NEWS OF THE DAY:
Norway will continue to explore for oil and gas, incoming government says
Victoria Klesty, Terje Solsvik, Nerijus Adomaitis Reuters, October 13, 2021
Norway will continue to explore for oil and gas in the next four years, with most new drilling permits to come in mature regions of its oceans, the incoming government said on Wednesday.
A minority coalition of the leftwing Labour Party and the rural Centre Party will take power on Thursday after beating the ruling Conservative-led government in last month’s election.
“The Norwegian petroleum industry will be developed, not dismantled,” the two parties said in a joint policy document, adding that it will maintain the existing system of handing out exploration licences.
While climate change was a top issue debated during the campaign for parliament, Labour has said it wants to ensure any transition away from oil and gas, and the jobs it creates, is a gradual one.
OIL:
White House asks U.S. oil-and-gas companies to help lower fuel costs
Jarrett Renshaw, Reuters, October 13, 2021
The White House has been speaking with U.S. oil and gas producers in recent days about helping to bring down rising fuel costs, according to two sources familiar with the matter.
Energy costs are rising worldwide, in some cases leading to shortages in major economies like China and India. In the United States, the average retail cost of a gallon of gas is at a seven-year high, and winter fuel costs are expected to surge, according to the U.S. Energy Department. Oil-and-gas production remains below the nation’s peak reached in 2019.
“We are closely monitoring the cost of oil and the cost of gas Americans are paying at the pump. And we are using every tool at our disposal to address anti-competitive practices in U.S. and global energy markets to ensure reliable and stable energy markets,” a White House official said, without addressing whether it has been in touch with the industry.
U.S. crude oil recently hit $80 a barrel for the first time in seven years, as the Organization of the Petroleum Exporting Countries and their allies known as OPEC+ restrict output. The White House has discussed rising prices with top OPEC producer Saudi Arabia in recent weeks.
The average retail price of a gallon of gasoline has risen to $3.29, according to AAA figures. The U.S. Energy Department said on Wednesday that household heating costs are expected to rise dramatically this winter for all fuels, but particularly for heating oil and propane.
U.S. oil production has been slow to rebound from 2020, when output dropped during the coronavirus outbreak. Production hit a record of nearly 13 million barrels per day (bpd) in late 2019, but the U.S. Energy Department said Wednesday that output will only average 11 million bpd in 2021, rising to 11.7 million bpd in 2022.
Natural gas prices are up sharply this year, the result of supply shortages and stronger-than-expected demand in Europe and Asia.
President Joe Biden’s administration has been conducting internal discussions about rising fuel costs, one of the two sources added.
U.S. shale producers, who are responsible for the boom in crude oil output in the last 10 years, have been less willing to drill for more oil after years of weak financial performance, and have instead focused on cutting spending to boost returns for investors.
It can take six months to drill and complete a new well and bring the oil and gas to market. Any call by the White House for an increase in U.S. production is likely to fall on deaf ears, according to one oil executive, who did not want to be identified criticizing the approach. The industry has also been unhappy with some of Biden’s earlier actions, including a temporary drilling halt on federal lands, that they see as an attack on the industry.
The White House has been trying to tackle supply bottlenecks that have boosted the price of various goods, from meat to semiconductors. Officials said Wednesday that the administration has been working with major ports in Los Angeles and Long Beach, along with shipping giants UPS and FedEx, to alleviate congestion slowing deliveries.
GAS:
Natural gas and net zero: Can they coexist?
Edward Klump, ENERGYWIRE, October 13, 2021
A new net-zero goal from CenterPoint Energy Inc., a Texas-based utility company, contains an eye-catching 2035 timeline that puts it 15 years ahead of many industry peers.
But the pledge to slash greenhouse gas emissions also arrives with asterisks that critics say undermine its value.
That’s in part because CenterPoint has both natural gas and electricity operations — and most of its greenhouse gas emissions are tied to customers’ gas use that is outside the net-zero goal. The company also is planning to build some gas-fueled generation in the name of affordable and reliable power.
“It’s pretty pure public relations here,” said David Pomerantz, executive director of the pro-renewables Energy and Policy Institute.
CenterPoint’s net-zero commitment, outlined in September, adds to a growing debate about how utilities’ low-carbon goals may play out on the ground and what role natural gas could have in a decarbonizing world.CenterPoint is distinctive in that its generation assets aren’t a huge part of its business, but they illustrate broad challenges facing the power sector as it tries to cut emissions.
CenterPoint, for example, must balance coal unit retirements with other electricity sources to meet its 2035 goal and maintain reliability — a situation that other companies are grappling with around the country. And like other utility companies, having operations tied to gas also complicates more far-reaching efforts to cut carbon for CenterPoint.
Pomerantz described elements of CenterPoint’s approach as “green washing,” a charge that has been leveled at utilities by climate advocates to suggest corporate actions are insufficient.
It’s also a claim the electric industry rejects amid coal plant retirements and a surge in renewables. The Edison Electric Institute has pointed to a roughly 40 percent drop in carbon dioxide emissions for the U.S. power sector at the end of 2020 compared with 2005 levels. More than 30 members of EEI, which represents investor-owned electric utility companies, have specific net-zero, carbon-free, carbon-neutral or 100 percent clean energy goals. The timing for many of those is around the midcentury mark.
Power companies also have an incentive to reach a greener grid because of new demand for power from electric vehicles.
“With great power comes great responsibility, so we have to continue to make the electric supply as clean as possible,” said Emily Fisher, general counsel and senior vice president for clean energy at EEI.
The Biden administration has called for decarbonizing the U.S. power sector by 2035, though the path to get there is uncertain amid political wrangling over the potential Clean Electricity Performance Program under consideration in Congress along with other measures. How to address natural gas emissions also remains an open question among many policymakers and utility companies.
CenterPoint’s net-zero carbon emissions timeline for electricity is in line with President Biden’s 2035 goal, although the company’s generation holdings were less than 1,500 megawatts of installed and purchased capacity combined last year. Its core Texas electricity business is focused on poles and wires, for example.
Jason Wells, CenterPoint’s chief financial officer, said recently that the company’s net-zero plan is backed by clear and transparent steps. He said “our environmental leadership” influences everything from allocating capital to working with regulators to adapting to customers’ needs. CenterPoint’s plans include tapping renewable energy and examining battery storage.
“While we may be late in terms of announcing a net-zero carbon reduction goal, we had been working rapidly to reduce our carbon footprint,” Wells said during a Sept. 23 analyst day presentation.
That doesn’t mean gas is on the way out. During the meeting with analysts, Houston-based CenterPoint outlined the potential for $16 billion-plus of gas business-related investments over a decade to go along with $23 billion-plus of investments tied to electricity. The company’s core regulated businesses are slated to be around 60 percent electric and 40 percent gas after the planned sale of local gas distribution companies in Arkansas and Oklahoma closes.
Clean energy advocates liked some ideas mentioned by the company, such as weatherization and gas conservation, while citing gas-related emissions as something for leaders to examine.
“They may need to take some consideration into their business model and think about whether for the long-term natural gas delivery is the way that they really want to go,” said Stephanie Thomas, a researcher and community organizer who focuses on the Houston area for Public Citizen, a consumer advocacy group.
Eyeing natural gas
Heating and cooking are staples of residential gas use in parts of the country, but debates continue about the role of gas in a society trying to slash carbon and battle climate change. Advocates of electrification are pushing for cleaner power generation combined with more reliance on electricity in homes and businesses.
Like a number of utility companies, CenterPoint has a foot in both power and gas. That includes electric delivery operations in the Houston area and a smaller power generation and electric utility business in Indiana. Its local gas distribution operations have customers in Texas as well as parts of Minnesota, Indiana, Ohio, Louisiana and Mississippi. And the company is in the process of exiting a midstream business tied to oil and gas.
What to do about so-called Scope 3 emissions tied to customers’ use of gas is perhaps the biggest challenge facing both CenterPoint’s plans and net-zero greenhouse gas ambitions among utilities with gas customers.
Scope 1 emissions, for example, from the direct operation of its assets totaled the equivalent of about 5.2 million metric tons of carbon dioxide in 2020. Scope 2 emissions topped 58,000 metric tons from purchased electricity and line losses, excluding certain emissions related to the Houston area. CenterPoint said its 2035-time frame for net zero in these scopes is well ahead of a peer average.
“But we don’t just want to achieve emission reductions faster,” the company said in an emailed statement. “Our Net Zero goals are based on actionable decarbonization pathways taken on our operating systems — both electric and natural gas — within our footprint.” The CenterPoint website and recent analyst day discussion provide some details of its plans.
Scope 3 emissions for CenterPoint were about 26.7 million metric tons in 2020, based on the amount of natural gas supplied to end-use customers. That scope represented about 83 percent of its emissions for 2020, according to the company.
It said Scope 3 emissions are projected to fall 20 to 30 percent by 2035 from 2021 levels. CenterPoint said that makes it a leader among natural gas utilities.
Still, the planned reduction put forth by CenterPoint’s leaders for the utility business didn’t impress Pomerantz.
“At that rate, they’ll still have emissions from selling their customers gas for many decades, which is not compatible with where we need to go,” he said.
But EEI’s Fisher said the electric industry often focuses on Scope 1 and 2 emissions that cover generation and purchased power. She said Scope 3 emissions are hard to calculate and subject to a lot of debate.
“As an industry, we’re the second-largest source of carbon emissions in the nation, so just focusing on our Scope 1 emissions is pretty significant,” she said.
Options listed by CenterPoint to address Scope 3 gas emissions include pilots for hydrogen and commercial carbon capture and storage, as well as energy efficiency and conservation programs. As far as new actions, it cited options such as renewable natural gas offsets, high-efficiency appliances and new technology.
“The methods that CenterPoint says it will use to reduce the greenhouse gas pollution of its gas business also call the integrity of the plan into question,” Pomerantz said in an email. He called for aligning policy advocacy with climate goals, as well.
‘All progress is good progress’
EEI’s Fisher noted the flexibility of power generation to depend on different resources. With natural gas still in the power mix, she said, work can be done on fugitive emissions.
When asked about gas and climate goals, the American Gas Association pointed to past comments, including a position statement on climate change. The industry group’s document lists gas utility commitments such as reducing methane emissions from gas utility systems, supporting renewable natural gas development and encouraging and supporting energy efficiency.
Thomas with Public Citizen noted that CenterPoint doesn’t appear to be focusing its message on more use of building electrification, though she said that is “one of the simplest and efficient ways that we can reduce emissions.” She touted the idea of having electric-ready buildings so consumers can make a choice to use more electric appliances in their homes.
Fisher said there are places where electrification can make a lot of sense and help reduce emissions and be good for customers. The power sector is working on transportation electrification as a way to reduce emissions given that sector’s leading role in U.S. carbon emissions, she said.
Electrification advocates have criticized support by companies such as CenterPoint for H.B. 17, which passed the Texas Legislature earlier this year and was signed by the governor. It prohibits local jurisdictions from banning utilities from delivering certain energy sources, thus potentially limiting efforts to curb natural gas use.
On the power side, CenterPoint has seen pushback from its plan in Indiana to replace coal-fueled generation in part with natural gas-fueled capacity (Energywire, Aug. 24). Using power from wind and solar also is part of its outlook.
The company’s website says a plan to add two gas combustion turbines in Indiana “will maintain our commitment to a clean energy future while preserving the local economic value created by our facilities and providing our customers an affordable option for delivering abundant, safe and reliable energy.”
While every system is different, Pomerantz questioned how new gas-fueled generation would fit with a net-zero plan for Scope 1 emissions by 2035. CenterPoint’s plan envisions that offsets or credits could constitute 10 to 15 percent of its 2035 net-zero goal. The company said it will report emissions reductions in a transparent and timely way.
CenterPoint’s generation portfolio is small compared with those of numerous big U.S. utility companies, but Fisher said “all progress is good progress as we try to reduce emissions.”
Mike O’Boyle, director of electricity policy for Energy Innovation, an energy and climate policy think tank, said via email that CenterPoint’s net-zero plan for generation and purchased power by 2035 “is exactly the kind of ambition that other utilities will need to show.”
O’Boyle said CenterPoint also is right to see methane leakage as a priority.
“However, to reach net zero emissions economy-wide by 2050, any natural gas utility will have to focus not just on the carbon intensity of the fuel supplied, but also facilitate a just and equitable transition away from natural gas as a fuel,” he said. “And this transition needs to start now.”
MINING:
Pentagon adds graphite to stockpile list
Shane Lasley, North of 60 Mining News, October 11, 2021
Points to importance of developing Graphite Creek in Alaska
As another signal foreshadowing the growing demand for graphite, the Pentagon has added this lithium-ion battery ingredient to its newest National Defense Stockpile Acquisitions List.
Published by the U.S. Defense Logistics Agency on Oct. 4, this list calls for DLA’s strategic materials department to acquire up to 900 metric tons of graphite to store in government stockpiles over the coming year.
Primary reasons for the Department of Defense to have a graphite stash for its own use is the global demand for this carbon material is rocketing due to its use in the anodes of lithium-ion batteries that power electric vehicles and a dearth of domestic sources of this material already deemed critical to the U.S.
According to the Pentagon’s latest publicly available National Defense Stockpile Requirements Report, “natural flake graphite” is on its watch list of “shortfall materials” based on modeling against specific conflict scenarios that indicate a potential graphite shortfall of more than 82,000 metric tons.
Earlier this year, the International Energy Agency predicted that the electric mobility and low-carbon energy sectors will demand 25 times more graphite per year by 2040 than today.
Without any graphite mines on American soil, U.S.-based manufacturers and the Pentagon are in the disadvantageous position of relying on imports to supply their growing needs of this battery and industrial material
China, which accounted for roughly 62% of global natural graphite production, was the largest supplier of this carboniferous material into U.S. supply chains, according to the U.S. Geological Survey.
The USGS said two companies are developing projects that could begin to offer a domestic supply of graphite, one of which is Graphite One Inc.
Graphite One CEO Anthony Huston says the addition of graphite to the Pentagon’s stockpile list is the latest in a series of signals that indicate officials in Washington D.C.
According to a report on securing America’s supply chains published by the Biden administration in June, flake graphite is an essential material to the supply chains for three industrial sectors – advanced semiconductors, high-capacity batteries, including EV batteries, and pharmaceuticals. As an extension, this material is critical to the technology and defense sectors.
An enormous infrastructure bill crafted by the White House and passed with bipartisan support by the House of Representatives calls for a new Department of Energy program to ensure a viable North American battery supply chain, including enhancing the domestic processing of minerals necessary for advanced batteries.
Graphite One says that if this infrastructure legislation is passed by the Senate, then Alaska projects offering a domestic supply of graphite and other critical minerals will be eligible for federal loan guarantees, and US$6 billion would be available for battery processing and manufacturing.
“The inclusion of graphite on the National Defense Stockpile list is another sign of graphite’s growing importance,” said Huston. “Coupled with the importance of graphite to three of the four key supply chains recognized by the June 2021 White House report, it is clear the U.S. government sees graphite as essential to both national security and the technology economy.”
Graphite One hopes to supply a portion of America’s growing need for this critical material from a mine at its Graphite Creek project about 35 miles north of Nome, Alaska.
According to the most recent calculation, the Graphite Creek deposit hosts 10.95 million metric tons of measured and indicated resources averaging 7.8% (850,534 metric tons) graphitic carbon; and 91.89 million metric tons of inferred resource averaging 8% (7.34 million metric tons) graphitic carbon.
After raising more than C$21 million (US$16.7 million) this year, Graphite One is advancing the Graphite One project 2021 summer program focused on collecting the final bits of data needed for a prefeasibility study that details the company’s vision to establish a domestic supply of the coated spherical graphite used in lithium batteries.
This PFS will build upon a 2017 preliminary economic assessment that outlined plans for a mine at Graphite Creek that would produce roughly 60,000 metric tons of 95% graphite concentrate per year and a separate processing facility to upgrade these annual concentrates into 41,850 metric tons of the coated spherical graphite and 13,500 metric tons of purified graphite powders annually.
The World Bank forecasts that low-carbon energy technologies, primarily lithium-ion batteries, will require 4.5 million metric tons of graphite per year by 2050, which is nearly a 500% increase over 2018 levels and a 310% increase over the total graphite mined worldwide during 2020.
POLITICS:
From the Washington Examiner, Daily on Energy:
WHO’S COMING TO BLOCKBUSTER FOSSIL FUEL ‘DISINFORMATION’ HEARING: The CEOs of six major oil and gas companies and lobby groups will testify at a House Oversight Committee hearing this month about their role “spreading disinformation” about the role of fossil fuels in causing global warming.
Rep. Ro Khanna, Democrat of California, who chairs the Oversight and Reform Subcommittee on Environment, told the Washington Post that he’s “pleased at the compliance that we’re seeing” from the fossil fuel industry in participating in the hearing.
Khanna has threatened to subpoena the executives if they don’t show up for the Oct. 28 hearing.
Top officials from BP, Chevron, Shell, and Exxon, along with the Chamber of Commerce, confirmed to the Post they are planning to participate in the hearing.
The American Petroleum Institute previously confirmed to Josh it will make its CEO Mike Sommers available to the committee.
WHAT TO ANTICIPATE: Expect the industry officials to look to shift the conversation to the present and future to emphasize their support for policies such as carbon pricing and how they see themselves as part of the solution to address climate change.
CLIMATE CHANGE:
This Oil and Gas Road Map Could Lead Planners Astray
Jinjoo Lee, The Wall Street Journal, October 13, 2021
International Energy Agency’s latest report is a rallying call for politicians to act on climate change, but its projections illustrate why the coming transition could be full of potholes
The International Energy Agency’s closely watched World Energy Outlook confirms what the world is starting to feel in its bones: The coming energy transition could be painful and expensive.
Fatih Birol, executive director of the IEA, in a statement accompanying the report lamented the failure to invest enough to meet future energy needs, saying the situation is “setting the stage for a volatile period ahead.”
Worth noting in the report, which was released Wednesday, is that the agency for the first time forecasts an eventual decline in oil demand in all three of its scenarios—from the most status quo assumption to the most ambitiously green (net-zero emissions by 2050). Under its most conservative “stated policies scenario,” which is based on climate policies that are already in place and those that are under development, the IEA expects oil demand to peak in the mid-2030s at roughly 104 million barrels a day from almost 100 million today, with a slow decline through 2050.
That is quite a different picture compared with that painted by the Organization of the Petroleum Exporting Countries, which in its World Oil Outlook last month predicted that oil demand will continue to rise until at least 2045. The IEA’s most ambitious scenario—net zero by 2050—sees oil demand shrinking to a quarter of today’s levels.
Differences of opinion are natural, but the IEA’s report last year stopped including a forecast for a “current policies scenario,” which excludes goals that governments have announced but aren’t enforcing. The agency had said back in 2020 that this was because it is “difficult to imagine this ‘business-as-usual’ approach prevailing in today’s circumstances.”
That is troubling on a number of levels, but mainly because it rules out a real possibility that governments might not meet those targets. Its latest “stated policies scenario,” for example, includes some distant targets in the U.S. such as 100% carbon-free electricity by 2050 in at least 20 states, as well as California’s goal for all new passenger cars and light trucks sold to be zero-emission vehicles by 2035.
The risk is that the IEA’s forecast becomes more of a wish list than a clear-eyed look. That becomes a problem if its forecasts are used by governments and companies to judge how much investment must still be made in fossil fuels to ensure a smooth transition. Bob McNally, founder of energy consulting firm Rapidan Energy Group, argues that a premature peak consensus wouldn’t only be wrong but also dangerous.
Today’s energy-price spikes might not be due to energy-transition efforts, as the IEA notes. But they illustrate the volatility and shortages that can ensue if the transition isn’t planned out properly. The IEA’s warning signs about climate risks must be heeded. Its blinkers, though, should serve as their own warning.