NEWS OF THE DAY:
Santos $6 billion takeover of Oil Search gets tepid backing from independent expert
Sonali Paul, Reuters, November 10, 2021
Oil Search shareholders are set to vote on Dec. 7 on a merger with Santos Ltd after gaining approval from a Papua New Guinea court and a mixed endorsement from an independent expert.
If it goes ahead, the A$8.8 billion ($6.5 billion) takeover of Oil Search would create a global top 20 oil and gas company and make Santos the largest shareholder in Papua New Guinea’s biggest resource project, the PNG LNG project, run by Exxon Mobil Corp.
Oil Search’s appointed independent expert firm, Grant Samuel, said the merger was in the best interest of Oil Search shareholders as it would boost funding for its $3 billion Pikka oil project in Alaska and improve gas development prospects in Papua New Guinea.
It said Santos’ offer, which will give Oil Search shareholders a 38.5% stake in the merged group, did not fully reflect Oil Search’s underlying value, which it said was worth 43%-44% of the total estimated value of the merged group.
“There is clearly a risk that the funding and other strategic benefits do not fully compensate shareholders for this dilution,” Grant Samuel said in a report attached to the merger document going to shareholders.
It concluded nevertheless that Oil Search shareholders were likely to be better off if the deal went ahead, given growing funding constraints facing the industry in the drive away from fossil fuels.
Oil Search acting chief executive Peter Fredericson defended the merger ratio, saying it took into account relative contributions from earnings, reserves and production along with the strategic benefits, such as much better access to capital markets for the enlarged group.
“At the end of the day there are going to be one or two out there who are going to say it’s not enough in the deal that we’ve got, but the majority of shareholders we’ve spoken to see the strategic benefit of putting these two businesses together,” Fredericson told Reuters.
Based on Santos’ closing share price of A$6.78 on Thursday, its offer valued Oil Search at A$4.25 a share, slightly above Oil Search’s close, indicating investors expect the deal to go ahead.
OIL:
ADIPEC: Oxy’s Hollub wants Biden to stop hectoring OPEC and focus on U.S. oil
Anthony Di Paola, Verity Ratcliffe, World Oil, November 15, 2021
The world’s biggest oil and gas companies and many OPEC+ energy ministers are meeting in Abu Dhabi this week for the ADIPEC conference — one of the first major in-person events for the industry since the onset of the coronavirus pandemic.
The Organization of Petroleum Exporting Countries and its allies are likely to maintain their plan of raising output by 400,000 barrels a day, according to the United Arab Emirates. The group has so far ignored calls from some nations, including the U.S., to increase production faster in an attempt to control surging prices. Saudi Arabia expects inventories to rise over the next few months, reducing the need for OPEC+ to boost supply quicker.
The conference, running from Nov. 15-18, is taking place in the wake of the COP26 climate talks and with energy prices soaring. Benchmark Brent crude has climbed almost 60% to above $80 a barrel, while gas prices in Asia and Europe hit record highs recently.
BP Expects ‘Robust’ Oil Prices for Longer (2:41 p.m.)
Oil prices are likely to remain high for longer, BP Plc CEO Bernard Looney said.
“There’s a constructive market at the moment and I think you can expect oil prices to remain robust for some time to come,” he said.
Still, the company is being run to break even at an oil price of $40 a barrel since “there are many uncertainties,” Looney said. Occidental Petroleum Corp.’s CEO Vicki Hollub said her company also had a $40 breakeven oil price.
Looney also called the recent COP26 summit “a success” because it included a pledge from nations to cut emissions of the greenhouse house. Methane “is now on the global agenda,” he said. “We have more ambition, not enough, but we have more ambition.”
Biden Should Focus on U.S. Oil, Not OPEC, Oxy Says (1:50 p.m.)
President Joe Biden should focus on raising U.S. oil production rather than putting pressure on OPEC+ to pump faster, Occidental’s Hollub said. If the administration wants more supply, they should ask U.S. producers first, she said.
“If I was going to make a call, I’d make a local call first,” she said. “I wouldn’t make a long-distance call.”
OPEC Under-Production Not an Issue: UAE (1:45 p.m.)
Some OPEC nations producing below their quota isn’t a concern, UAE Energy Minister Suhail Al Mazrouei said.
Some of the group’s members, including Angola and Nigeria, have struggled to keep up with the planned production increases following investment constraints and export suspensions.
He also said that oil and gas will always be used for energy, and it’s “delusional” to think they will be phased out.
Poor Nations Need to Pump Their Fossil Fuels (1:20 p.m.)
“We aren’t going to allow oil and gas not to be developed because of the energy transition,” Equatorial Guinea’s energy minister, Gabriel Obiang Lima, said. “We are a small and poor country. If the U.S. and others won’t help us develop it, maybe China, Brazil, the Middle East or Turkey will.”
Barkindo Says ‘Alarm Bells’ in Glasgow (1:10 p.m.)
This year was the first of the COP talks where the oil and gas industry was targeted but had no place in the conversation about slowing climate change, OPEC Secretary-General Mohammad Barkindo said.
“For us attending in Glasgow, this was an alarm bell,” he said. “I left Glasgow with this sobering feeling.”
IEA Call to Stop New Oil Spending Not Helpful: Oman (12:40 p.m.)
The International Energy Agency’s call this year for an end to new oil and gas exploration “wasn’t very helpful,” Oman’s energy minister, Mohammed Al-Rumhy, said.
The Persian Gulf sultanate pumps about 650,000 barrels of crude a day. The Paris-based IEA, which advised rich countries on energy policy, said in May that stopping of all new investment in fossil fuels was necessary to neutralize carbon emissions by 2050.
Ukraine Says Russia Creating ‘Artificial Shortage’ of Gas (12:12 p.m.)
Russia is creating “artificial shortages” of natural gas and should increase supplies to Europe to ease the energy crisis, according to the chief of Ukraine’s state-run energy company.
“If they abandon this abusive policy, there will be no problem for Europeans this winter,” Yuriy Vitrenko, CEO of Naftogaz Ukraine, said in an interview with Bloomberg Television.
Ukraine is pushing to remain a key transit route for the fuel, just as Russia is going ahead with the controversial Nord Stream 2 pipeline to Germany. The link is completed and designed to bypass Ukraine, but it still lacks final regulatory approvals.
GAS:
Some Americans will pay more for natural gas, but not Alaskans, ENSTAR says
Sabine Poux, KDLL, November 15, 2021
Federal officials warn U.S. households will pay more to heat their homes this year.
But Alaska is insulated from those changes. ENSTAR spokesperson Lindsay Hobson says that’s because the company has pre-existing long-term gas contracts.
“Enstar is completely separate up here, where we contract with local producers in Cook Inlet for the production and then we deliver the natural gas to our customers,” she said.
Many Alaska homes — and half of all homes across the U.S. — are heated with natural gas.
U.S. households that heat their homes with natural gas are expected to pay 30 percent more for their heating bills this year, according to a report released last month from the federal Energy Information Administration.
That’s as natural gas prices spike in response to rising demand. And many companies aren’t equipped to handle that demand since they cut back investment in new production during the pandemic.
But ENSTAR already has its gas price set for this winter. Each July, the company files with the Regulatory Commission of Alaska to set the cost of gas that consumers will pay until the following July.
“Last July, the gas cost adjustment that we filed with the Regulatory Commission of Alaska actually included a 2.4 percent decrease over the previous year. And so that is the rate that will be in effect for the upcoming year, and that will be in effect through 2022,” Hobson said.
Still, natural gas prices in Alaska are higher than in much of the country. ENSTAR pays about $8 per thousand cubic feet. It gets most of its natural gas supply from oil and gas company Hilcorp, in Cook Inlet.
The national price is about $5.50 for the same amount. An exception is New England, where natural gas costs roughly four times as much.
And another factor in the federal agency’s forecast is weather. The National Oceanic and Atmospheric Administration is predicting a colder winter this year than last, both in the Pacific Northwest and in Southcentral Alaska.
MINING:
US adds nickel, zinc to critical minerals list
Andy Home (Reuters), Mining.Com, November 15, 2021
Top of FormBottom of FormThe US Geological Survey (USGS) is proposing both metals be included in the redrafted critical minerals list. The list has grown from 35 to 50 since the last iteration in 2018, but that largely reflects the splitting out of rare earth elements and precious group metals into separate entities.
Four minerals – helium, potash, rhenium, and strontium – have been dropped. The United States is the world’s leading producer and net exporter of helium, while import dependency for the other three is mitigated by “low disruption potential.” Uranium was also dropped after being reclassified as a “mineral fuel.”
Nickel and zinc are the only two new additions, and each reflects an evolution of the methodology used to determine whether a mineral is critical to the well-being of the US economy.
Single point of failure
According to the USGS, the United States relies on refined nickel imports for around half of its annual consumption.
The top three suppliers last year were Canada (42%), Norway (10%) and Finland (9%) – all deemed “friendly” countries.
This relatively benign supply profile kept nickel off the critical minerals list in the past.
But it’s now included for two reasons.
Firstly, the USGS has expanded its criticality criteria to look beyond trade dependency to domestic supply, particularly what it calls “single points of failure.”
There is currently only one domestic operating nickel mine in the United States – the Eagle mine in Michigan – which exports concentrates for overseas refining.
There is a single producer of nickel sulphate, but only as a by-product of precious group metals production.
This limited domestic nickel production base was also highlighted in the Biden Administration’s 100-day review of critical supply chains, which recommended the government should invest as a priority in a new nickel refinery.
The second reason is nickel’s changing usage profile from alloy in stainless steel production to chemical component in electric vehicle batteries.
The combination of limited, single-point-of-failure domestic supply and the expected demand growth from battery manufacturers makes “a compelling case for inclusion” of nickel in the critical minerals list, the USGS noted.
Or, as the supply-chain review put it, not having enough battery-grade nickel “poses a supply chain risk for battery manufacturing globally, not just in the United States.”
Zinc concentration
The United States’ domestic supply chain of zinc is less fragile.
The country has 14 operating mines and three smelter facilities, one primary and two secondary, one of which resumed operations in 2020 after several years of inactivity.
However, the country’s refined zinc import dependency is relatively high. Imports of 710,000 tonnes last year represented 83% of domestic consumption, according to the USGS.
Global supply trends make this problematic.
“For zinc, global mine and smelter production concentration has increased notably during the past few decades,” the USGS said, adding that “this change has been driven mainly by increased production in China.”
Part of the thinking behind the latest critical minerals list is moving the analysis beyond simple import dependency to encompass broader global supply trends.
The more supply is concentrated in one country, the higher the potential risk factor, particularly if that country is designated a mineral competitor, as is the case with China.
Zinc’s supply risk is now above the 0.40 threshold used by the USGS to help determine criticality at 0.48.
Top of the supply-risk table are gallium, niobium, and cobalt, followed by several rare earth elements.
Aluminum lies in eighth place with a score of 0.60, thanks to the concentration of smelting in China, and tin is also on the supply risk spectrum with a score of 0.50.
A continuum of supply risk
The USGS stresses that falling below the 0.40 cut-off point doesn’t mean there is no supply risk.
“The metrics developed with (the new) methodology are best viewed as a continuum of supply risk,” and one which is continuously moving as global supply chains for each commodity evolve, it said.
Out of the major industrial metals traded on the London Metal Exchange, only two are now not deemed critical minerals by the United States.
Copper has a low supply-risk profile due to a large domestic mining, smelting, and recycling industry.
Lead is more interestingly poised on the USGS supply-risk table with a score of 0.39, just below the cut-off point, again due to a growing concentration of global mining and smelting capacity in China.
None of these industrial metals feature on the European Union’s critical minerals list.
In part that’s a reflection of Europe’s domestic production base both at the mining and smelting level.
But in part it may be because the USGS is ahead of its European peers in analysing global supply patterns and the resulting potential threats to critical minerals availability.
Nickel and zinc may not spring to mind when most people think of critical minerals, but as far as the United States is concerned, they both are.
POLITICS :
Media Bias? Voter Distrust of Political News Grows
Rasmussen Reports, November 15, 2021
Voters increasingly distrust reporting about politics, and most think the media are less aggressive in questioning President Joe Biden than they were with former President Donald Trump.
The latest Rasmussen Reports national telephone and online survey finds that 53% of Likely U.S. Voters don’t trust the political news they’re getting. That’s up from 43% in July. Just 33% now say they trust the political news they’re getting, down from 37% in July. Another 14% are not sure. (To see survey question wording, click here.)
Fifty-eight percent (58%) of voters believe the news media are less aggressive in questioning Biden than they were in questioning Trump. Only 17% think the media question Biden more aggressively than they did with Trump, while 21% think the media’s question of Biden has been about the same as Trump.
More Democrats (48%) than Republicans (21%) or those not affiliated with either major party (26%) trust the political news they’re getting. Even among Democrats, however, nearly a third (32%) don’t trust political news, a sentiment shared by 69% of Republicans and 62% of unaffiliated voters.
The survey of 1,000 U.S. Likely Voters was conducted on November 10-11, 2021, by Rasmussen Reports. The margin of sampling error is +/- 3 percentage points with a 95% level of confidence. Field work for all Rasmussen Reports surveys is conducted by Pulse Opinion Research, LLC. See methodology.
While 75% of Republicans and 62% of unaffiliated voters think the news media are less aggressive in questioning Biden than they were in questioning Trump, only 38% of Democrats agree. A majority of Democrats believe either that the media treat Biden about the same as Trump (31%) or that the media question Biden more aggressively than they questioned Trump (24%).
Women voters (58%) are more likely than men (47%) to say they don’t trust the political news they’re getting, but there is little difference in their opinions about the media’s aggressiveness in questioning Biden.
Black voters (42%) are more likely than whites (30%) or other minorities (34%) to trust the political news they’re getting. Whites (59%) and other minorities (61%) are more likely than Black voters (44%) to believe the news media are less aggressive in questioning Biden than they were in questioning Trump.
Among voters who don’t trust the political news they’re getting, 76% think the news media are less aggressive in questioning Biden than they were in questioning Trump.
Voters with annual incomes of $100,000 or more are more likely to say they trust the political news they’re getting than those earning less.
Government employees trust political news more than private sector workers do.
President Biden’s strongest supporters trust the media more than other voters do. Among those who Strongly Approve of Biden’s job performance as president, 70% say they trust the political news they’re getting. By contrast, among voters who Strongly Disapprove of Biden’s performance, 79% don’t trust the political news they’re getting.
As the homicide trial of Kyle Rittenhouse continues in Kenosha, Wisconsin, voters are largely divided along party lines about whether the teenage gunman should be convicted.
Only 42% of Americans rate the media’s coverage of the COVID-19 pandemic excellent or good, and many have concerns about the accuracy of reporting on vaccine safety.
CLIMATE CHANGE :
The brutal gap between ambition and reality in addressing climate change
Ben Geman, Axios, November 15, 2021
One thing that was unavoidable at COP26 was the jarring dissonance between the pledges of action and the current global energy and emissions trajectory.
The big picture: The chart above shows the upward march of global fossil fuel consumption even as renewables have surged.
Use dipped in 2020 during the pandemic but emissions are rebounding this year. Those steep and sustained cuts that summits like COP26 are supposed to help enable? Nowhere in evidence.
What they’re saying: Columbia University climate expert Jason Bordoff delves into this ambition-reality gap on the “Talking Politics” podcast that’s affiliated with the London Review of Books.
“Right now, I fear that it’s getting wider apart, because the ambition, fortunately, is being elevated. But the more the ambition is elevated, the more the gap widens, unless the reality starts to change as fast or faster,” he said.
“And the reality is, oil use is going up each year, gas use is going up each year, coal is going up now, maybe it’s going to plateau, it’s not falling off a cliff. And that is just how hard the math of decarbonization is.”
“So we just need that reality to change much more quickly. And the math is unforgiving.”
Go deeper: COP26 climate deal calls for historic shift from fossil fuels