Today’s Key Takeaways: Big Oil gets money from private equity while debt markets focus on green lending. BP boosts investment in U.S. oil. U.S. ties Qatar as world’s top LNG exporter. Rare-earth elements extracted from coal mine drainage. House Republican legislation targets Strategic Petroleum Reserve.
NEWS OF THE DAY:
Green Lending Tops Fossil Fuel as Big Oil Gets Cash Elsewhere
Tim Quinson, Bloomberg Investing, January 4, 2023
For the first time, more money was raised in the debt markets for climate-friendly projects than for fossil-fuel companies.
Roughly $580 billion was arranged in 2022 for renewable energy and other environmentally responsible ventures, while the oil, gas and coal industries turned to lenders and underwriters for closer to $530 billion, according to data compiled by Bloomberg.
But it’s not that green financing is finally winning out over fossil fuel lending. Rather, Big Oil looks to be getting more money from elsewhere. High oil prices over the past year have likely freed energy companies from their dependence on capital markets, said April Merleaux, research manager at the environmental nonprofit Rainforest Action Network.
“We’re also seeing fossil-fuel companies turn to less traditional sources of capital, such as private equity, which is much harder for us to track,” Merleaux said. Given this backdrop, “it’s difficult to say with confidence that there’s a new trend in the lending markets that will extend into 2023.”
The big question for oil, gas and coal companies is how they plan to use their balance sheets to make the transition to clean energy, Merleaux said. Currently, many are saying they plan to expand fossil-fuel production now and decarbonize later, she said.
“This is false logic, and it isn’t what the International Energy Agency (IEA) recommends,” she said. As for the banks, “they know what needs to be done, but we don’t yet see evidence that they’re really ready to follow through on their emissions-reduction objectives.”
Bankers are generating considerably more revenue these days from selling green bonds and loans. In 2022, they pocketed an estimated $3.3 billion of fees from these deals, exceeding the $2.5 billion earned from lining up bonds and loans for the highest-polluting energy sectors, Bloomberg data show.
Credit Agricole SA, BNP Paribas SA and Bank of America Corp. ranked as the top arrangers of green bonds and loans last year, according to Bloomberg data, while RBC Capital Markets, Wells Fargo & Co. and JPMorgan Chase & Co. were the leading providers to the fossil-fuel industry.
However, if one looks at the bigger picture, Wall Street and its brethren clearly remain dedicated to funding the companies most responsible for global warming. Since the Paris climate agreement was announced in 2015, banks have raised almost $4.6 trillion for oil, gas, and coal companies—double the $2.3 trillion gathered from green loans and bond sales.
But those Big Oil banks—including JPMorgan—say they have climate ambitions, and they’re expanding. Last month, the New York-based bank announced new emissions-reduction targets for airlines, cement manufacturers and iron ore and steel companies. That adds to JPMorgan’s first set of goals, which focused on the oil and gas, electric power, and auto manufacturing sectors.
JPMorgan said the six sectors now covered by its reduction goals account for the majority of global emissions. The new targets are intended to align with the IEA’s net zero by 2050 scenario, according to the bank.
Climate activists have had a mixed reaction to JPMorgan’s claims.
While the adoption of additional sectoral goals is “great to see,” JPMorgan’s oil and gas commitments have so far done “nothing to change its unwavering support” for the fossil-fuel industry, said Lucie Pinson, director of environmental nonprofit Reclaim Finance. “The jury is still out on the material impact of these new targets for cement and steel.”
Merleaux and others also have questioned JPMorgan’s decision to focus on reducing the carbon intensity of its financing portfolio rather than pledging to reduce absolute emissions. That jibes with a United Nations-appointed panel of experts that said companies and financial institutions should focus on cutting absolute emissions when setting net-zero goals.
JPMorgan has responded by saying that intensity-based metrics are the most “decision-useful way to evaluate clients progress against climate scenarios.”
OIL:
BP To Significantly Boost Investment In U.S. Oil
Charles Kennedy, OilPrice.Com, January 4, 2023
Moving in lockstep with the Biden Administration’s calls for U.S. oil and gas companies to expand production, London-based BP Plc has unveiled plans to boost spending in the American oil heartland by over 40% this year.
On Wednesday, BP said it would raise onshore oil and gas investment in the U.S. from $1.7 billion in 2022 to $2.4 billion in 2023–a 41% hike year-on-year. Offshore, in the Gulf of Mexico, BP said it plans to invest a total of $7 billion by 2025, compared to $10 billion in investment over the past five years. While the investment dollars will be increasing, however, BP also noted a reduction in Gulf of Mexico production plans from 400,000 boed to 350,000 boepd.
In the Gulf of Mexico, BP has four deepwater production platforms, with a fifth, Argos, set to launch first production later this year as part of the oil giant’s Mad Dog 2 project. The 2023 production date represents a delay from original first production plans last year.
Several new projects are underway, including a $1.3-billion expansion at the Atlantis field in the Gulf of Mexico, the $9-billion Mad Dog 2 development, and a major expansion at the Thunder Horse field.
According to BP’s “US Impact Report: Investing in America” released on Wednesday, the company has a larger presence in the United States than anywhere else in the world, and has invested more than $135 billion since 2005, “supporting nearly a quarter million American jobs” and “contributing about $60 billion to the national economy in 2021”.
In 2021, BP produced an average of 296,000 boepd in the United States, the bulk of that in the Gulf of Mexico.
BP also noted that U.S. refineries represent around 40% of the company’s global refining capacity, with refining capabilities of 851,000 bpd.
GAS:
US Surges to Top of LNG Exporter Ranks on Breakneck Growth
Stephen Stapczynski, Bloomberg, January 3, 2023
- US tied Qatar to export 81.2 million tons in 2022: ship data
- Europe rushes to buy more LNG amid shift away from Russian gas
The US tied Qatar as the world’s top exporter of liquefied natural gas last year, a milestone for the meteoric rise of America as a major supplier of the fuel.
Both countries exported 81.2 million tons in 2022, according to ship-tracking data compiled by Bloomberg. While that’s a modest increase for Qatar, it marks a huge leap for the US, which only began exporting LNG from the lower-48 states in 2016 and has seemingly overnight become a dominant force in the industry.
A shale gas revolution, coupled with billions of dollars of investments in liquefaction facilities, transformed the US from a net LNG importer to a major supplier. The global energy crisis and a shift away from Russian pipeline gas has increased demand for US LNG, which could also help support construction of several new export projects across the Gulf Coast.
MINING:
How coal mine drainage can become a source of rare earths
Staff Writer, Mining.Com, January 4, 2023
A recent study published in the journal Environmental Engineering Science presents a novel process for extracting rare-earth elements from coal mine drainage.
The experimental process has been patented by a team at Ohio State University and it was shown to successfully clean coal mine drainage while producing rare-earth elements in samples from various rivers across Ohio, Pennsylvania, and West Virginia.
“One thing that surprised me was just how well our process cleans up the water,” Jeff Bielicki, co-author of the paper, said in a media statement. “From an environmental standpoint, the major benefit of this work is that we’re successfully trapping and neutralizing so much pollution.”
According to Bielicki, currently, coal mine drainage is treated using active treatment systems that employ chemicals to clean the water, or passive treatment systems, which often depend on bacterial activity or geochemical methods.
The study shows that passive approaches tend to require fewer resources and have fewer environmental impacts. Thus, the Ohio State team used a passive system employing a combination of alkaline industrial by-products, including materials like water treatment plant sludge, to neutralize the coal drainage and capture the rare-earth elements.
“It’s designed to let the natural seepage of coal mine drainage percolate through the material to trap and extract it,” the researcher said.
He also explained that the average time it takes to rid water of waste often varies because the process largely depends on how quickly water flows out from the mine.
The new method, however, was able to capture a variety of metals such as terbium, neodymium, and europium, which play critical roles in phone displays, batteries, microphones, speakers, and other parts.
The process is currently more costly than the current market price of rare metals, but further advances are expected to bring the price down.
POLITICS:
Republicans target oil reserve releases with initial energy bills
Rachel Frazin, The Hill, January 4, 2023
House Republicans are homing in on releases from the nation’s Strategic Petroleum Reserve in the first set of bills that they’re expected to take up once they can start legislating.
While their legislation is unlikely to make it through the Democrat-led Senate and past President Biden, including these bills among the first of the new Congress signals that the nation’s oil reserves will be a key policy priority for the GOP.
On Friday, Rep. Steve Scalise (La.), a key Republican leader, released a list of “meaningful, ‘ready-to-go’” bills that will be the first that the party takes up, including two bills related to the strategic oil reserves.
“These commonsense measures will address challenges facing hard-working families on issues ranging from energy, inflation, border security, life, taxpayer protection, and more,” he said of the 11 total bills in a dear colleague letter.
The Strategic Petroleum Reserve is the nation’s emergency crude oil supply. Last year, the Biden administration executed the largest-ever sell off of oil from the reserve, drawing Republican ire, in an effort to tamp down fuel prices that skyrocketed after Russia’s invasion of Ukraine.
Now, the GOP is pushing back. The party is slated to take up two bills aimed at future oil releases: one that would prevent new releases of SPR oil unless there is a plan in place for more energy development on the nation’s public lands and another that would seek to prevent oil from U.S. reserves from ending up in China.
“We wanted to start with some things on SPRO which we’ve seen President Biden raid to cover for his failed policies,” Scalise told reporters, referring to the strategic reserve.