Today’s Key Takeaways: Oil Output Boosted, Labeling Gas and Nuclear Green, Ucore Rare Earth’s Processing Plant Commissioning in Q1 2022, Conventional Wisdom Imploding on GOP Gerrymander Panic.
NEWS OF THE DAY:
U.S. oil producers plan to boost output despite rising costs
Ben Geman, Axios, January 3, 2022
Companies in the heart of the U.S. oil patch plan to keep boosting production this year despite rising costs.
Driving the news: The Dallas Fed’s fourth-quarter 2021 survey of oil-and-gas execs finds that “costs rose sharply for a third straight quarter.” However, most expect to keep boosting output as prices and demand have recovered from the pandemic.
Why it matters: The Dallas Fed’s quarterly survey takes the pulse of companies in the region that includes the Permian Basin in Texas and New Mexico.
What they’re saying: Anonymous comments take stock of the changing landscape.
- “The political pressure forcing available capital away from the energy industry is a problem for everyone. Banks view lending to the energy industry as having a ‘political risk,'” one respondent said.
The big picture: The U.S. Energy Information Administration estimates domestic crude production will average 11.8 million barrels per day (bpd) this year, exceeding 12 million bpd late in the year.
- That remains below the pre-pandemic peak of around 13 million bpd.
Go deeper: A new warning on oil investment
OIL:
ConocoPhillips Passes Major Milestone
Andreas Exarheas, Rigzone, January 3, 2022
ConocoPhillips passed a “major” milestone in Norway this fall, the company highlighted last month.
In a statement posted on the company’s website, ConocoPhillips revealed that oil production from the Ekofisk field reservoir alone reached three billion barrels over a period of 50 years. The statement also outlined that, since production started in 1971, the Greater Ekofisk Area (GEA) has produced a total of six billion barrels of oil equivalent.
“Over five decades, Ekofisk has been developed and maintained by thousands of committed employees and contractors,” Jan-Arne Johansen, the general manager of operated assets in Europe, said in a company statement.
“Through continued innovation and teamwork, we continue to build our business for the long-term,” Johansen added in the statement.
Around 3,000 people work on installations, rigs, and vessels in the GEA, according to ConocoPhillips’ website, which highlights that about 1,000 employees and contractors work offshore at the asset at any given time.
The GEA is located in the southern part of the North Sea, 186 miles southwest of Stavanger. In addition to the Ekofisk field the area consists of the producing fields Eldfisk and Embla, both of which are part of production license (PL) 018, ConocoPhillips outlines on its site.
ConocoPhillips Skandinavia AS is the operator for the GEA with a 35.11 percent interest. Total E&P Norge AS holds a 39.90 percent stake, Vår Energi AS holds a 12.39 percent interest, Equinor Energy AS holds a 7.60 percent stake and Petoro AS holds a five percent interest, ConocoPhillips’ website shows.
The Ekofisk field was Norway’s first producing field and is one of the largest on the Norwegian continental shelf (NCS), according to ConocoPhillips, which describes itself as a pioneer on the NCS. The company traces its roots in Norway to before 1970.
GAS:
EU drafts plan to label gas and nuclear investments as green
Kate Abnett, Simon Jessop, Reuters, January 1, 2022
The European Union has drawn up plans to label some natural gas and nuclear energy projects as “green” investments after a year-long battle between governments over which investments are truly climate-friendly.
The European Commission is expected to propose rules in January deciding whether gas and nuclear projects will be included in the EU “sustainable finance taxonomy”.
This is a list of economic activities and the environmental criteria they must meet to be labelled as green investments. By restricting the “green” label to truly climate-friendly projects, the system aims to make those investments more attractive to private capital, and stop “greenwashing”, where companies or investors overstate their eco-friendly credentials.
Brussels has also made moves to apply the taxonomy to some EU funding, meaning the rules could decide which projects are eligible for certain public finance.
A draft of the Commission’s proposal, seen by Reuters, would label nuclear power plant investments as green if the project has a plan, funds, and a site to safely dispose of radioactive waste. To be deemed green, new nuclear plants must receive construction permits before 2045.
Investments in natural gas power plants would also be deemed green if they produce emissions below 270g of CO2 equivalent per kilowatt hour (kWh), replace a more polluting fossil fuel plant, and receive a construction permit by Dec. 31, 2030. Such plants must meet other conditions including that they are technically equipped to burn low-carbon gases.
Gas and nuclear power generation would be labelled green on the grounds that they are “transitional” activities – defined as those that are not fully sustainable, but which have emissions below industry average and do not lock in polluting assets during the shift to clean energy.
The Commission could not immediately be reached for comment.
EU countries and a panel of expert advisors will scrutinise the draft proposal, which could change before it is due to be published later in January. Once published, the proposal could be vetoed by a majority of EU countries or the European Parliament.
The policy has been mired in lobbying from governments for more than a year and EU countries disagree on which fuels are truly sustainable.
Natural gas emits roughly half the CO2 emissions of coal when burned in power plants, but gas infrastructure is also associated with leaks of methane, a potent planet-warming gas.
The EU’s expert advisers had recommended that gas plants not be labelled as green investments unless they met a lower 100g CO2e/kWh emissions limit, based on the deep emissions cuts’ scientists say are needed to avoid disastrous climate change.
Nuclear power produces very low CO2 emissions, but the Commission sought expert advice this year on whether the fuel should be deemed green given the potential environmental impact of radioactive waste disposal.
Some environmental campaigners criticised the leaked proposal on Saturday. WWF Austria said in a tweet that labelling gas and nuclear as green would lead to “investments of billions in climate-damaging industries”.
Austria opposes nuclear power, alongside countries including Germany and Luxembourg. EU states including the Czech Republic, Finland, and France, which gets around 70% of its power from the fuel, see nuclear as crucial to phasing out CO2-emitting coal fuel power.
Brussels finished the rules last year for parts of the green list including sectors such as buildings and transport and from this month investments not included in the taxonomy cannot be marketed as climate-friendly in the EU. The gas and nuclear rules will kick in later.
MINING:
Ucore, Innovation Metals’ rare earths processing plant expected in Q1 2022
Mining.Com, January 2, 2022
Canada’s Ucore Rare Metals (TSXV: UCU) and its subsidiary Innovation Metals announced that Q1 2022 will see the commissioning of the RapidSX demonstration-scale plant, where the processes of separation and purification of rare-earth elements will take place.
The plant is located in Kingston, Ontario. According to the companies, once a comprehensive, independent techno-economic study and the subsequent design of a commercial-scale REE separation facility is carried out, their RapidSX technology will be ready for commercial adoption and implementation in Ucore’s Alaska Strategic Metals Complex. This is expected to take place in Q2 2022, with a revenue-producing licensing model being rolled out by the end of the year.
“Our belief is led by our actions, and we have supported and funded IMC’s efforts for the development of RapidSX and the coordinated plan for its subsequent deployment into the first modern rare-earth separation plant in North America, the Alaska SMC – on schedule for production of individual rare-earth oxides in H1-2024,” Ucore chairman and CEO, Pat Ryan, said in a media statement.
Ryan pointed out that following initial extraction-rate testing in the summer of 2021, the team at Kingston Process Metallurgy subsequently completed a series of additional extraction-rate tests to further validate the approach being taken and to quantify the effects of the underlying phenomenon being exploited using the RapidSX columns.
The executive said that such tests utilized various mixed REE solutions, including commercially available feedstocks procured from a US-allied source.
“With the associated empirical work now concluded, an independent report describing the findings is scheduled for January 2022,” he said.
Ucore’s chairman also mentioned that IMC has made significant progress in recent months on the mathematical modelling of the chemical processes that occur during the operation of the RapidSX technology.
“These models will form the basis of the proprietary software that will be utilized at the commercial scale for the control of RapidSX-based separation facilities to optimize parameters for the physical hardware platform,” he said. “The mathematical models have already been effectively used in the development of REE separation flowsheets and regimes for extraction-rate testing and will assist in the finalization of the flowsheet for the initial campaign, which will be undertaken using the demo plant.”
In addition to the modelling work, Pat Ryan said that IMC has been working with researchers at the University of Toronto to develop and evaluate proprietary, cost-effective methods for reducing the amount of yttrium in heavy-REE-rich feedstocks, prior to separation using RapidSX.
He explained that yttrium is a lower value REE and reducing the quantity of Y in HREE feedstocks prior to subsequent separation, has the potential to reduce operating costs, as well the required plant size, thus cutting capital costs.
POLITICS :
The End of the GOP Gerrymander Panic
The Editorial Board, The Wall Street Journal, January 2, 2021
Republicans may not be the 2022 redistricting favorites after all.
One hundred and fifty political scientists signed an open letter to Congress six weeks ago declaring that “midnight is approaching” for American democracy. Among their concerns was Republican gerrymandering. They wrote that “drawing fair district boundaries . . . should not be partisan”—but the GOP has shown “a clear intent to entrench minority rule.”
It has been an article of faith among those who claim to be most knowledgeable about American politics that this year’s House of Representatives redistricting would give Republicans an edge in November and even keep the GOP in power indefinitely despite public opposition.
Count this as another conventional-wisdom implosion. It appears that, despite controlling fewer state legislatures, Democrats are as likely as Republicans to benefit from the new maps. A recent analysis by Data for Progress, a left-leaning analysis shop, found that 212 House seats may be to the left of the country in 2022 by one measure, up from 203 in 2020. And that’s before the onslaught of well-funded lawsuits by Democratic lawyer Marc Elias targeting Republican-drawn maps.
The expectation of a lopsided GOP gerrymander in 2022 came partly from the misperception that the adoption of “independent” redistricting commissions would extinguish Democratic opportunities to make partisan gains. But like any other political body, the commissions are subject to influence by interest groups.
The map released by California’s commission could eliminate three of the 11 GOP seats in the state’s House delegation; Democrats currently hold 42 seats. New Jersey’s commission polarized along partisan lines, with the designated tiebreaker choosing the map that protects most Democratic gains of the past decade. New York’s commission appears to be breaking down, likely handing control to Democrats in Albany, who could cut the number of New York House Republicans to three from eight.
Colorado’s redistricting commission did blunt potential Democratic gains in the increasingly blue state. Conversely, Arizona’s drew a map more forgiving toward Democrats than might have been drawn by the state’s GOP-controlled Legislature.
As for states that don’t have redistricting commissions, Illinois, Maryland, and Oregon pursued aggressive Democratic gerrymanders. Republicans did the same in Ohio and North Carolina.
The Texas map strongly favors the GOP, with the two seats it gained in the 2020 Census likely going to Republicans—though Democrats also may not lose any of their current 13 Lone Star seats. Florida, the second-most populous state under GOP control, may be putting more weight on protecting incumbents than gaining partisan advantage. Under one proposed map, Democrats would be favored to take the state’s new House seat; in another, the GOP would.
The Republicans who control Missouri also appear to be taking a light partisan touch. And while Georgia’s GOP Legislature is trying to squeeze out a Democratic House seat in redistricting, Republicans in modest-sized southern states like South Carolina, Arkansas, Oklahoma, and Mississippi don’t have much room to make their congressional delegations any redder.
If pundits and pollsters overestimated Democratic voting strength in 2020, they also underestimated the Democratic willingness to try to hold power through redistricting hardball. Luminaries from former President Obama on down created a panic about a looming democracy-ending Republican gerrymander.
Yet control of the House continues to turn over regularly. Far from governing through “minority rule,” Republicans have won more overall votes in most U.S. House elections since 1994, and they currently lead in generic ballot polls for 2022.
Republicans are supposed to be plotting an antidemocratic seizure of power, but they haven’t been able to defeat Democrats in congressional redistricting despite major geographic and political advantages. Perhaps midnight for American democracy is still a ways away.
CLIMATE CHANGE :
South Korea Chided for Declaring Gas a Sustainable Investment
Heesu Lee, Bloomberg News, January 3, 2022
South Korea’s government is being criticized for including natural gas in a category of activities that it deems will help cut emissions.
Liquefied natural gas was included in a taxonomy to accelerate green goals released by the Environment Ministry on Dec. 30, while nuclear energy was left out. LNG is in the transition section, so shouldn’t be seen as an outright green activity, but is essential in the move away from dirtier fuel, the ministry said.
While South Korea has a goal of being carbon neutral by 2050, the decision shows that it still sees natural gas, a fossil fuel, as key to the transition. Seoul’s stance is similar to the European Union, whose plan to allow some natural gas and nuclear energy projects to be labeled as sustainable has also come under fire from activists.
“We have great concerns about the utility of the taxonomy scheme because it’s not sending the right signals to investors,” said Youn Sejong, climate finance program director at South Korean non-profit Solutions for Our Climate. “Now that the taxonomy includes fossil fuels, we expect to see serious greenwashing.”
The rules that governments are putting in place to help them achieve carbon neutrality goals are coming under increasing scrutiny from civil society groups that are concerned they’re not strict enough or will be able to be gamed by the private sector. Investors in gas-fired generation in Korea may also be able to make the case they’re being environmentally friendly due to the rules.
The classifications will be updated every two or three years based on stakeholder feedback, and nuclear power will be kept under review as the government assesses global trends, the ministry said.
“Compared with other major countries, our manufacturing and energy-intensive industries heavily depend on fossil fuel,” it said. “Going forward though, we’ll try to encourage low-carbon or carbon-free power plants such as fuel cell or ammonia generation.”
Yoon Joonbyeong, a lawmaker from President Moon Jae-in’s ruling Democratic Party, said he had a meeting with the environment ministry before the taxonomy was finalized to make sure that LNG was only deemed green during the transition phase. That view was reflected in the final version, and the exclusion of nuclear is also welcome, he said.
“The decision to include LNG generation in the taxonomy is regrettable,” Yoon said. “We’ll need to keep a close eye on how the classification is executed by the government and used by companies and investors.”