NEWS OF THE DAY:
Louisiana refineries slammed by Hurricane Ida
Argus Media, August 30, 2021
More than 800,000 b/d of US Gulf coast refining capacity is offline today as Hurricane Ida swept ashore in Louisiana.
The storm brought 150mph (240km/h) winds and nine-foot storm surge to areas near New Orleans, coastal Louisiana and stretches of the Mississippi River, home to nearly 1mn b/d of refining capacity, key facilities for offshore oil and gas support work, as well as ports and docks that handle a wide range of other commodities.
Most refinery operators with facilities in the storm’s path said they shut down ahead of its arrival, but the extent of damage and potential re-start times may not be known for several days.
Valero’s 215,000 b/d St Charles, Louisiana, refinery and 135,000 b/d Meraux refinery were both shut as the hurricane made landfall, the company said. ExxonMobil’s 500,000 b/d Baton Rouge facility — located west of where the heaviest winds and rain are expected — also shut “some units and equipment.” Exxon said it continued to meet contractual commitments at the site and that it was maintaining service at the Baton Rouge fuel terminal, servicing fuel distributors throughout southeast Louisiana.
Phillips 66’s 250,000 b/d Alliance refinery in Belle Chasse and Shell’s 225,000 b/d refinery in Norco began shutdown operations on 27 August in preparation for the storm.
Nearly 700,000 customers in Louisiana were without power as evening fell and winds battered power lines, according to local power utility Entergy. Category 4 hurricanes such as Ida can cause power outages that may take up to three weeks to restore, the company said. The company was bringing in workers from other parts of its service region, which stretches from east Texas to Oklahoma, to begin work on lines once the storm passes.
The storm comes as US peak summer gasoline demand begins to wane. US gasoline demand was up by 3pc to 9.6mn b/d on the week ended 23 August and was up 4pc from year-earlier levels. US diesel demand was down by 5pc to 4.1mn b/d in the same week, a 4pc gain from the same time in 2020.
More than 45pc of US refining capacity is located along the Gulf coast.
Ex-Fracker at Walmart Reveals One Risk to U.S. Oil Supply Growth
David Wethe, Sheela Tobben, Josyana Joshua, Bloomberg, August 26, 2021
For more than a year, Kristopher Guidry crisscrossed the Texas oil patch, fixing up electrical equipment on drilling rigs. Today, he’s studying to become a home appraiser. Abhinav Mishra was an oil engineer in some of the same fields. In January, he started an internship in Silicon Valley. And Andrew Crum, who ran digital operations for fracking outfits, headed to Kansas City, Missouri, where he joined Walmart Inc.’s supply-chain management team.
All three men say they’ve probably left the industry for good.
After three oil busts in the past seven years alone, they’re fed up with the stomach-churning volatility of it all. The boom years may be wonderful, but the trips to the unemployment line that follow are devastating. Besides, some workers say, the industry is on the decline now as the government and corporate America pivot to a greener future. Who wants to be part of a dying business?
“I would have to be pretty desperate to consider going back,” said Crum, who had followed three earlier generations of his family into the oil fields.
Of all the labor shortages that are wreaking havoc on the U.S. economy — from cashiers to chefs — few are as thorny or potentially as permanent as the one that has a grip on the oil sector. Thousands of roughnecks and engineers are, like Guidry, Mishra, and Crum, wary of returning to jobs like the ones they lost when the pandemic sent the price of crude oil crashing last year.
It doesn’t help that oil producers, trying to display a newfound financial discipline to their frustrated Wall Street backers, are hesitant to offer the signing bonuses and double-digit pay hikes that have become commonplace in other industries. Average pay in the Permian shale basin of West Texas and New Mexico remains below pre-Covid levels. All of which, analysts say, could add up to a cap on production in the Permian and other shale formations that collectively pump out more than two-thirds of all U.S. oil. Drillers may be promising to avoid rushing back into expansion mode — as part of that same pledge to Wall Street — but the lack of workers frankly gives them no choice.
“If reported labor shortages continue, it would be impossible to grow production,” said Elisabeth Murphy, an analyst at research firm ESAI Energy.
Not What They Used To Be
Oilfield wages in Permian yet to recover from pre-pandemic levels in 2020.
Spending in the oil basins of U.S. and Canada will drop 7% in 2021 from a year earlier, according to Evercore ISI, even though crude prices have surged by more than a third this year to trade above $65 a barrel. That’s after U.S. oilfield service workers lost an estimated $8.7 billion in annual wages to Covid-19, according to the Energy Workforce & Technology Council trade group.
“I am just waiting on better offers at the moment,” said Tremayne Tryels, who has worked in the Permian since oil prices were $100 a barrel in 2014. Though Tryels has held jobs ranging from roustabout — an all-purpose oilfield maintenance worker — to chemical specialist, “most of the salary offers for jobs are way too low for someone that has the experience level I have.”
While oilfield pay is growing at about 3% month-over-month, the median salary for a roustabout remains roughly 10% below pre-Covid levels, according to energy data and consulting firm Enverus.
Canadian rig contractor Precision Drilling Corp. estimates it managed to recruit roughly half of the 1,000 or so former workers on its call-back list, a drop from previous recoveries when it could rehire as many as two-thirds.
“They found jobs that have a more stable lifestyle,” said Kevin Neveu, Precision’s chief executive officer. “I really can’t recall a period where it was this tricky and this challenging to attract people to the industry.”
Chris Wright, CEO of Liberty Oilfield Services Inc., has encountered similar hiring challenges. America’s second-biggest provider of frack work has amassed a larger army of recruiters to fill open posts.
“We laid off about a thousand people last year in April,” he said. “We’ve hired back maybe two-thirds of those people. And I would say the other third have left the industry.”
Russian Oil Giant Rosneft Seeks Approval To Export Natural Gas
Tsvetana Paraskova, OilPrice.Com, August 30, 2021
State-controlled Rosneft, the largest oil producer in Russia, has asked Russian President Vladimir Putin to be allowed to export natural gas with giant Gazprom acting as an export agent, Russian newspaper Kommersant reports, citing a letter which Rosneft’s boss has sent to Putin.
Gazprom is the sole exporter of natural gas in Russia.
Rosneft’s chief executive office Igor Sechin wrote a letter to Putin dated August 13, asking the Russian oil producer to be allowed to export 10 billion cubic meters of gas to Europe per year, Kommersant says.
Rosneft proposes to sign an agreement with Gazprom, in which the gas monopoly will act as the export agent for the gas Rosneft plans to ship to Europe, according to Sechin’s letter seen by Kommersant.
Such an agreement would not affect Gazprom’s monopoly in Russian exports, Sechin notes in the letter. Rosneft’s key argument for being allowed to export natural gas is that increased exports will raise the budget revenues for Russia at a time when gas prices in Europe are hitting records due to high demand and insufficient supply, including from Gazprom.
Additional revenues could bring Russia as much as US$502 million (37 billion Russian rubles) annually, Sechin’s letter says, as per Kommersant.
Rosneft did not indicate in the letter which pipeline route the company would use if it was allowed to export gas. However, gas exports from Rosneft could help lift the EU restrictions on Nord Stream 1 and Nord Stream 2 pipelines, according to the letter.
Back in 2017, Rosneft and its 20 percent shareholder BP agreed to cooperate in the gas business, including with delivering gas to Europe.
Meanwhile, a German court ruled last week that the Nord Stream 2 gas pipeline from Russia to Germany would have to obey European Union regulations that separate owners of the pipelines from suppliers of gas, dealing a blow to Russian gas giant Gazprom who had sought to have EU rules waived for the controversial pipeline.
Tesla needs to perform delicate balancing act when it comes to lithium mining – expert
Valentina Ruiz Leotaud, MINING.COM, August 29, 2021
Tesla’s promise to slash battery costs by 50% has led the carmaker to dabble into a whole new field of making its own battery cells and, therefore, looking into manufacturing cathodes and extracting associated raw materials.
But the risks linked to this new line of work mean that Tesla has to perform a delicate balancing act where it tends the increasing demand for electric vehicles and the fact that activists, car buyers, and investors want every step of the process of making an EV to be respectful towards the environment and affected communities.
“Tesla will need to demonstrate that its new approach to lithium mining does in fact have a lower environmental impact than other methods. Transparency — providing plenty of information in a timely and accurate way — will be critical to winning support,” Robin Bolton, executive head of sustainability at IsoMetrix, told MINING.COM.
After securing access to 10,000 acres of lithium-rich clay deposits in Nevada a year ago, Elon Musk’s company filed this year a new patent for the “selective extraction of lithium from clay minerals.”
The patent states that extracting lithium from ore using sodium chloride is an environmentally friendlier way to obtain the metal, compared to currently used techniques such as acid leaching. According to Tesla, it also allows for higher recoveries.
In parallel to these developments, the company signed a five-year raw materials pact with Piedmont Lithium (ASX: PLL), which should start supplying spodumene concentrate sometime between July 2022 and July 2023 from a North Carolina lithium mine and processing facilities under development. Tesla is to transform the chemical into lithium hydroxide – a key building block for EV batteries – at a plant it is building in Texas.
Manage, educate, get buy-in
But all these mining-related developments mean that Tesla needs to manage, educate, and get buy-in from all the stakeholders while broadening the scope of what is considered efficient and environmentally friendly in mining by looking at its entire supply chain.
For Robin Bolton, such a global yet detailed view at each stage of its production process is particularly important taking into account that one mining operation in Nevada – Lithium America’s Thacker Pass project – is already experiencing opposition due to environmental concerns.
“While this is a separate mining operation with a different technology than Tesla is talking about using, it’s important for Tesla to recognize that it faces the same risks,” Bolton said. “All mining operations should take the appropriate measures to ensure transparency from the start and engage communities and stakeholders throughout the process.”
In the executive’s view, the main ESG issues for lithium mines have to do with collecting, managing, and reporting information about environmental impacts. This means that if local communities, environmental action groups, and local legislators are not persuaded that the mining operation is a responsible one, their objections can easily shut down the project.
“Other considerations include community relations: identifying local stakeholders and engaging them in conversation,” Bolton said. “Building a process for providing transparency and accountability. Creating a central management system where data about ESG issues can be stored securely, accessed, and actioned easily is very important. Being willing to listen to and engage with various stakeholder concerns and expectations will also help to build trust.”
Given that Musk is also securing access to raw materials outside the US – for example, through a deal with the Goro mine in New Caledonia -, Bolton says that it is important that Tesla adapts the details of its ESG strategy to the reality of each area where it has interests.
“Local communities have different priorities and demographics, and depending on the type of mining being done, they will be affected in different ways. It’s critical for Tesla’s approach to be tailored to the local, regional, and national conditions where each of its mines are located,” IsoMetrix’s head of sustainability said. “ESG software solutions often have seamless integrations with regulatory content databases that will highlight the relevant mining regulations in each applicable region to help companies like Tesla ensure their mines are operating in compliance with local laws.”
For Bolton, however, the best universal strategy to build confidence in any mining operation is to build a process for providing transparency and accountability for internal and external stakeholders, adhering to global international best practices.
With Alaska’s legislature and governor deadlocked, the 2021 PFD will be delayed
James Brooks, Anchorage Daily News, August 30, 2021
Two weeks into their third special session of 2021, members of the Alaska Legislature say they do not know when this year’s Permanent Fund dividend will be paid, do not know how much it will be, and don’t know whether they can come up with a formula for future payments.
The dividend is ordinarily paid in October, but that almost certainly will not happen this year.
“If the Legislature would like a traditional October distribution, we will need to know by Aug. 31,” said Genevieve Wojutsik, an employee of the Alaska Department of Revenue, speaking on behalf of the Permanent Fund Dividend division.
It’s virtually impossible for the Legislature to meet that deadline.
Earlier this year, Gov. Mike Dunleavy vetoed a dividend that passed the House and Senate, and though the governor has asked legislators to come up with a replacement, they haven’t been able to do so.
Dunleavy and some legislators even disagree about the size of the vetoed dividend. The governor’s office said at the time that it was $525, but after a subsequent legal ruling, legislative budget officials said it was $1,025.
The 2020 dividend was $992. Right now, there is zero dividend for 2021.
The Alaska House is so divided that it hasn’t held a full meeting since Aug. 20, and the Alaska Senate has been stymied by discord between rank-and-file members and the leaders of its finance committee.
While lawmakers say they are still optimistic about resolving their disagreements, there is a rising chance that this year will be the first year since 1982 without a Permanent Fund dividend.
“It’s a distinct possibility, is what I’ve been saying,” said Speaker of the House Louise Stutes, R-Kodiak.
“It is not the direction that the House majority would like to go,” she said.
How much should be spent from the Permanent Fund?
There isn’t a dividend amount right now because legislators disagree about whether they should spend extra money from the Alaska Permanent Fund.
The Permanent Fund’s investment earnings account for two-thirds of the state’s unrestricted revenue in the current fiscal year. Oil, long the state’s most important revenue source, accounts for only about a quarter, following years of low prices and falling production.
In 2018, lawmakers voted to cap the amount of money that can be spent annually from the Permanent Fund and set up a regular transfer from the fund to the state treasury.
With that transfer, oil taxes and other taxes, Alaska has a small surplus after paying for all budgeted state services. But that doesn’t account for the Permanent Fund dividend.
Members of the predominantly Democratic coalition that controls the state House have proposed spending $400 million of the surplus, plus another $330 million from a state savings account, on a dividend of about $1,100 per person.
Members of the House’s Republican minority previously proposed breaking the 2018 cap in order to pay a larger dividend, as did the governor.
The fund has gained almost 30% in value over the past 12 months and now stands at more than $82 billion.
Members of the majority and some members of the minority disagree. They say those gains must be saved and reinvested, so the state has more money to spend in the future.
Complicating the situation, Dunleavy spokesman Jeff Turner said the governor’s administration believes the House majority’s preferred savings account has been drained and is unavailable for spending.
Members of the House majority said a recent court ruling may imply otherwise, and a lawsuit could be in the offing if the disagreement continues.
In the Senate, top members of the powerful Senate Finance Committee also oppose spending additional money from the Permanent Fund.
Their position matters, because any dividend proposal must be approved by their committee before it receives a vote of the full Senate.
Sen. Bert Stedman, R-Sitka, and the co-chair of the committee, said a larger dividend requires additional revenue to pay for it, and he hasn’t seen a serious revenue proposal to date.
Future dividends also are a factor
In both the House and Senate, the dispute over this year’s amount is entangled with negotiations over a formula that could be used to set dividends in 2023 and beyond.
In May, Dunleavy proposed a new formula that would constitutionally guarantee dividend payments, if voters approve the change in the 2022 general election.
On its own, the formula creates a significant deficit, and lawmakers have been thus far unwilling to advance it. New formulae proposed by individual lawmakers also have not advanced.
An eight-member bipartisan, bicameral legislative working group concluded at the start of this month that the Legislature should work toward a formula similar to the one proposed by the governor, but only under certain conditions.
Sen. Shelley Hughes, R-Palmer, and a member of the working group, said she sees “five components” to the fix: a 2021 dividend amount, some kind of new revenue measures, a change to the state’s existing spending cap, some kind of constitutional amendment on the dividend, and a change to the existing formula in state law.
Senate Minority Leader Tom Begich, D-Anchorage, and Rep. Geran Tarr, D-Anchorage, are planning to introduce new tax legislation with an eye toward satisfying one of the five components.
Begich is proposing to eliminate a corporate income tax exemption that applies to large companies like Hilcorp, he said.
Tarr is planning to propose a statewide sales tax and the reduction of an oil tax credit, which would have the effect of increasing oil taxes.
But because the House has lacked a quorum for more than a week, she hasn’t been able to formally introduce her legislation.
Stedman noted that Democratic-proposed legislation could encounter resistance from Republican lawmakers, but other lawmakers said that if there is true interest in progress on the dividend, that resistance will be minimal.
Legislators on both sides of the political aisle said it would be helpful if Dunleavy introduced a tax bill of his own. Right now, said Hughes, Republicans are at political risk if they support a tax bill but it later fails to pass.
In addition, said fellow working group member Sen. Jesse Kiehl, D-Juneau, it would be a sign that the governor may not veto a particular piece of legislation.
“It builds trust,” he said.
There’s no guarantee that Dunleavy’s support would help matters. Lawmakers previously said that if the governor introduced a bill allowing consideration of a 2021 dividend, it would allow progress on future payments.
So far, that hasn’t happened.
With the special session almost halfway over, lawmakers generally agree that any new formula will not be completed soon.
Some suggest the work can be finished next year when the Legislature convenes in January for its regular session. Others say a fourth special session, sometime later this fall, could be necessary.
The state of renewables in the first half of 2021, by the numbers (note: 1 megawatt of capacity ≈ electricity consumed by 400 to 900 homes in a year, depending on location):
- 9,915 megawatts of capacity came online in the first half of this year — a 17% increase over the first half of 2020;
- On a quarterly basis, new solar installations in April-June were 2,226 megawatts of capacity, a 73% jump over the first quarter;
- Q2 wind capacity installations were 2,824 megawatts, similar to Q1 and above the same period last year;
- New battery storage capacity is growing even faster, albeit from a much smaller base, with Q2 installations of 570 megawatts compared to roughly 100 in Q1;
- Total storage added this year so far almost matches 2020’s full-year.
– A potential market within the circular economy? About 13 million tons of EV lithium-ion batteries will go offline between 2021 and 2030; in the same time frame, about 10.35 million tons of lithium, cobalt, nickel, and manganese will be mined to manufacture new lithium-ion batteries.