Today’s Key Takeaways: Demand and Supply lead to more funding for oil industry despite pledges to divest. Oil prices rose as Shanghai’s relaxed COVID-19 restrictions and OPEC warned of replacing Russian oil supply. America can fuel world’s needs for clean-burning natural gas and meet our own domestic requirements. Will the AK redistricting board give Eagle River one or two Senate seats?
NEWS OF THE DAY:
High Prices Make Oil And Gas Much More Appealing To Big Banks
Irina Slav, OilPrice.Com, April 11, 2022
- A dramatic rise in oil and gas prices has led to a wave of fresh funding in the industry.
- Citigroup, Wells Fargo, and several other major banks underwrote more oil and gas loans than renewable energy loans in March.
- High costs are making renewable energy much less appealing to Big Banks, despite pledges to divest from fossil fuels.
Banks have been actively seeking ways to distance themselves from the oil and gas industry in recent years under growing pressure from pro-energy transition activists. Their efforts have been quite productive, too, with funding of renewable energy loans rising significantly. But the tables are turning as fossil fuel prices soar in the face of tight supply and the threat of shortages.
The Wall Street Journal, for instance, reported earlier this month that banks had underwritten more renewable energy loans than oil and gas loans during the first quarter of the year. However, certain banks underwrote more oil and gas loans than renewable ones, the report noted, reversing course on their earlier approach to lending.
Citigroup, Wells Fargo, Societe Generale, and Mizuho Financial Corp were among the banks that underwrote more oil and gas loans than renewable energy loans, according to the report,
A separate report, by a group of environmental nonprofit organizations, once again pointed the finger at the banking industry for continuing to provide the oil and gas industry with money at all. Dubbed “Banking on Climate Chaos,” the group said in its 2022 Fossil Fuel Finance Report that banks had provided a total of $742 billion in funding to the fossil fuel industry last year. Of that, four Wall Street majors, including JP Morgan, Wells Fargo, Bank of America, and Citigroup, account for a quarter.
Banks have been a huge target for environmentalists as the push for the energy transition began to really gather momentum a few years ago. The pressure exerted on the industry has led to a flurry of net-zero commitments by virtually every bank, with the majors mentioned in the above report also being members of the Net Zero Banking Alliance.
Yet the hard realities of the energy world have not escaped the attention of bankers. Demand for fossil fuels is on the rise while supply is, at best, tight. With pressure rising on Europe to impose an embargo on Russian oil and gas, there are fears, even expressed by the International Energy Agency, that the global oil market could swing into a deficit of as much as 3 million barrels daily.
What this means is that the world urgently needs more oil production and also more gas production. There is even a shortage danger in the coal market following an EU decision to ban imports of Russian coal, although Brussels scheduled the start of the ban for August so it can stock up on the commodity in the meantime.
As the Wall Street Journal report points out, this context for banks also involves higher costs for renewable energy projects: the tight supply is not only a feature of the hydrocarbons market. In such a context, any bank would remember it is a business rather than a charity and take its money where the returns are.
It is certainly an unfortunate situation for wind and solar. After years of everyone pretty much assuming their costs will only ever go down, the pandemic and the outlook for raw material demand changed that. Supply chain disruptions were the first to start affecting wind and solar prices negatively. Then higher energy costs kicked in for an additional cost boost, with polysilicon prices hitting the highest since 2011 earlier this year.
It is a special kind of irony that energy costs, or rather, the cost of fossil fuel energy used in the production of solar panels, for instance, are affecting the costs of the technology supposed to wean us off fossil fuels. Yet facts are what they are: higher fossil fuel prices are driving up the prices of virtually everything that features energy inputs.
Banks have made it clear that despite their increasingly ambitious commitments to the net-zero path, they cannot simply drop their oil and gas clients overnight. The reason for this is that renewable energy is not on par with fossil fuels in terms of performance. It won’t be on par for a while yet, but global energy demand will remain strong, it seems, and it would need to be met.
Just how important this is was made clear by none other than pro-transition Democrats in the U.S., who, for all their focus on the shift from oil and gas to renewables, have now taken to calling on the oil and gas industry to boost production amid high priced at the pump. These have been blamed on Russia’s President recently but assigning blame will not make the burden lighter on Americans, hence the calls on Big Oil to pump more, despite transition efforts.
As for renewable energy financing, this is not going anywhere, whatever the costs. The pressure from environmentalist organizations and activist shareholders is not showing any signs of subsiding, which means lenders will continue to feel it and adjust their actions accordingly. Until there is such strong government support, including financial, for renewables, banks will continue to finance the industry.
Oil rises on OPEC warning and easing of Shanghai COVID curbs
Rowena Edwards, Reuters, April 12, 2022
Oil prices climbed on Tuesday as Shanghai’s relaxation of some COVID-19 restrictions eased concerns about Chinese demand and as OPEC warned it would be impossible to replace potential supply losses from Russia.
Brent crude futures rose by $5.51, or 5.6%, to $103.99 a barrel by 1343 GMT while U.S. West Texas Intermediate was up $5.12, or 5.4%, at $99.41. Both contracts lost about 4% on Monday.
Shanghai said on Monday that more than 7,000 residential units had been classified as lower-risk areas after reporting no new infections for 14 days and districts have since been announcing which compounds can be opened up. read more
The Organization of the Petroleum Exporting Countries (OPEC), meanwhile, warned that it would be impossible to replace 7 million barrels per day (bpd) of Russian oil and other liquids exports lost in the event of sanctions or voluntary actions. read more
The European Union has yet to agree any embargo on Russian oil, but some foreign ministers said the option is on the table. read more
“The oil market is still vulnerable to a major shock if Russian energy is sanctioned, and that risk remains on the table,” wrote Edward Moya, a senior market analyst with OANDA.
OPEC on Tuesday lowered its Russian liquids production forecast by 530,000 barrels per day (bpd) for 2022, but also cut its forecast for growth in world oil demand, citing the impact of Russia’s invasion of Ukraine, rising inflation as crude prices soar and the resurgence of the Omicron coronavirus variant in China. read more
Indian Oil Corp (IOC), which bought Russian Urals in previous tenders, has removed the grade from its latest crude tender. U.S. President Joe Biden told Indian Prime Minister Narendra Modi late on Monday that buying more oil from Russia was not in India’s interest. read more
IEA member nations are planning to release 240 million barrels over the next six months from May in an effort to calm the market.
While the release will ease immediate tightness, analysts suggested it will not solve the structural deficit caused by underinvestment and stocks will need to be replenished.
A preliminary Reuters poll showed U.S. crude oil inventories are likely to have risen by 1.4 million barrels in the week to April 8 after declining for three consecutive weeks.
The poll was conducted ahead of a report from the American Petroleum Institute due at 4:30 p.m. EDT (2030 GMT) on Tuesday.
America’s Natural Gas Juggernaut
Gregory Wrightstone, Real Clear Energy – Opinion, April 11, 2022
America can fuel the world’s needs for clean-burning natural gas for many decades and have plenty left over for our own domestic requirements. The vast majority of our nation’s undeveloped gas supply is found in the Appalachian Basin of the eastern United States. The size of the resource is stunning and largely unknown outside of the teams of geologists and engineers that are responsible for its discovery and ongoing development.
Gas fields with more than 3 trillion cubic feet (TCF) of recoverable natural gas reserves are considered to be giant gas fields, while those with more than 30 TCF are termed super-giants. In 2008, while researching the gas potential of the A-Basin, and realizing its enormous potential, I proposed that a new classification be adopted: any field with recoverable reserves in excess of 300 TCF be considered a mega-giant field.
These mega-giant fields are exceedingly rare. There are only three of them worldwide, and two of the three are in the Appalachian Basin — the Marcellus and Utica shales. The A-Basin is home to a third huge gas reservoir known as the Burket/Geneseo Shale. The Burket is a bit smaller in reserve size but is still classified as a super-giant. These three monsters are found at depths from 5,000 to more than 12,000 feet in depth and located in Pennsylvania, eastern Ohio, and northern West Virginia. The New York portions that would be productive are off limits due to the Empire State’s ban of fracking technology.
The Marcellus Shale is the largest of the reservoirs. The most recent assessment of its total recoverable reserves pegs its size at 609 to 998 TCF, making it just slightly smaller than the largest gas field in the world, the South Pars/North Dome gas field of Qatar and Iran. According to Bill Zagorski, who was given the moniker of the “Father of the Marcellus,” the gas-in-place of the Marcellus dwarfs all conventional fields in the world. The size is so large that the ten largest conventional fields in the world combined do not equal the in-place reserves of the Marcellus.
The Utica Shale is found several thousand feet below the Marcellus. It has recently been assigned total recoverable reserves ranging from 508 to 834 TCF, large enough to rank it as the third largest gas accumulation in the world, just behind the Marcellus. The majority of the development to date has focused on the shallow liquids-rich portions on the deposit’s western margins. The deeper dry gas portions of the Utica have yielded some of the highest production rates ever measured in North America but is largely undeveloped due to higher costs associated with its much deeper drilling depths.
The icing on America’s natural gas cake is the little-known Burket/Geneseo Shale found above the Marcellus Shale with reserves pegged at 91 to 124 TCF. It has been the red-headed stepchild of the nation, — lightly explored and generally ignored. Bear in mind that a recent discovery by Israel in the offshore Mediterranean was labeled a “game-changer” for that nation yet has “only” 23 TCF of gas reserves, one-quarter the likely size of the Burket!
If the nation has incredibly large untapped supplies of natural gas, why is it not being fully developed? The answer, at least in the eastern United States, is due to lack of export capacity through pipelines. Existing pipelines are operating at capacity because of opposition to proposed projects. In the eastern U.S. alone, six major pipelines with capacity to move 7.0 BCF per day have been canceled or blocked over unreasonable environmental activism.
What is the solution? Unleash America’s secret energy weapon, natural gas, by completing blocked or canceled pipelines and relaxing the lengthy permitting process that delays — and kills — needed infrastructure. American entrepreneurs can energize the world if government would just get out of the way.
Western Australia is world’s new top mining destination
Cecelia Jamasmie, Mining.Com, April 11, 2022
Resource-rich Western Australia has been picked the most attractive region for mining investment in 2021, replacing the US state of Nevada, which fell to the third place in the latest annual survey of mining companies released by think-tank the Fraser Institute.
Canada’s Saskatchewan is still on the podium, climbing from a third place overall in 2020 to a second position in the 2021 index, which takes both mineral and policy perception into consideration.
Nevada, which topped the 2020 ranking, ranked third last year, followed by Alaska, Arizona, Quebec, Idaho, Morocco, Yukon, and South Australia.
The US was the country with the most jurisdictions considered among the world’s 10 most attractive by mining investors — Nevada, Alaska, Arizona, and Idaho. Canada followed closely with three provinces at the top of the index — Saskatchewan, Quebec, and the Yukon. Australia only had two states among the best ten destinations — Western Australia and Southern Australia.
As in previous years, the best places to invest in mining are located in developed countries with long histories of success in the industry, which not necessarily is a good thing.
The main issue is that the number of available projects in the top jurisdictions are limited, while some of the world’s best deposits are in places where doing business is, or is perceived as, risky.
Zimbabwe, which has an abundance of resources including gold, platinum, diamonds, lithium, chrome, and coal, ranked as the least attractive jurisdiction in the world for investment followed by Spain, the Democratic Republic of Congo (DRC) and Mali.
Also in the bottom ten, beginning with the worst, are Nicaragua, China, Panama, Argentina’s Mendoza, Venezuela, and South Africa.
The survey also included a sub-ranking of exploration jurisdictions, based on the length of their permitting process.
This year’s report went beyond Canada, gathering data from Australia, the US and Scandinavia, all regions where mining, environmental and other policies are broadly comparable.
In most Canadian provinces and territories, the majority respondents said they were able to acquire the necessary exploration permits within six months. There were some notable differences among regions, particularly when comparing Manitoba, where 42% of participants said it took them 24 months or more to obtain all necessary permits, versus British Columbia, where the majority said it took between three and six months.
“Overall, senior mining executives continue to cite the uncertainty around protected areas, disputed land claims, and environmental regulations as major areas of concern for Canadian provinces and territories,” said Elmira Aliakbari, director of the Fraser Institute’s Centre for Natural Resource Studies and co-author of the study.
“Policymakers in every province and territory should understand that mineral deposits alone are not enough to attract investment,” Aliakbari said.
Quebec performed the best, with 60% of respondents indicated that they received exploration permits in two months or less. When comparing the four regions included in the survey — Canada, the United States, Australia, and Scandinavia — Canadian jurisdictions have, on average, a higher percentage of respondents indicating that it took six months or less for them to receive their permits.
Alaska Redistricting Board set to soon choose between 2 Eagle River Senate maps
Sean Maguire, KTUU, April 11, 2022
The Alaska Redistricting Board is set to choose this week between two proposed Anchorage political maps with debate focused on what should happen with Eagle River.
The Alaska Supreme Court said in March that a Senate map pairing Eagle River with East Anchorage was an unconstitutional “political gerrymander.” The board is set to send a new plan to an Anchorage judge on Friday.
There are two proposed maps for Anchorage: The first, known as Option 2, keeps Eagle River intact in one Senate seat. Joint Base Elmendorf-Richardson would be paired with Muldoon in another seat and stretches of South Anchorage would be paired with a district that stretches down to Girdwood in a third seat.
The second map, known as Option 3B, splits Eagle River in two: The eastern part of Eagle River would be paired with the Girdwood House District. The western side of Eagle River would be connected to JBER.
Conservatives have largely supported Option 3B: It would give the solidly Republican Eagle River a strong chance of increasing GOP representation in the Senate. Liberals have largely backed Option 2: It’s been seen as more status quo and more likely to see Democratic incumbents reelected.
The two maps have sparked passionate debate during multiple days of public testimony and competing accusations of partisan gerrymandering.
Randy Ruedrich, former chairman of the Alaska Republican Party, helped draw the map that would pair Eagle River with Girdwood. He has argued it meets the constitutional requirements for contiguous districts.
“We meet that standard, in this case, by one of the longest contact areas in Anchorage,” he argued on Saturday.
“Map 3B is absolutely ridiculous,” Reinbold said, strongly urging for Eagle River to be kept intact in one Senate district.
Yarrow Silvers, an East Anchorage community leader who led the successful legal challenge against the board’s previous Senate plan, argued on Saturday that Option 3B had similar problems.
“Keeping communities together is not gerrymandering,” she said. “Splitting communities apart is, unless you have a really rational, logical argument for it. And I have not heard that.”
There have been threats from the same law firm for another legal challenge if the board splits Eagle River into two Senate districts, again. The board is set to meet on Wednesday and Thursday to make a final decision on the Anchorage Senate maps.