Today’s Key Takeaways: $680 million less in revenue for Alaska legislators as they finalize budget. Innovation in oil and gas extraction paves the way for the future. US should get serious about mining critical minerals for clean energy. Bank turmoil could make financing difficult for clean energy start-ups.
NEWS OF THE DAY:
Lower oil price, production outlook impacts revenue forecast
AP, March 22, 2023
Alaska lawmakers have nearly $680 million less in expected revenue for the upcoming budget year amid lower oil price and production outlooks, a report released Tuesday suggests.
The state Revenue Department’s spring forecast also revises expectations for the current year, ending June 30. The report says revenue available for general state spending and capital projects for this year is expected to be about $245 million lower than what the department forecast in December.
This comes as the House Finance Committee works on its version of a state budget. Whatever passes the House will go to the Senate for consideration and differences between the two chambers are typically settled in negotiations.
The new report is based on oil prices of $85.25 a barrel for the current year and $73 a barrel for the upcoming fiscal year. It is also based on an average of 485,200 barrels of oil a day for the year ending June 30, and 496,400 barrels a day for the upcoming year.
The department says use of earnings from the state’s oil-wealth fund, the Alaska Permanent Fund, remains a key source of revenue.
Lawmakers in 2018 began using earnings, long used to pay yearly dividends to residents, to also help pay for government. Lawmakers also sought to cap withdrawal amounts based on a percentage of the fund’s market value. The withdrawal amount for the upcoming fiscal year is expected to be about $3.5 billion.
OIL & GAS:
How innovation in oil and gas extraction paving way for a new futuristic model
Ashish Agarwal, The Financial Times, March 21, 2023
The oil and gas industry has always been one of the early adopters of new developments in technology. The stakeholders have adopted model reservoirs, pipeline and distribution automation, robotics for drilling operations, etc. These advancements have made the extraction of oil and gas once perceived as impossible into reality. The oil and gas industry has played a significant role in the global economic transformation. Having said that, digitalization in the industry is still in its nascence. The innovation in the technology of the industry can be broadly categorised into two buckets, the first about field operations, and the second being the analytics support to optimise the field operations. Even Gartner’s recent research highlights – the oil and gas sector must build on optimizing business performance to unlock new possibilities.
Defining the digital strategy
To create innovative capabilities in the oil and gas industry, the imperative is to understand which business model can lay a solid foundation for digitizing the sector. An article recently published in the Economist about Europe’s energy crisis was alarming, to say the least, and gives a lot of perspective on how India’s model can be shaped. A nation’s application of innovation can be futile if the primary focus does not rely on the self-sustainability of energy, as the current situation in Europe has unnervingly laid out for the world.
Energy companies are aggressively figuring out ways to bring efficiency, sustainability and profitability in digitally driven business models. The onset of the pandemic has already shifted the model stakeholders to accelerate digitalization, and build a robust infrastructure of futuristic technologies to address systematic challenges like affected supply chains or price hikes.
MINING:
The US should get serious about mining critical minerals for clean energy
Saleem Ali, Nature, March 21, 2023
We are living in a time of a mineral impasse. Crucial green technologies, including solar panels, wind turbines and electric-vehicle batteries, require increasing amounts of metals, such as lithium, copper, nickel, cobalt, manganese, and rare-earth elements.
Yet the current US administration is in a bind. The climate movement, a core part of President Joe Biden’s base, wants clean energy and electric cars. But it doesn’t want mining of the minerals required — certainly not close to home.
Emblematic of this impasse is a January decision by the US Department of the Interior to withdraw 91,000 hectares near the Boundary Waters in northeastern Minnesota from mining and geothermal leasing for the next 20 years. The area, known for its pristine lakes, also holds some of the nation’s largest undeveloped copper and nickel deposits.
The country is in danger of forgetting one of the four laws of ecology that Barry Commoner — one of my early inspirations for a career in environmental teaching and research — established in his 1971 book A Closing Circle: “There is no such thing as a free lunch.” All industrial activities have some ecological impact. As researchers, and as informed societies, we must consider the benefits and trade-offs in concert.
Other nations face the same problem. For example, Serbia stopped its Jadar lithium-mining project last January in response to environmental protests from across the political spectrum, even though it met the European Union’s stringent environmental standards.
But the United States seems particularly stuck. Both President Biden and former president Donald Trump have called for mineral supply security. Yet, in 2022, domestic metal mine production was 6% lower than in 2021, and mineral imports reached a record high, according to the US Geological Survey. The nation remains 100% dependent on imports for 12 critical minerals, including manganese, niobium (used in steel alloys) and tantalum (for electronics). Opening new mines takes time, but no momentum has built up so far.
POLITICS:
Bank Turmoil Could Undermine The Effect Of Biden’s Clean Energy Bill
Tsvetana Paraskova, OilPrice.Com, March 22, 2023
After the collapse of Silicon Valley Bank and Signature Bank, U.S. clean energy start-ups and companies could face growing difficulties in accessing finance, which could slow the effect of a rapid renewable energy rollout intended by the Inflation Reduction Act, analysts and investment firms have told the Financial Times.
The Inflation Reduction Act (IRA) has around $370 billion in climate and clean energy provisions, including investment and production credits for solar and wind power generation, storage, critical minerals, funding for energy research, and credits for clean energy technology manufacturing such as wind turbines and solar panels.
After the collapse of Silicon Valley Bank, which triggered a banking sector scare for regional U.S. banks and spread to Europe with the near-collapse of Credit Suisse, regulators in the U.S. stepped up to guarantee the deposits of clean energy start-ups in SVB. However, renewable energy firms are now assessing their vulnerability and exposure to the banking sector. Some of those firms may find it harder to access funding, and it’s not only the high-interest rates that will be the hindrance according to investment managers.