NEWS OF THE DAY:
Review of federal oil, gas leasing program being ‘finalized internally – Haaland
Reuters, July 27, 2021
A highly anticipated review by the Interior Department of the federal oil and gas leasing program is undergoing final internal review and should be released “very soon,” Interior Secretary Deb Haaland told a Senate hearing on Tuesday.
President Joe Biden announced the review shortly after taking office in what was widely viewed as a first step to fulfilling his campaign promise of banning new federal drilling leases to fight climate change and rapidly slashing greenhouse gas emissions over the next decade.
Haaland had said previously that the review would be completed by “early summer.” (Reporting by Valerie Volcovici, Editing by Franklin Paul)
OIL:
Shell Greenlights First Project Since Defeat In Dutch Court
Julianne Geiger, OilPrice.Com, July 27, 2021
Energy transition or no, Shell has given the go-ahead of its Whale deepwater project in the Gulf of Mexico, according to a Shell press release on Monday.
It would be the first greenlighted project since its defeat in a Dutch court last month that ordered Shell to reduce its emissions targets at a pace quicker than it had planned.
Royal Dutch Shell owns 60% of the Whale project, while Chevron owns the remaining 40%. The expected production—set for 2024—is estimated at 100,000 bpd, with an estimated recoverable resource volume of 490 million boe.
Shell said that Whale would be Shell’s 12 deepwater project in the Gulf of Mexico.
Whale is located next to Shell’s Silvertip field, about 10 miles from its Perdido platform.
Shell is a leading deepwater oil and gas producer in the Gulf of Mexico, producing 150 million barrels of oil equivalent per year—which is about half of Shell’s total U.S. oil and gas production.
With the climate pressure now on full tilt, Shell is now focusing its efforts on going after high rate of return projects and those that are more efficient.
For this project, Shell expects an internal rate of return of more than 25%–significantly higher than the industry standard, according to Reuters.
“Whale is the latest demonstration of our focus on simplification, replication and capital projects with shorter cycle times to drive greater value from our advantaged positions,” Wael Sawan, Shell Upstream Director said in Monday’s release. “We are building on more than 40 years of deep-water expertise to deliver competitive projects that yield high-margin barrels so that we are able to meet the energy demands of today while generating the cash required to help fund the development of the energy of the future.”
GAS:
Scientists unveil ‘big step’ in slashing natural gas emissions
Ester Wells, Energywire, July 27, 2021
A team of scientists have reported an advance in converting methane into methanol, a development they say could help change how the world uses natural gas and cut the fuel’s greenhouse gas emissions, according to a new study.
The researchers used iron zeolites, crystals that convert natural gas — which is made up primarily of methane — to methanol at room temperature and discovered that the smaller the pore size in the zeolites, the more they were able to prolong the reaction and produce more methanol. This pore size-reactivity relationship is known as the “cage effect.”
Zeolites with large pores — which allow molecules up to about 1.6 times larger to pass through than zeolites with small pores — deactivate after a single reaction cycle. But with the cage effect, the scientists were able to regenerate 40% of the deactivated sites, according to the study, published this month in Science.
Edward Solomon, professor of chemistry and of photon science at Stanford University and co-author of the paper, said the research is a significant step toward both industrial-scale production of methanol and reduction of methane emissions.
The discovery establishes “a really key component of design on what you need to do to be able to efficiently make a methanol molecule,” said Solomon.
Methanol, which is rich in hydrogen, powers fuel cells and is more easily stored and transported than natural gas, the researchers said. If natural gas could be used as a feedstock and converted efficiently into liquid methanol, it would be a step forward in creating industrial-scale production of methanol for use as a lower-carbon transportation fuel, they said. Currently, methane leaks from gas pipelines and processing plants are considered a challenge for addressing climate change.
Solomon said the team was not only able to improve zeolite performance but make the conversion to methanol, which is currently an energy-intensive, two-step process, into a low-energy, one-step process.
But Rob Jackson, professor of Earth system science at Stanford, said he sees a more exciting application for the research in removal of atmospheric methane from burning natural gas. Gas operations were responsible for about 45 million metric tons of methane emissions in 2020, according to the International Energy Agency.
“We collaborate in trying to look for ways to remove methane from the atmosphere, and this paper provides encouraging news for the potential to do that more cheaply,” Jackson said.
Solomon noted that the study took place under controlled lab conditions using nitrous oxide, and the next step is to create methanol using oxygen so that the reaction can be more easily replicated.
“It’s a big step toward understanding what you need to do to turn this into an efficient process … and it might make methane abatement more accessible,” he said.
MINING:
Drills turning at critical Graphite Creek
Shane Lasley, North of 60 Mining News, July 27, 2021
With the massive growth in global demand for mined graphite predicted over the coming two decades, Graphite One Inc. has crews collecting the final bits of data that will be needed for a feasibility study for its Graphite Creek project about 35 miles north of Nome, a western Alaska mining town famous for the gold found along the beaches and under the icy waters of the Bering Sea.
“The 2021 field program is a very important and exciting milestone for our stakeholders as it is advancing the Project towards the feasibility study while providing economic benefit to the local businesses,” said Graphite One CEO Anthony Huston.
The centerpiece of the summer 2021 program at Graphite Creek is 3,000 meters of core drilling focused on upgrading inferred resources to the higher confidence measured and indicated resource categories ahead of the feasibility study, which will come on the heels of a prefeasibility study due out later this year.
These advanced engineering and economic studies 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 refine these annual concentrates into 41,850 metric tons of the coated spherical graphite used in the lithium-ion batteries powering electric vehicles and storing renewable energy, plus 13,500 metric tons of purified graphite powders annually.
According to a 2019 calculation, Graphite Creek hosts 10.95 million metric tons of measured and indicated resources averaging 7.8% (850,534 metric tons) graphitic carbon; plus 91.89 million metric tons of inferred resource averaging 8% (7.34 million metric tons) graphitic carbon.
The infill drilling planned for this year is expected to upgrade large portions of the inferred resources into the measured and indicated category, which could, in turn, be elevated to reserves with the completion of a feasibility study.
“Previous drilling has identified long intercepts of high-grade graphite at surface, and results will continue to provide Graphite One with invaluable data to progress the project towards a production decision,” said Huston.
In addition to resource upgrade drilling, the 2021 program includes a sonic rig collecting geotechnical data at the location of the proposed open pit mine and infrastructure sites on the property. This will provide vital ground conditions information to engineers working on the design of the operation for the upcoming feasibility level studies.
“We’re working simultaneously to complete our PFS, and to generate additional data for our FS to further demonstrate the strong value proposition of our Graphite Creek deposit,” Huston added.
While the drills are turning, the engineering team is carrying out access route surveys and environmental specialists are collecting additional ecological baseline data.
The 2021 program will also include community outreach activities.
By the end of the program, Graphite One expects to have all the information needed to continue advancing the design and engineering for a mine at Graphite Creek, a flotation process facility to produce graphite concentrates from the mined material, as well as the secondary treatment plant that will upgrade those concentrates into the coated spherical graphite used in the anodes of lithium-ion batteries.
The closing in on a mine decision for Graphite One‘s mining and refining facilities comes at a time when the electric mobility and renewable energy sectors are expected to need massive quantities of the coated spherical graphite that serves as the anode material for most lithium-ion batteries.
According to the International Energy Agency, roughly 146 lb of graphite goes into the average EV battery. With annual EV sales forecast to climb to 82 million by 2040, the automotive sector alone will need around 5.4 million metric tons of battery-grade graphite each year, roughly five times more than produced at all the mines on Earth.
For the United States, this staggering growth figure is compounded by the fact that there are currently no graphite mines, leaving the burgeoning EV and renewable energy supply chains in the U.S. dependent on imports for their supplies of this critical battery mineral.
A mine at Graphite Creek and an associated facility producing battery-ready spherical graphite would help meet a portion of this growing domestic need.
POLITICS:
Alaska Legislature will take public testimony on the future of the state budget and Permanent Fund dividend this week
James Brooks, Anchorage Daily News, July 26, 2021
Alaskans interested in sharing their opinions about the future of the state budget and Permanent Fund dividend are being invited to testify 6-9 p.m. Thursday in Anchorage at the Legislative Information Office at 1500 W. Benson Boulevard.
The meeting is the first of four that will collect input from Alaskans across the state before a special session scheduled to begin Aug. 2 in Juneau. Legislators have organized an eight-member group whose job is to set the agenda for that session, and public testimony is part of the process.
In the session, lawmakers will attempt to come up with a new long-term formula for the Permanent Fund dividend and a way to pay for that formula, if needed. Without agreement, there may not be a Permanent Fund dividend this year, and there may not be funding for the Power Cost Equalization fund, which subsidizes home electricity prices in rural Alaska.
Between 1982 and 2016, Alaska relied on a formula in state law to set the amount of the annual dividend. Since a 2017 Alaska Supreme Court decision, the governor and legislators have set the dividend manually.
The three other opportunities for public testimony:
* 6-9 p.m. Friday at the Mat-Su Legislative Information Office, 600 Railroad Ave. No. 1 in Wasilla.
* 1-4 p.m. Saturday at the Fairbanks Legislative Information Office, 1292 Sadler Way, Suite 308.
CLIMATE CHANGE:
China’s New National Carbon Trading Market: Between Promise and Pessimism
Jane Nakano, Center for Strategic and International Studies, July 23, 2021
After a decade of planning and trials, China officially launched a national carbon trading market last week. Called the national emissions trading scheme (ETS), it initially targets carbon emissions from the power sector. While the Chinese ETS launch comes more than 15 years after the European Union launched the world’s first international carbon trading market, China’s carbon market will be the largest in the world once it is fully implemented. That said whether the program will actually deliver on the promise of the Chinese government being better able to control CO2 emissions and facilitate decarbonization of its economy is another matter.
Q1: Why is China taking this step?
A1: China first embarked on the effort to test emissions trading as a key means to manage its CO2 emissions about a decade ago, with pilot programs launched in seven provinces and cities starting in 2013 (Beijing, Tianjin, Shanghai, Chongqing, Hubei, Guangdong, and Shenzhen). Managing and reducing national emissions intensity became the basis for China’s mitigation pledges under the global climate mitigation frameworks, starting with the Copenhagen Accord in 2009, where China committed to 40–45 percent reduction in CO2 emissions intensity by 2020. Leading up to the Paris Agreement in 2015, China updated its emissions intensity reduction commitment to 60–65 percent by 2030 and announced a fresh pledge to peak emissions by 2030—albeit without specifying its level.
The official announcement to implement emissions trading at the national level came in 2017.
As China strives to meet its climate commitments, including reaching carbon neutrality by 2060, its policymakers view managing CO2 emissions through national trading as a viable tool to help the government deliver on these key climate pledges.
Q2: How will the national ETS work?
A2: China’s ETS is a rate-based system, meaning that it targets reductions in CO2 emissions per unit of output rather than total CO2 emissions (a mass-based system). As such, enterprises under the ETS would need to provide information on the volume of emissions as well as economic output on a regular basis. Under this scheme, enterprises receive allowances whose allocation is based on historical emissions levels and output, as well as allowances that are adjusted according to actual output during a specified period. Allowance allocation has begun free of charge, but the official plan suggest that enterprises will need to purchase them over time.
Initially, the ETS will focus on the electricity sector and its 2,200-plus large firms that account for 40 percent of China’s total annual CO2 emissions. Once fully implemented, however, the national carbon market will cover large firms in seven additional sectors: petroleum refining, chemicals, non-ferrous metal processing, building materials, iron and steel, pulp and paper, and aviation. No official timeline has been set as to when each of these additional sectors will join the national carbon trading market, although sectors with relatively homogenous products like iron, steel, and cement are frequently mentioned as the likeliest candidates for inclusion sooner.
According to a nonprofit survey quoted by the top Chinese business media outlet Caixin, carbon credits will likely be traded at around 50 yuan/ton, with a subsequent rise to 71 yuan/ton in 2025, and 93 yuan/ton by 2030. The price on the opening day was 49 yuan/ton, or $7.6/ton—roughly at the levels of trading on the Regional Greenhouse Gas Initiative (RGGI) market in the United States. Moreover, similar to the limits on most of China’s stock markets, the carbon credit pricing will not be allowed to swing beyond 10 percent in a daily session.
Q3: Is the national ETS likely to work?
A3: Key factors that make a carbon trading market effective include: (1) whether the system has a sound monitoring, reporting, and verification (MRV) capability; (2) how non-compliance is dealt by the regulatory authority; and (3) whether the price of credits is high enough to incentivize producers to reduce their carbon emissions (or improve efficiency). Similar to the EU ETS, firms under the Chinese ETS are required to monitor and report the amount of CO2 emissions, which are then inspected and verified by government-certified technical experts. In an effort to discourage collusion, the Chinese program requires randomized matches between reporting enterprises and their verifiers, for example. While punitive measures against non-compliance appear to include both financial and non-financial penalties, it is unclear whether the fines are set high enough to compel compliance.
Will the ETS have a desired effect on CO2 management? China has been the top emitter of greenhouse gasses (GHG) since 2006, accounting in 2019 for 27 percent of the global total. The 14,093 gigatons of GHG emissions in 2019 not only meant a 25 percent increase over the last decade, but also put China’s emissions level over the combined total of GHG emissions by all other advanced, industrialized countries. One of the key features of the Chinese ETS is that the program incentivizes the improvement in emissions intensity. On one hand, the intensity-based approach would allow Chinese economy to continue to grow while managing CO2 emissions. On the other hand, relying on the intensity reduction but not capping emissions, either at a fixed level or declining over time, would not guarantee overall emissions reduction even if it led to improved energy efficiency. Also, an ETS has limited room for success if the emissions it allows are not significantly lower than the emissions currently in place even if the aforementioned factors worked well. The International Monetary Fund estimates that the price of carbon credits will need to reach around $50/ton to effectively drive down carbon emissions in China. Given China’s current and forecast rates of economic growth, there is good reason to doubt that China’s focus on intensity will satisfactorily facilitate a rapid energy transition.
Q4: What are the implications for global firms in the related sectors and beyond?
A4: In the near term, the implications for global firms will be relatively small, and their path to carbon neutrality will be primarily driven by measures put forward by the United States, European Union, and other advanced economies.
In the pilot programs, foreign-invested firms in some sectors were included, but the programs were not very ambitious. So complying was not particularly difficult for multinational corporations (MNCs). Even in cases where foreign firms did not fully comply (such as with Hyundai Mobis, Parkson, and Microsoft in the Beijing pilot), the financial penalties given to them were modest, especially relative to the other costs of doing business in China. On first glance, the initial list of roughly 2,000 energy generation firms covered in the new national ETS does not appear to include any foreign firms, but authorities have said they will gradually grow the list of covered firms and expand to other industries, such as chemicals, where there are numerous large MNCs that will likely need to comply. Based on past experience with China’s other regulatory schemes in the environment, intellectual property rights, and antitrust, one can expect Chinese authorities to require stricter adherence by MNCs relative to domestic firms, especially state-owned enterprises.
More relevant for most MNCs is the possibility that the ETS will in general raise the cost of energy and electric for business consumers and their customers. Of course, the purpose of these new rules and other related regulations is to incentivize all parts of the supply chain to be greener; this transition will inevitably have adjustment costs, but it is also possible that companies will be both greener and have lower energy costs over the longer term.
Finally, although the national ETS is a significant step for China, it is only a small step for the world. This program is unlikely to result in a dramatic reduction in carbon emissions in China by either domestic or foreign companies. Also, this scheme is far less ambitious than Europe’s ETS or the border-adjustment carbon tax schemes the European Union has implemented, and United States is considering. More significant for the world is China’s bid in electric vehicles (cars and buses) and batteries, which is driving the global auto industry and regulators elsewhere to transition from internal combustion-based vehicles to new-energy vehicles and the related infrastructure. In short, China is likely to continue having a larger voice in schemes that involve new productive investment and less in those that more directly involve conservation of resources.