Today’s Key Takeaways: More consolidation in the oil industry. Confusing oil production with oil demand. Singapore centralizes gas purchased in pursuit of energy security. Pogo on pace for 250,000 ounces of gold in 2023. From house energy committee to speaker of the house?
NEWS OF THE DAY:
Chevron buys Hess for $60B as Big Oil deals reshape industry
Ben Geman, Axios, October 23, 2023
U.S. oil industry consolidation is suddenly happening at breakneck speed.
Driving the news: This morning Chevron announced an all-stock deal to buy Hess Corp. for $53 billion, with a total deal value of $60B including debt. It comes on the heels of Exxon’s blockbuster Oct. 11 deal to buy Pioneer Natural Resources in an even larger transaction.
Why it matters: The deals (if regulators bless them) are reshaping the American industry as the two largest U.S. companies, flush with cash after a long stretch of high prices, snag giant independents.
State of play: Chevron’s deal has big differences with Exxon’s.
- While Pioneer operates in the Permian Basin, Hess has operations in North Dakota’s shale patch, as well as the offshore Gulf of Mexico.
- It’s a multinational player too, a huge part of the deal.
- Hess has developments offshore Guyana — a major new oil frontier where Exxon is a major presence — and gas operations in the Gulf of Thailand.
The big picture: Exxon and Chevron are making bigbets on robust and enduring oil and gas demand despite climate policies.
- Chevron said the merged firm “is expected to grow production and free cash flow faster and for longer than Chevron’s current five-year guidance.”
What they’re saying: “While Hess is based in the U.S., the real prize in the portfolio is Guyana where in less than a decade, the country has vaulted into one of the most important growth areas for non-OPEC oil production,” Third Bridge analyst Peter McNally said in emailed remarks to reporters.
What we’re watching: How much more consolidation looms.
The bottom line: Dominoes are falling.
Do Environmentalists Confuse Oil Production With Oil Demand?
Irwin Dawid, Planitizen, October 23, 2023
Big Oil, “whose past behavior makes them easy targets for attacks,” and domestic oil production are major targets for environmental organizations in the United States that are fighting climate change, writes Samantha Gross, previously a director of the Office of International Climate and Clean Energy at the U.S. Department of Energy, for the Brookings’ Energy Security and Climate Initiative on September 14.
Her research paper is a 36-minute read and the source article for this post.
This is a more difficult task than protesting particular projects or companies; it involves changing the system through which we use energy. In the case of oil, it primarily involves changing how we fuel our transportation system — moving from gasoline and diesel to electricity for most of our on-road transport.
It could also involve redesigning our cities and lifestyles, making more efficient forms of transport workable and attractive.
Furthermore, reducing domestic oil production does nothing to reduce emissions, adds Gross. Rather, the main result is to increase oil imports.
Oil is plentiful, fungible, and easy to transport, and other producers can easily step in to meet oil demand if the United States does not. U.S. energy security will also suffer if the United States reduces domestic oil production faster than demand.
“Offshoring” oil production to other countries only adds to emissions due to the transport requirements. Gross notes that “[m]any foreign sources of oil inherently require more energy in their production, resulting in greater emissions of GHGs and other pollutants than production here in the United States.”Election 2024: California Oil Drilling Referendum]
Case in Point: Alaska’s Willow Project
“On March 13,the Biden administration approved one of the largest oil developmentson federal land, a decision that came after months of intense lobbying and over objections that the project, known as Willow, would undermine U.S. efforts to phase out fossil fuels worldwide,” reported Timothy Puko for The Washington Post on March 17.[Related in Planetizen: Judge Halts Controversial Alaska Drilling project, August 22, 2021.]
Backlash from environmental groups was instantaneous.
We’ve been fighting Willow since it was first proposed, and this isn’t the end. Earthjustice has filed a lawsuit on behalf of conservation groups to keep this destructive project from moving forward.[April 3 update from Earthjustice: “A federal judge today ruled in favor of oil giant ConocoPhillips by denying a motion [pdf] for preliminary injunction brought by environmentalists as part of a lawsuit [pdf] challenging the Willow project in Alaska’s Western Arctic.”]
Is the drilling project a carbon bomb?
“Describing the Willow project as a ‘carbon bomb’” assumes that if the Willow project does not happen, no other producer will pick up the slack,” argues Gross.
But that assumption is wrong. Instead, the avoided U.S. production would be added to the global market by producers in some other country. The United States would lose the security benefit of producing the fuel domestically without a reduction in global greenhouse gas emissions.
As long as there is demand for the oil that the project aims to produce, someone will produce it. If not at this project, then at another.
Singapore Centralizes Gas Purchases to Boost Energy Security – Bloomberg
Yongchang Chin, Stephen Stapczynski, Elizabeth Low, Bloomberg, October 23, 2023
- Gas demand from power-generating companies to be aggregated
- Change will create stable, secure power system, minister says
Singapore will centralize natural gas purchases in a bid to improve the stability and security of its power sector.
The nation will aggregate demand from generating companies, which will create economies of scale and allow Singapore to negotiate more favorable gas contracting terms and procure fuel from diverse sources, Minister for Trade & Industry Gan Kim Yong said at the Singapore International Energy Week conference.
“This is a fundamental shift in our approach toward gas procurement,” he said. “We believe that this is necessary to create a more stable and secure power system that will ultimately benefit the consumers and also the gencos themselves.”
Pogo on pace for 250,000 oz gold in 2023
Shane Lasley, North of 60 Mining News, October 20, 2023
Northern Star Resources Ltd. Oct. 19 reported that its Pogo Mine in Alaska produced 61,817 ounces of gold during the third quarter of calendar year 2023. Over the first nine months of this year, Pogo poured 192,918 oz of gold, putting the company’s only operation outside of Australia on pace to top 250,000 oz in 2023.
Since completing an expansion of the Pogo mill to 1.3 million metric tons per year in 2022, Northern Star has been working to ramp up gold output at the high-grade underground mine to 300,000 oz per year.
Calander year 2023 got off to a bit of a slow start due to a damaged motor that put the mill out of commission for three weeks. Despite this setback, the operation produced 49,779 oz during the first quarter.
Pogo bounced back during the second quarter – producing 81,322 oz of gold during the three-month period ending in June, the highest quarterly output in recent years.
PALMER LOOKS TO LEAP FROM ENERGY COMMITTEE TO SPEAKER’S OFFICE: A prominent House Energy Committee member is vying to wield the Speaker’s gavel: Republican Rep. Gary Palmer of Alabama.
The Alabama Republican formally announced his bid on Sunday, joining eight other GOP members in the race to be leader of the GOP conference. In a statement, Palmer argued that he can offer “steady, conservative leadership” that can unite the conference “behind a clear path forward.”
Why it’s significant: Out of the exhaustive list of candidates running to replace former Speaker Kevin McCarthy, Palmer is the only candidate that sits on the House Energy and Commerce Committee. Notably, he’s also a policy wonk, sitting as chair of the Republican Policy Committee. If Palmer were to assume the gavel, he would come in with a unique perspective on the energy landscape.
His track record: Palmer had influence over House Republicans’ sweeping energy package that passed the House earlier this year (but was stalled in the Senate). The bill includes his provisions defunding the $27 billion Greenhouse Gas Reduction Fund under the Inflation Reduction Act, and another that would prevent the implementation of an Energy Department efficiency rule regulating gas stoves.
As a prominent member of the House Energy Committee, Palmer sits on three subcommittees: the Energy, Climate, and Grid Security subcommittee; Environment, Manufacturing & Critical Minerals subcommittee; and Oversight and Investigations subcommittee.
The American Energy Alliance, a conservative advocacy group that is pro-fossil fuels, gave Palmer a 100% on their 2022 Energy Scorecard. Their annual report card is scored on principles that include “eliminating the subsidies, mandates, and special interest giveaways that lead to higher energy costs,” and “reducing the role of government in energy markets.”
Still, the congressman doesn’t always agree with his party on marquee bills. In 2016, the Alabama Republican was one of 21 House Republicans to vote against a major water infrastructure package that would improve drinking water facilities across the nation, among other things. He reasoned that the bill included a provision that would undermine Alabama’s efforts to resolve a water dispute with Georgia and Florida, arguing that it inserts federal power into a matter “that can and should be resolved by the states.” The dispute was over the allocations of water in two major river basins that cross some or all of the states’ borders: the Alabama-Coosa-Tallapoosa Basin and Apalachicola-Chattahoochee-Flint Basin.
From the Washington Examiner, Daily on Energy