NEWS OF THE DAY:
Saudi Arabia’s climate plan relies on more oil
Sara Schonhardt, CLIMATEWIRE, November 8, 2021
Saudi Arabia says it wants to join the global fight against climate change — by drilling for more oil.
Rather than cut back on the production of fossil fuels that contribute the most to global warming, the Gulf kingdom wants to tap more of them to bring down emissions.
The idea is to help Saudi Arabia raise money for emission reduction technologies such as carbon capture, which would allow the oil-dependent country to keep running its rigs. Key to this strategy is Saudi Arabia’s continued export of oil around the world — a proven moneymaker that wouldn’t affect Saudi Arabia’s recent pledge to reduce its own emissions to net zero by 2060.
For under international standards, these oil exports would count as emissions for the importing country — and not Saudi Arabia.
The plan has been greeted with skepticism by international activists and analysts, who say the world needs to reduce its dependence on fossil fuels as fast as possible in order to avoid the increasingly severe storms, floods and heat that global warming brings.
“It’s a strange dichotomy,” said Jim Krane, an energy studies fellow at Rice University’s Baker Institute for Public Policy. “Its success in reaching this goal hinges on the rest of the world continuing to use oil.”
But Saudi Arabia is limited in its options.
Oil revenues pulled in by national oil company Saudi Arabian Oil Co. (Aramco) contribute to around 60 percent of the government budget.
And so Saudi Arabia is put in a tough spot when international officials gather to talk about global warming, as they’re doing now in Glasgow, Scotland, for the 2021 United Nations Climate Change Conference. Much of the discussion has centered on creating a pathway toward the end of fossil fuels.
“I think they realize they can’t rely on oil forever. At some point it will run out,” said Ellen Wald, a senior fellow with the Atlantic Council Global Energy Center and author of “Saudi, Inc.” “But they definitely have the long view.”
Saudi Arabia’s new position on climate change represents a shift — at least rhetorically — from its past position on the issue.
Saudi Arabia has long lobbied to change or delete language that would go against its national interests. And it has sought to delay decisions at past U.N. climate conferences in its favor (Climatewire, Oct. 23, 2018).
A recent leak of documents obtained by Unearthed, a division of Greenpeace, showed that Saudi Arabia and other climate-polluting countries sought to water down language in an upcoming U.N. climate report that calls for a rapid phaseout of fossil fuels.
But the danger of global warming is becoming increasingly hard to refute — even for a petrostate such as Saudi Arabia.
More than a third of Saudi Arabia’s land area is desert, and rising temperatures will threaten water supplies, will turn heat waves deadly, and could make large parts of the country and the Gulf region uninhabitable.
A new carbon cycle
Saudi Arabia’s oil dependence runs deep.
Not only does oil revenue fund more than half the government’s budget, but Saudi Arabia argues that it needs that money to fund its energy transition and support research and development of new climate-friendly technologies.
In addition to exporting oil, it continues to burn it to generate power.
The country’s latest climate plan aims at “reducing, avoiding and removing” 278 million tons of greenhouse gas emissions annually by 2030 — more than twice its previous target. To help get there, it plans to increase renewable energy to 50 percent of the electricity mix by 2030, up from less than 1 percent currently.
Much of its plan also hinges on a proposed circular carbon economy, where hydrocarbons would be either recycled, removed or reused. Achieving that goal would require a major scaling-up of carbon capture capacity.
The total amount of carbon dioxide that has been removed from the air by current carbon capture projects is in the order of tens of thousands of tons, compared with the hundreds of millions of tons produced by these petrostates, said Zeke Hausfather, director of climate and energy at the Breakthrough Institute.
And capturing that carbon and removing it is very, very expensive — around $600 a ton.
“You could have a state still producing oil and offsetting that by carbon removal in a net-zero world but calling that state a petrostate would be a stretch, simply because there’s probably not going to be enough demand for oil globally in 2050 — or certainly in 2070 — to make it the centerpiece of a country’s economy,” Hausfather said.
Saudi Arabia is not the only country pinning its climate targets on such technology. The White House’s long-term climate strategy also leans heavily on carbon removal (Climatewire, Nov. 2).
Officials in Saudi Arabia are working to diversify some of its economy, such as building up tourism and financial services. It also could capitalize on growing demand for carbon offsets if it can scale up its carbon capture capacity quickly. But it’s still not giving up on oil.
“In fact, its implementation of its climate pledges are conditional on its ability to continue selling fossil fuels to finance its transformation,” Karim Elgendy, a fellow at Chatham House, wrote in an email.
It’s a pledge he thinks should be taken seriously.
“Saudi Arabia and Aramco’s view is that even if everyone switches over to EVs — which they don’t think is likely — the world will still need oil and oil products because all of these things that you need to, say, make a really light airplane that’s going to fly using a battery, need plastics. And plastics come from petrochemicals,” said Wald, the Atlantic Council fellow.
Even if oil demand in the developed world may be tapering off, Wald added, Aramco sees huge markets for its products in China, in India and across Africa.
Saudi Crown Prince Mohammed bin Salman did not attend the leaders’ summit at the start of last week’s talks in Glasgow. But he did host a green forum the week prior in Riyadh that U.S. climate envoy John Kerry attended.
It was there that he announced the 2060 net-zero goal and committed $186 billion in public investment toward achieving that target.
Aramco has set an even more ambitious net-zero target of 2050, but that goal doesn’t include indirect emissions, such as the burning of the fuel it sells.
Rising demand and undersupply have sent oil prices surging this year. Aramco is planning to increase oil production from 12 million to 13 million barrels a day in the coming years to take advantage of a widening gap in the market as other major oil companies plan to ease production.
Yet Climate Action Tracker ranks Saudi Arabia’s latest targets as highly insufficient, saying its current diversification plans “do not adequately address scenarios in which global oil consumption significantly declines in the coming decades.”
While governments will rely on some level of carbon removal to achieve net zero, it needs to be as limited as possible, said Claire Fyson, co-head of climate policy at Climate Analytics, which helps produce the tracker.
At the opening of climate talks last week, Mia Mottley, prime minister of Barbados, said that relying on undeveloped technology was reckless.
But Khalid Abuleif, head of the Saudi negotiating team and a former oil executive, said the kingdom’s net-zero target had been well received.
“It balances many things and it’s much more realistic on the timeline,” he said, according to a report by Arab News. “It takes fully into account that Saudi Arabia is going through an accelerated economic diversification program that needs to be completed.
OIL:
U.S. infrastructure bill ‘screams bullish for oil’ as crude futures rise
William Watts, Myra P. Saefong, Market Watch, November 8, 2021
Oil futures rose Monday, bouncing back from last week’s losses, as investors cheered passage of a $1 trillion U.S. infrastructure spending package and Saudi Arabia lifted prices for crude exports.
West Texas Intermediate crude for December delivery CL00, +0.60% CLZ21, +0.60% rose 91 cents, or 1.1%, to $82.18 a barrel on the New York Mercantile Exchange. The U.S. benchmark pulled back 2.8% last week. January Brent crude BRN00, +0.60% BRNF22, +0.60%, the global benchmark, gained 80 cents, or 1%, to trade at $83.54 a barrel on ICE Futures Europe after falling 1.2% last week.
“When the market saw oil prices fall after last week’s OPEC+ meeting most observers knew this was an exaggerated reaction and the expectation was that prices would quickly jump back as there was no surprise to justify the drop,” said Louise Dickson, senior oil markets analyst at Rystad, in a note.
Global oil-market conditions became more bullish following last week’s OPEC+ meeting, which saw the producers defy pressure to increase the size of planned production increases, she said. And the $1 trillion infrastructure bill passed by Congress late Friday will undoubtedly boost growth in oil demand, the analyst said.
“This U.S. infrastructure bill screams bullish for oil,” Dickson wrote.
Meanwhile, a decision by Saudi state-run oil company Saudi Aramco to boost crude prices on exports added to the bullish tone, analysts said.
Aramco late Friday more than doubled the premium that Asian consumers would pay beginning in December next month for its flagship Arab Light crude to $2.70 a barrel more than the average of Platts Dubai and DME Oman prices. Aramco also raised prices for its sales of light crude to the U.S. to $1.75 a barrel above the Argus Sour Crude Index, which reflects the U.S. Gulf Coast medium-sour crude and cut discounts it offers Northern European and Mediterranean consumers to $0.30 a barrel less than ICE Brent prices.
Read more: Saudi Aramco raises official selling prices amid tightness
“The price increments are much higher than market expectations and give a bullish signal on supply tightness,” said Warren Patterson, head of commodities strategy at ING, in a note. “OPEC’s steady approach on the output increments at 400,000 barrels a day per month and stronger oil demand in global markets appears to have contributed to the increase in prices.”
Oil traders also assessed the latest data on China’s crude oil imports, which slumped below the 9 million barrel-per-day mark to a 39-month low of 8.94 million barrels per day in in October, according to a report from S&P Global Platts Monday, citing data from the General Administration of Customs. The decline came as both state-owned and private refiners slowed down buying in the face of high oil prices, the report said.
At the same time, analysts are watching for clues as to whether the Biden administration, whose pleas for OPEC+ to accelerate production increases were ignored last week, will tap the U.S. Strategic Petroleum Reserve. Analysts said a decision on such a move would likely come after the Tuesday release of the Energy Information Administration’s latest Short-Term Energy Outlook.
GAS:
As LNG prices surge, North American project development languishes
Scott DiSavino, Reuters, November 7, 2021
Demand for liquefied natural gas (LNG) has never been higher, but developers in North America are headed into the final weeks of the year without having approved one new project yet.
Global natural gas prices are near record highs, as utilities in Europe and Asia compete for whatever LNG cargoes they can get before winter. LNG demand worldwide has increased every year since 2012 and soared by 40% in the last five as utilities substitute gas for dirtier-burning coal, but supply has not kept up with demand – and won’t for several years.
The market’s growth spurred rapid development of liquefaction terminals in big exporters including the United States, slated to become the largest LNG producer by capacity next year.
However, spending on new projects halted in 2020, as low prices from coronavirus-induced demand destruction caused buyers to back away from signing long-term supply contracts.
At the start of 2020 and again in 2021, roughly a dozen firms signaled plans for final investment decisions (FID) on proposed projects. But just one, Sempra Energy’s (SRE.N) Costa Azul in Mexico, started construction in 2020, while numerous others have been pushed into 2022.
“We’re setting up for a structural shortage of LNG capacity,” said Reid Morrison, global energy advisory leader at PwC in Houston. “There is reticence to taking a long-term position in natural gas given the net zero commitments that different governments are making.”
TIME LAG
Several North American projects could go forward in 2022, mostly in Texas and Louisiana, when the International Gas Union estimates world demand will reach about 375 million tonnes per annum (MTPA) from 356.1 MTPA in 2020.
But those projects will do little to meet growing demand in the short term since it takes about three to five years for a new project to produce LNG.
“This tight market could extend well through 2025,” said Anatol Feygin, chief commercial officer at U.S. LNG producer Cheniere Energy Inc (LNG.A). The market is “calling for new capacity to be added,” he said.
There are two projects that could get the go-ahead later this year: Pacific Energy Corp Ltd’s Woodfibre in British Columbia and Venture Global LNG’s Plaquemines in Louisiana.
The U.S. government granted Venture Global permission to start early site work on Plaquemines, and units of China Petroleum & Chemical Corp (600028.SS), or Sinopec, agreed to long-term LNG purchase agreements with the company. read more
Plaquemines would produce up to 20 MTPA of LNG, or 2.6 billion cubic feet per day (bcfd) of natural gas. One billion cubic feet is enough for about five million homes for a day. It is expected to be ready to produce its first LNG as soon as 2024.
Venture Global declined to comment. On its website, the company said it planned to make a decision on Plaquemines in the fourth quarter of 2021.
Venture Global has about 70 MTPA of LNG export capacity under construction or in development in Louisiana, including the 10-MTPA Calcasieu in Louisiana, which will likely start producing this year.
Pacific Oil and Gas’ Woodfibre would produce about 2.1 MTPA of LNG, but not until 2025, analysts estimate. The company has not made a final decision on construction, even though it recently agreed to sell 1.5 MTPA of LNG to British oil major BP PLC (BP.L) over 15 years. read more
“We are continuing to finalize our construction contract and are optimistic to be moving the project forward this year,” Woodfibre LNG spokesperson Rebecca Scott told Reuters.
MINING:
Tower Hill posts new Livengood Mine PFS
Shane Lasley, North of 60 Mining News, November 5, 2021
A 65,000-metric-ton-per-day operation at the Livengood mine project in Alaska would produce 6.4 million ounces of gold over a 21-year span, or an average of around 304,750 oz per year, according to an updated prefeasibility study released by International Tower Hill Mines Ltd. on Nov. 4.
Lying alongside a paved highway about 70 miles north of Fairbanks, the Money Knob deposit at Livengood hosts 704.5 million metric tons of measured and indicated resources averaging 0.4 grams per metric ton (13.62 million oz) gold, according to a new calculation completed in August.
“International Tower Hill’s estimated 13.6 million ounces, together with our favorable jurisdiction and proximity to infrastructure, offers our investors great leverage to the gold price,” said International Tower Hill Mines CEO Karl Hanneman.
The prefeasibility study elevates 430.1 million metric tons of the Livengood resources averaging 0.65 g/t (9 million oz) gold to proven and probable reserves.
This new economic and engineering study, which supersedes a PFS completed in 2017, integrates new interpretations based on an expanded geological database, improved geological modeling, new resource estimation methodology, an optimized mine plan, and extensive metallurgical work carried out over the past four years.
Tower Hill says this work, along with new engineering estimates and updated cost inputs, significantly de-risk the Livengood project.
“This study is the culmination of years of work and greatly enhances our understanding of the deposit,” said Hanneman. “We have now thoroughly evaluated, optimized, and de-risked all major elements of the project and have an excellent foundation on which to build shareholder value.”
At a base case gold price of US$1,680 per oz, the mine detailed in the 2021 PFS generates an after-tax net present value (5% discount) of $45 million and an internal rate of return of 5.3%. Under this scenario, the operation would pay back the US$1.93 billion of initial capital expenditures in 10.2 years.
At US$2,000 per oz gold, the NPV jumps to $975 million, IRR climbs to 11.2%, and the payback drops to 6.3 years. And at US$2,500 per oz gold, the NPV hits US$2.35 billion, the IRR reaches 18.5%, and the payback is only 3.9 years.
“This PFS confirms that the Livengood Gold Project is one of the largest, highly leveraged gold projects in North America,” the Tower Hill Mines CEO added.
POLITICS:
Secretary Granholm: Alaska Can Be Your “Exhibit A” for Green Energy Components
Rick Whitbeck, Power the Future Blog, November 8, 2021
US Energy Secretary Jennifer Granholm recently spoke at The Auto Innovators Summit, where she – among other topics – opined on the need for the US to increase its domestic supply chain capabilities for electric vehicle (EV) manufacturing, stating:
You know, mining has a lot of opposition to it among the environmental community because some companies have not done so sustainably, right? But here’s the kicker, that in America we have got the means to sustainably extract critical minerals. And we’ve got an abundant group of minerals beneath us. And to do so in a way that’s in partnership with the communities that will surround a potential mine…And if we do this right, then our critical minerals can be used by us, but also we’ll be at the top of the list for export. Because other countries are looking to obtain responsibly mined minerals as well.
So if we’re going to all rely on the Democratic Republic of Congo, which has, you know, abuses in child labor practices from mining for cobalt, well, shame on us—why aren’t we finding a way to be able to do this responsibly? So, you know, I’m very bullish on us being able to demonstrate how it can be done…It would be crazy to responsibly extract these minerals and then have to send them to China for processing. We should be responsibly refining, responsibly doing each step in the supply chain, which we can.
If Secretary Granholm is serious about domestic mining – and there is little from the Biden Administration’s actions in the past ten months to show that this is any more than posturing – then she should be visiting, championing, and advocating for any of Alaska’s many mining opportunities.
In case she reads this, let me highlight just some of the projects:
- Pebble Mine, with its gold, copper, rhenium and molybdenum, among others;
- Graphite Creek, with its world-class, high-quality graphite;
- The multiple projects in the Ambler Mining District, containing copper, zinc, lead and cobalt;
- Bokan Mountain’s multiple rare earth deposits, along with UCore’s Strategic Minerals Complex processing facility near Ketchikan.
Each of the above can help the US build and fortify its domestic supplies of ‘green’ energy components that we currently import from Communist China and elsewhere. The ability to add jobs, create energy solutions from domestic sources and decrease supply chain threats from unfriendly foreign entities are all things that should be paramount to the Biden Administration. Are they? We will see if Secretary Granholm and the rest of the federal ‘leadership’ is ready to step up and build America or continue with its lip service.
CLIMATE CHANGE:
What the $1.2 trillion infrastructure bill means for climate change
Ben Geman, Axios, November 8, 2021
Is the newly passed infrastructure bill just small steps on climate or a BFD? The answer to both questions could be yes.
Catch up fast: The House voted late Friday to send the $1.2 trillion bill to President Biden.
- It has massive investments in roads, bridges, transit and other “hard infrastructure” provisions, including billions of dollars for EV charging.
- It includes $47 billion in climate resilience measures, and, per the White House, $65 billion in clean energy and grid-related investments.
The big picture: The bill provides just “nominal” emissions cuts between now and 2030 compared to current policy, according to REPEAT Project, a group led by Princeton energy expert Jesse Jenkins, in partnership with the firm Evolved Energy Research and Dartmouth’s Erin Mayfield.
- They estimate energy and industrial CO2 emissions 30% below 2005 levels in 2030 — way off President Biden’s pledge of a 50% cut in U.S. greenhouse gas emissions by 2030.
Yes, but: “The bill contains very important innovation policy investments whose impacts are difficult to model, but enable deeper cuts in the 2030s and 2040s by helping drive improvement in key technologies like clean hydrogen, carbon capture, advanced nuclear and geothermal, and long duration storage,” Jenkins told Axios via email.
- He also flagged major investments in transmission, and CO2 networks and storage. Third Way’s Ryan Fitzpatrick has a rundown.
What we’re watching: All eyes are now on bigger spending and tax legislation Democrats hope to move on a party-line vote soon.
- It’s stuffed with provisions to drive the nearer-term deployment of more mature clean energy and emissions-cutting tech — enough, analysts say, to enable steep emissions cuts this decade.