Today’s Key Takeaways: Exxon considering big move on carbon capture. Biden re-evaluating Saudi Arabia relations. LNG freight rates jump to all time high. First U.S. cobalt mine opens. White house releases Arctic strategy document – falls short on developing natural resources.
NEWS OF THE DAY:
Denbury could become ExxonMobil’s carbon capture key
Dan Primack, Axios, October 11, 2022
ExxonMobil is considering a takeover offer for Denbury, a Plano, Texas-based oil and gas company with nearly a $5 billion market cap, per Bloomberg.
Why it matters: Denbury owns the country’s largest carbon dioxide pipeline network, and thus could be a crown jewel for ExxonMobil’s grand carbon capture plans.
- More from Bloomberg: “If the takeover happens, it would also be the biggest carbon-management investment since the Inflation Reduction Act passed in August, providing large tax incentives for burying carbon dioxide.”
OIL:
Biden Is Re-Evaluating Relations With Saudi Arabia Following The OPEC+ Cut
Michael Kern, OilPrice.Com, October 11, 2022
U.S. President Joe Biden is re-evaluating the United States’ relationship with OPEC’s de facto leader Saudi Arabia after the Kingdom led the OPEC+ group to announce a major oil production cut last week, John Kirby, the coordinator for strategic communications at the U.S. National Security Council, said on Tuesday.
In an interview with CNN quoted by Reuters, Kirby said that President Biden was prepared to work with Congress on the future of U.S. relations with Saudi Arabia.
The comments from Kirby come hours after U.S. Democratic Senator Bob Menendez, chairman of the U.S. Senate Foreign Relations Committee, blasted Saudi Arabia for announcing the oil production cut and called for an “immediate” freezing of U.S. cooperation with the Kingdom, including arms sales.
Commenting on the deadly Russian attacks on cities across Ukraine on Monday, Senator Menendez said, referring to Saudi Arabia, “There simply is no room to play both sides of this conflict – either you support the rest of the free world in trying to stop a war criminal from violently wiping off an entire country off of the map, or you support him.”
“The Kingdom of Saudi Arabia chose the latter in a terrible decision driven by economic self-interest,” Senator Menendez added.
Last week, OPEC+ announced the biggest cut to its collective target since 2020. Despite insistence from Russia and all of OPEC+ that the production cut is based on technical market assessments and is aimed at “stability,” many analysts, as well as the White House, saw the move as a political one.
The United States is considering “response options” in its relations with OPEC+ members and its de facto leader Saudi Arabia, U.S. Secretary of State Antony Blinken said last week after the OPEC+ group announced the production cut.
“As to the relationship going forward, we’re reviewing a number of response options. We’re consulting closely with Congress,” Secretary Blinken said last week.
GAS:
Europe Rushing to Secure Gas Sparks Record High LNG Ship Rates
Stephen Stapczynski, Bloomberg News, October 11, 2022
Liquefied natural gas vessel rates hit a record high, with Europe’s dash to lock-in winter energy supplies sparking a scramble for ships and raising fears some buyers may find themselves without means to transport the fuel.
The cost to charter an LNG ship in the Atlantic jumped to $397,500 per day on Tuesday, surpassing an all-time high set in the Pacific last year, according to Spark Commodities, which assesses prices from shipbrokers.
Those rates are poised to keep ballooning as traders and utilities move to hoard more gas. This presents a new risk to buyers this winter: those without ships will have to pay sky-high rates to ferry additional fuel, or worse, find they can’t book any ship at all.
There are few vessels available through the rest of the year, and free ones are being offered at astronomical rates, according to LNG traders. Energy majors, which typically lease their vessels to other buyers, are refusing to do so out of fear they could be caught without a ship as winter approaches, the traders said.
Europe’s gas storage sites are quickly filling up in preparation for a winter without Russian fuel. With inventories nearing max capacity, utilities and traders are increasingly storing LNG in vessels at sea, further tying up ships that would normally ferry the fuel between ports.
Ships are in such short supply that LNG exporters in Asia are selling gas directly from loading ports rather than offering to ship the fuel. Those that don’t have vessels are being forced to find buyers that have a way to transport the cargo, traders said.
MINING:
Cobalt mine officially opening Friday in Salmon-Challis National Forest
Abby Davis, KTVB, October 5, 2022
This is the only mine in the U.S. primarily producing cobalt, which is a key material used to make electric vehicle batteries.
The Gem State is home to the Idaho Cobalt Belt, which is one of the biggest cobalt deposits in the U.S.
Cobalt is a metal often used to make batteries for electric vehicles. Since demand for EVs are rapidly growing, so is demand for cobalt.
“Having a source of cobalt here in the U.S., if it’s able to be mined responsibly, you know, is an important thing and not something that should be taken lightly,” Idaho Conservation League senior conservation associate, Josh Johnson said.
The cobalt deposit in Idaho drew the attention of Australian-based mining company, Jervois. Their project, Idaho Cobalt Operations, officially opens on Friday.
Mine manager Matt Lengerich said they have already been mining for over a year, but this ceremony is a chance for the company to recognize how far they have come.
So far, Lengerich said they have 8,000 feet of underground tunnel created. The mine will run for seven years, although that number might increase depending on the amount of cobalt found.
Lengerich said they are producing something called cobalt concentrate.
“It comes out in a form that looks about like sand,” Lengerich said. “That cobalt comes out at about 2,000 tons per year. So, over the course of seven years, we’ll produce a little more than 16,000 tons.”
16,000 tons of cobalt means a lot of batteries. He said Idaho Cobalt Operations has the ability to supply roughly 400,000 electric vehicles a year, which adds up to about 2.8 million during the life of the mine.
About 70% of the world’s cobalt comes from the Democratic Republic of Congo, Johnson said. From there, it is refined in China and later used for batteries.
Historically, he said miners in the Democratic Republic of Congo work in poor conditions. There are even documented instances of child labor.
Something Johnson said simply cannot happen in the U.S.
“If us as Americans want to be able to drive electric cars and feel good about our environmental impact, we need to be eyes wide open about where the raw materials for electric vehicles come from,” Johnson said.
The best way to feel good – mining locally, Johnson said. Not just mining locally but making sure mining companies are held to high ethical and environmental standards.
This cobalt mine in Idaho is located near the inactive Blackbird Mine Site. The site was closed in 1982, after severely contaminating water nearby with heavy metals.
“It got to the point where Panther Creek, which is a main tributary to the Salmon River in this area, was basically devoid of aquatic life,” Johnson said. “Fish couldn’t survive there, aquatic organisms, like little bugs and things couldn’t survive there.”
Johnson said the waterways are now recovered and are home once again to fish, especially salmon, but repeating the past, is not something the conservation league is interested in.
Responsible mining plays a big part in preventing contamination of waterways and general pollution, Johnson said.
Lengerich said they are committed to keeping their environmental impact small.
“We have to recognize that that which can’t be grown, we have to find a way to mine sustainably,” Lengerich said.
Jervois has rigorous monitoring programs in place, Lengerich said. So, if something were to happen, they could get on top of the issue fast.
In case the mining operation contaminates any water nearby – the company built a water treatment plant. Lengerich said they do not plan on using it; but it is there just in case.
To date, Jervois has given $300,000 to the Upper Salmon Conservation Action Program, which is fund jointly managed with the Idaho Conservation League, Johnson said.
The fund goes toward watershed restoration projects. Johnson said the mining company will add $150,000 each year to the program.
Since mining is already underway, Lengerich said the next step is bringing the mineralized rock that contains cobalt out from underground. Eventually, cobalt concentrate will be sent to a refinery in Brazil – there is no cobalt refinery in the U.S.
Lengerich said they expect to start shipping cobalt from the refinery later this year.
POLITICS:
White House releases new Arctic strategy document
Jack Barnwell, Fairbanks Daily News Miner, October 11, 2022
The White House released an Arctic strategy Friday that places a strong emphasis on security, something that sets it apart from a 2013 predecessor established under former President Barack Obama.
The 15-page document summarizes goals, objectives and needs under four pillars, with security being at the top.
“This strategy … addresses the climate crisis with greater urgency and directs new investments in sustainable development to improve livelihoods for Arctic residents while conserving the environment,” the document’s executive summary reads. “It also acknowledges increasing strategic competition in the Arctic since 2013, exacerbated by Russia’s unprovoked war in Ukraine, and seeks to position the United States to both effectively compete and manage tensions.”
The other pillars include climate change, sustainable economic development and international governance and cooperation.
The document follows a number of policies the White House has executed in recent months, including the creation of a new Arctic ambassador to work with similar allied Arctic nations in Europe and North America.
National security experts have cited the need to step up its goals of establishing more presence in the Arctic as rival nations including Russia and China race to stake their own claims.
The updated strategy differs from its 2013 predecessor in that it specifically lists Russia as a security threat. This 2022 version heavily references the nation and its ongoing war with Ukraine.
“Russia’s unprovoked war of aggression against Ukraine has rendered government-to-government cooperation with Russia in the Arctic virtually impossible,” the document states in its introduction. “Over the coming decade, it may be possible to resume cooperation under certain conditions. Russia’s continued aggression makes most cooperation unlikely for the foreseeable future.”
The strategy also places a heavy emphasis on working with Alaska Native organizations, communities, and tribes to achieve its overall goal. To help Alaska Natives combat climate change affecting Native villages, the administration will make it easier to access federal resources for resiliency.
Some Alaskan communities, the strategy states, are being forced to relocate as a result of climate change, on top of facing adverse impacts such as dwindling food security and increased vulnerabilities to drought and wildfires.
“We will support communities as they face these challenges, providing data and financial and technical assistance to enable community adaptation and resilience planning,” the document states. “We will collaborate with Alaska Native communities to determine preferred solutions for these and other climate challenges, and we will coordinate across federal, state and local agencies to define dedicated roles and responsibilities to deliver whole-of-government support.”
With economic development, the White House intends to focus on “much-needed infrastructure” to address “development, food security, stable housing, climate resilience and national defense needs as driven by requirements.”
Examples include the proposed deep-draft port in Nome, telecommunications, and education, as well as investments in smaller ports and airports.
When it comes to boosting national security, “the United States will enhance and exercise both our military and civilian capabilities in the Arctic as required to deter threats and to anticipate, prevent, and respond to both natural and human-made incidents.”
Boosting national security has a number of facets, from continued support of its treaties with allied nations, improving its understanding of the Arctic’s operating environment and expanding its fleet of Coast Guard ice cutters — something it lags far behind in comparison to Russia.
The U.S. only has two ice cutters, the heavy Polar Star, and the medium-class Healy. The Polar Star is an aging vessel at 40 years, and its 10 years past its operational lifespan. A third ice cutter, the Polar Sea, was taken out of commission in 2010 after five of its six diesel engines failed.
The Department of Defense noted there are six ice-breakers authorized for construction.
The U.S. military has already started pivoting toward national defense, including the standing up of two F-35 squadrons at Eielson Air Force Base and refocusing the Army’s focus on Arctic-based combat and strategy.
Both of Alaska’s senators said the strategy has its highs and lows.
Murkowksi said the document has many positive elements, “many of which implement my priorities to drive greater federal attention and resources to the U.S. Arctic.”
“I’m pleased with the administration’s emphasis on security, infrastructure, climate adaptation and resilience, greater consultation with the State of Alaska and Alaska Native Tribes and Corporations, and its elevation of Arctic diplomacy through the creation of the Arctic Ambassador position — all of which I have called for,” Murkowski said in a prepared statement.
Where it falls short, she added, is the lack of detail in developing Alaska’s natural resources, including critical elements. It also does not mention oil and gas development to offset Russia.
“The strategy suggests that critical minerals can be produced in the Arctic, but the administration’s obstruction of the Ambler Road project makes it impossible to take that seriously,” Murkowksi said. The strategy even invokes the 30×30 initiative, suggesting it is ‘consistent’ with further conservation in the Arctic, in blatant disregard of [Alaska National Interest Lands Conservation Act] and its ‘no more’ wilderness clauses.”
Sullivan said he appreciates the administration’s “full-throated support for increasing America’s operational capabilities, infrastructure and Coast Guard and naval vessels in the Arctic. Like Murkoswki, he added it falls short in a lot of other areas, such as resource development.
The strategy, he said, sends a troubling message “that despite America’s increasing national economic and security interests in the Arctic that are being directly challenged by Russia, and increasingly challenged by China, the administration will continue to focus on shutting down responsible resource development, like oil, natural gas and critical minerals in Alaska.”
“Going forward, the administration needs to undertake a dramatic course correction on resource development opportunities in the Arctic, fully acknowledge the implications of long-term strategic competition, not only with Russia, but in particular with China, and support this security strategy with the investments necessary to defend our homeland,” Sullivan said.