Today’s Key Takeaways: Energy security” revives fortunes” of AKLNG. Expect oil market volatility this week. AK’s Graphite One Inc. considering larger advanced graphite materials supply chain. Is a spending cap the mechanism to control Alaska’s budget?
NEWS OF THE DAY:
Alaska LNG advances on energy security concerns
Petroleum Economist, January 9, 2023
The supply shock caused by Russia’s invasion of Ukraine could push the long-delayed liquefaction project across the finish line
The focus on boosting energy security following Russia’s invasion of Ukraine last February has revived the fortunes of the stalled Alaska LNG development. The liquefaction project—also known as 8-Star—is being developed by state-owned Alaska Gasline Development Corp (AGDC), after a consortium made up of North Slope producers ConocoPhillips, ExxonMobil, and BP (which has since sold its Alaskan business to independent Hilcorp Energy) dropped the scheme in 2016, claiming poor economics.
AGDC is now confident the project will achieve FID within the next few years, its president, Frank Richards, tells Petroleum Economist. “Russia’s invasion of Ukraine has led to a dramatic increase in interest from potential customers for Alaska LNG’s output in Japan and South Korea and potential investors and developers for our project,” says Richards. “This is due to heightened security of supply concerns and high spot LNG prices in major Asian markets.
In fact, Alaska LNG is not the only export project to have been given a new lease on life because of the Ukrainian conflict, according to Ian Nathan, director of gas and LNG research at consultancy Energy Intelligence.
“It is difficult to argue with the notion that now is the right time for a project developer to ensure that its venture has a compelling value proposition for likely buyers and project partners if that is needed. This environment is one of the reasons the Alaska project—along with several others that have been working to advance for quite some time—is enjoying a higher profile these days. In fact, 2022 was a banner year for foundation agreements with projects that had announced little in recent years.”
Oil Market Volatility Likely This Week
Andreas Exarheas, Rigzone, January 9, 2023
Some volatility in the oil market is likely this week, according to Barani Krishnan, a senior commodities analyst at uk.Investing.com.
That’s according to Barani Krishnan, a senior commodities analyst at uk.Investing.com, who told Rigzone that any bullish news on the economic front, or from China, could see a $2-$3 gain in a single session.
In a Rigzone interview, Krishnan highlighted that the first two trading days of the year brought a 10 percent drop for both U.S. crude and London-traded Brent, which he said was “the worst start to a year in at least three decades, according to data”.
“Even some oil bulls were stunned by the sheer plunge of the market, even with the worst recession and China consumption fears being accounted for,” he added.
“At Friday’s close, both the benchmarks posted their biggest weekly loss in a month as even supportive U.S. jobs data for December could not sustain a rally seen earlier in the day,” Krishnan went on to state.
According to Krishnan, the average oil bull expected 2023 to be a reset year for those long the trade.
“But reality shows that until recession fears are totally out of the window, or that China’s Covid crisis is in much better control than now, the chance for a $100 oil, or even sustaining above $80 per barrel, may be a problem,” he said.
At the time of writing, the price of West Texas Intermediate (WTI) and Brent oil was trading at $76.28 per barrel and $81.02 per barrel, respectively. Both commodities closed well above $120 per barrel in June last year, before steadily dropping to under $80 per barrel in December 2022.
China’s weekly confirmed Covid cases jumped 45.33 percent from the week commencing December 19, 2022, to the week commencing December 26, 2022, according to the latest data from the World Health Organization (WHO).
$30 Billion Investment Will Keep Norwegian Gas Output High For Years
Tsvetana Paraskova, OilPrice.Com, January 9, 2023
Norway will continue to pump the current high volumes of natural gas for at least another five years as operators have pledged $30.3 billion (300 billion Norwegian crowns) to develop new fields and extend the lifetimes of producing fields, the Norwegian Petroleum Directorate said on Monday.
“These are remarkable investments for the future. This will help ensure that Norway can continue to be a reliable supplier of energy to Europe,” said NPD Director General Torgeir Stordal.
“Only rarely have we seen so much oil and gas produced on the Norwegian shelf as was the case last year – and only rarely have we seen such significant investment decisions,” the NPD said in its yearly overview of the production and investment activity on the Norwegian Continental Shelf.
In 2022, Norway’s gas production was 9 billion standard cubic meters higher compared with 2021. Gas now accounts for more than half of production from the shelf, the Norwegian authority said.
“Production is extremely high, and it will continue to grow in the years to come. Gas production is projected to remain at around 2022 levels for the next four to five years,” the directorate said.
The consistently high production has been the result of the higher number of producing fields, as several start-ups took place last year, as well as older fields producing longer and producing more than previously expected, according to the NPD.
Natural gas production in Norway, which supplies around 25% of the gas consumed in the EU and the UK, was expected to rise by 8 percent in 2022 compared to 2021, government estimates showed at the end of 2022.
In the summer of 2022, Norway’s authorities approved applications from operators to boost production from several operating gas fields, to allow higher gas production as its key partners, the EU and the UK, scrambled for gas supply ahead of the winter.
Last year, Norway became Germany’s single-largest natural gas supplier, overtaking Russia, as total German gas imports dropped by 12.3% compared to 2021, the German Federal Network Agency, Bundesnetzagentur, said last week. Norway provided 33% of the gas Germany imported last year, followed by Russia, whose share fell to 22% for last year, compared to a 52% share in 2021, the German regulator said.
Graphite One considers larger operations
Shane Lasley, North of 60 Mining News, January 5, 2023
Studying supply chain that provides more graphite annually to meet rocketing domestic demand for li-ion battery material
To better match the world-class size of its Graphite Creek deposit in Alaska to the enormous demand for the graphite going into lithium-ion batteries powering the electric vehicle revolution, Graphite One Inc. is considering a significantly larger advanced graphite materials supply chain in the United States.
Last year, S&P Global Platts forecast that by 2030 it will take 5 million to 6 million metric tons of graphite to meet annual global demand for this carbon material that serves as the anode in lithium-ion batteries.
This would be a roughly fivefold increase over the 1 million metric tons that was mined globally during 2021 to meet the demands of all industrial sectors, according to “Mineral Commodity Summaries 2022,” an annual report published by the United States Geological Survey.
For perspective, it would take up to 100 mines of similar size to what is proposed in a 2022 prefeasibility study for Graphite One’s advanced graphite materials supply chain to meet the demand forecast for the end of this decade.
For American automakers that must depend on domestic or allied sources of graphite for the EVs they produce to qualify for tax incentives included in the Inflation Reduction Act, the expected growing gap between supply and demand is further complicated by the fact that China accounted for 82% of the world’s mined graphite and produced nearly 100% of the battery-grade anode material during 2021.
“North America produced only 1.2% of the world’s graphite supply with production in Canada and Mexico,” USGS inked in its 2022 minerals report. “Two companies were developing graphite mining projects in the United States – one in Alabama and one in Alaska.”
Given the growing demand for domestic graphite and the thick layers of this battery material drilled during its 2022 drill program, the company developing the Alaska project is weighing the option of developing a larger graphite mining operation.
“(O)ur 2022 field program gives us confidence the Graphite Creek Project is truly a generational strategic resource,” said Graphite One CEO Anthony Huston.
EDITORIAL: Could this be the first step toward a fiscal solution for Alaska?Editorial Board, Anchorage Daily News, January 8, 2023
In just over a week, the Alaska Legislature will gavel into session. Provided the State House can do a better job organizing a majority caucus than the U.S. House (don’t bet on it), legislators will get down to business — which, for much of the session, will center around the state budget. It’s a process that’s been derailed in the past decade by paralysis over the Permanent Fund dividend, as lawmakers and even Gov. Mike Dunleavy have come to realize that our oil revenue gravy train is no longer sufficient to provide a full slate of state services and also pay a PFD via the 1982 formula. Thus, the PFD amount becomes an annual battle that stymies progress on virtually everything else, to the detriment of our savings accounts and our state’s future. And despite the good intentions of many lawmakers, plans to address the structural budget problem have gone over like a lead balloon.
The result? Years like 2022, when the state made rosy projections based on overinflated oil prices and legislators passed the second-largest budget in state history (the largest, before adjusting for inflation), only for prices to retreat and once again leave us with a deficit.
If we want to escape this PFD-fueled paralysis, we first need a mechanism to ensure legislators won’t overspend in boom years, nor let the dividend cannibalize essential services when oil prices go bust. What we need as a first step toward a budget that works for Alaska’s future is a spending cap.