrigeration, air conditioning and fire suppression, the report says.
Emissions from wildfires have also soared due to years of forest mismanagement. Blame politicians who have prioritized climate. Last year wildfires were the state’s second largest source of emissions, exceeding industrial businesses and the grid. A single fire in northern California produced more greenhouse gases than all non-industrial businesses.
Yet Next 10 excludes wildfires from its tally of statewide emissions because it says its focus is “fossil fuel combustion and other anthropogenic emissions.” It also excludes “biogenic materials” including renewable fuels that are used to replace oil even though they are a large source of the state’s emissions.
Including wildfires and renewable fuels would show emissions have risen since 2000, making California’s anti-carbon crusade look like an even bigger failure. Rather than make the emissions goals more realistic, Next 10 recommends doubling down.
Democrats don’t need the prodding. Last year Gov. Gavin Newsom ordered those sales of new gas-powered cars be banned by 2035. Then during the summer, CARB upped the ante by proposing to require all new light-duty cars sold in the state by 2025 be electric, and that refineries be shut down by 2035, which would effectively ban gas-powered cars.
Climate is the left’s substitute for religion, and politicians are making Californians martyrs to the cause. The main point seems to be suffering in the name of anti-carbon virtue, because that suffering hasn’t done much to reduce emissions.