Today’s Key Takeaways: 55% of millennials who earn $250,000 live paycheck to paycheck. Norwegian Continental Shelf global hot spot for exploration. Mining industry suffering from underinvestment. Nine new oil and gas fields predicted in Gulf of Mexico.
NEWS OF THE DAY:
Biden’s ‘green’ agenda ruins nearly everything
Colorado Springs Gazette Editorial Board, June 20, 2022
As the most fortunate of Americans attempt to enjoy vacations this summer — as they run out of money and run up high-interest credit cards — they should wrap their minds around one basic underlying cause for the struggle: Far-left activists and an infirm president they control have attacked our way of life.
Set aside socialist social reconstruction and consider a few economic facts in isolation. They alone are enough to cause widespread misery:
• Unleaded gasoline has hit a record-high price nationally for 35 of the past 38 days.
• As of Friday, the national average price for gasoline topped $5 for seven days straight.
• Forecasts show the cost of fuel going higher with no imminent end in sight.
• Fixed mortgage rates last week reached the highest level in more than 20 years, thanks to inflation forcing a massive interest-rate hike, meaning few young Americans can buy their first homes.
• A Willis Towers Watson survey last week found more than one-third of U.S. workers with salaries exceeding $100,000 live paycheck to paycheck — more than a doubling from 2019.
• A survey by Lending Club finds more than 55% of millennials who earn $250,000 live paycheck to paycheck.
• Lending Club finds nearly 100% of millennials barely make ends meet, regardless of income.
For low-income households, the economy under President Joe Biden means going without adequate food, shelter, and transportation. Throughout Colorado and the country, donations to food pantries, soup kitchens and homeless shelters are down and on a downward trajectory.
When people can’t afford food for themselves, it is hard to give to others. This means the poorest of the poor struggle with even less, meaning the economy causes disproportional suffering among nonwhite minorities Biden claims to care so much about.
This began with Biden, and he perpetuates it every chance he gets.
Fossil fuels are the world economy’s foundation and will remain so throughout the lifetimes of anyone living today, regardless of activist pipe dreams. It’s just a fact. Without fossil fuels — at this juncture and for at least another century — we don’t have food, shelter, or clothing. We don’t have solar panels or windmills. None of it is possible without oil, gas, and coal.
No country produces more oil and gas than the United States, and we do so with the highest safety and environmental standards in the world. Biden has consistently pledged to destroy the world’s economic base, and we’re starting to see what it looks like.
“Kiddo, I want you to just take a look. You don’t have to agree. But I want you to look at my eyes. I guarantee you. I guarantee you we’re going to end fossil fuel.”
That was Biden answering a question and shaking a young woman’s hand during a campaign stop on Oct. 6, 2019, in New Castle, N.H.
Two months later while speaking in West Virginia, coal miners expressed concern that Biden’s anti-energy agenda might threaten their jobs. Biden did not dispute this concern.
He told the miners to learn to code computers — a let-’em-eat-cake moment that left the crowd silent.
In a debate with then-President Donald Trump on Oct. 23, 2020, Biden promised to “transition from the oil industry.”
On the day of his inauguration, Biden signed an executive order shutting down construction of the Keystone XL pipeline. With the swipe of a pen, he shut off the most environmentally friendly and efficient way to transport crude the world needs for everything.
One less pipeline extension means more dangerous, expensive, and environmentally damaging transportation of crude by trucks, trains and fuel-guzzling tankers that can spill.
Biden’s messaging has, in every way possible, undermined confidence to invest in fossil fuel exploration and production. His decision to artificially inflate the economy with trillions of dollars backed by no labor or production has contributed so heavily to the labor shortage that domestic oil and gas companies cannot ramp up production regardless of profit potential.
The price and availability of everything the world needs to flourish and survive depend on a lavish supply of fossil fuels. It’s an irrefutable fact. Biden and his far-left base want to banish primary energy to the detriment of humanity and the environment, and the pain has only begun.
When it costs too much to live, blame Biden and his left-wing puppeteers. In November, render them powerless by giving control of Congress to the party with more compassion for humanity and the planet we live on.
Norway Remains Exploration Hotspot Despite Maturing Basins
Bojan Lepic, Rigzone, June 21, 2022
Exploration activity over the last decade has been impacted by two major oil price crashes and a global pandemic, which have resulted in large fluctuations in drilling costs, exploration performance, and discovered volumes.
Despite all of that, and the maturity of the Norwegian Continental Shelf (NCS), Norway continues to be a global hotspot for exploration.
An extensive infrastructure base, fiscal incentives for exploration, and a wide range of plays in four distinct basins have attracted multiple explorers to the region. The country does, however, continue to mature and this has been evident by fewer high-impact discoveries and decreasing average discovery sizes.
Westwood noted in its ‘Norway State of Exploration’ report the activity and performance of exploration wells that have been drilled on the NCS between 2012 and 2021, as well as the results to date for 2022. This report also provides an outlook for the remainder of the year.
As per the report, a total of 298 exploration wells were drilled between 2012 and 2021 in Norway with an estimated total exploration spend of $15.4 billion. Exploration performance has fluctuated over the 10-year period, but the average commercial success rate was 24 percent, and the technical success rate was 49 percent.
Westwood stated in the report that 71 commercial discoveries were made with total resources of 3.3 bnboe, at a drilling finding cost of $4.6/boe while only six commercial discoveries were under 100 mmboe, reflecting the decreasing discovery size as the NCS matures.
The Northern North Sea was the top performing basin on the NCS in terms of commercial success (34 percent) and discovered volumes that stand at 1.1 bnboe. The Barents Sea has continued to disappoint in terms of commercial success and the number of discoveries made, however, it has delivered over 1 bnboe of commercial resources at the lowest finding cost.
The most drilled and best-performing play in terms of commercial success and discovered resources was the Middle Jurassic with 1.7 bnboe from 91 wells and a commercial success rate of 36 percent.
Infrastructure-led exploration drilling accounted for around 60 percent of all activity and spending and contributed 2.1 bnboe with a commercial success rate of 35 percent. The proportion of such drilling is expected to trend upwards as companies look to sustain production levels in older hubs and have an increasing focus on lower-risk, short-cycle opportunities.
There were only 13 discoveries made from high-impact wells between 2012 and 2021, giving a commercial success rate of just 11 percent. The total resource discovered was around 1.5 bnboe, however, 65 percent of this was discovered in the early part of the decade in the Barents Sea.
In total, over 80 companies participated in exploration drilling, 36 of which participated in 10 or more wells. Most successful companies have either been involved in the high-impact discoveries of the decade or have targeted the more successful plays such as the Middle Jurassic.
Exploration portfolios focused on infrastructure-led exploration delivered more consistent performance, with higher commercial success rates and lower finding costs but with smaller average discovery sizes. Exploration success that can be brought onstream quickly remains attractive.
Despite the maturity of the NCS and recent global events, exploration activity is expected to remain buoyant. Westwood’s current expectations for 2022 are that 35 exploration wells could be drilled, targeting total resources of 2.5 bnboe. Going forwards, however, more companies are likely to focus on lower-risk infrastructure-led drilling to sustain production levels in existing hubs and that can provide short-cycle opportunities.
In our June 2022 Short-Term Energy Outlook (STEO), we forecast that new fields coming online in 2022 will account for 5% of natural gas production and 14% of crude oil production in the U.S. Federal Offshore Gulf of Mexico (GOM) by the end of 2023. We expect that GOM natural gas production will average 2.1 billion cubic feet per day (Bcf/d) in 2023, down 0.1 Bcf/d from 2022. We expect that GOM crude oil production will average 1.8 million barrels per day (MMb/d) in 2023, about the same as in 2022. Currently, no GOM fields are scheduled to start up in 2023.
During 2021, 15% of all U.S. crude oil production was produced in the GOM, and 2% of U.S. natural gas production was produced there. In our STEO, we forecast that eight new fields in the GOM will produce both oil and natural gas by year-end, based partly on data from Rystad Energy. We expect a ninth field, which will produce only crude oil, to start in 2022.
We expect that the additional capacity will not quite sustain crude oil production at levels similar to the end of 2021. The additional capacity from these new fields will not increase natural gas or crude oil production in the GOM. We expect GOM natural gas production to continue its three-year decline; annual GOM production last rose in 2019. Declining production from existing GOM fields is greater than the increase in production from new fields for natural gas and is equal for crude oil.
Since the late 1990s, new development in the GOM has been targeting oil-bearing reservoirs. Today, most of the natural gas produced in the GOM comes from associated-dissolved natural gas production in oil fields instead of natural gas fields. In 2020, gross withdrawals of natural gas in the GOM that came from natural gas wells accounted for less than 30% of total GOM natural gas production, compared with 76% in 1999.
We expect the large development fields of Argos, King’s Quay, and Vito to begin production in 2022. Each has a peak production capacity of 100,000 barrels of oil equivalent per day (MBOE/d) or more, and each is the result of a focused effort to lower the costs of field developments. Offshore producers have made significant progress simplifying and standardizing floating production systems and collaborating with various partners, including overseas construction services companies, to reduce total costs and remain competitive with onshore producers.
However, fields expected to start in 2022 may shift into our 2023 forecast if their start-up dates are pushed back. In addition, fields expected to start in 2024 could begin earlier, resulting in changes to our initial production forecasts.
Principal contributors: James Easton, Kirby Lawrence, Jim O’Sullivan
The Mining Industry Is Replicating The Oil Sector Crisis
Irina Slav, OilPrice.Com, June 20, 2022
- The global energy transition will require a huge volume of metals, and the prices of these metals are soaring.
- Just as in the oil industry, the mining industry is suffering from underinvestment as companies focus on shareholder returns.
- The rising prices of metals combined with supply chain issues and inflationary headwinds will be a major issue for the energy transition.
Earlier this month, Tesla made headlines yet again, but this time the news wasn’t good: the company was raising the price of most of its cars, with CEO Elon Musk citing raw material inflation as one of the reasons for the hike. Tesla is not the only one. The prices of copper, cobalt, lithium, aluminum—pretty much everything that comes out of the ground—are soaring. Normally, this would motivate miners to spend more on getting these metals out of the ground. This time, however, they are taking the same cautious approach as U.S. shale drillers, and that doesn’t bode well for the energy transition.
The world’s top ten miners are going to spend some $40 billion on mining projects this year and next, the Wall Street Journal reported this month, citing data from Bank of America. That’s down from double that back in 2012 and spells trouble for the energy transition as it pushes the prices of the raw materials essential for the transition much higher than is comfortable for anyone involved in building solar farms and wind parks.
Iron ore, the essential ingredient of steel, for instance, is up from a bit over $82 per ton last November to over $125 per ton. The price is far below the peaks of over $227 reached last year but still a significant increase over the last six months.
Copper has been on a steady rise since 2020, doubling in price in that period, even though, like iron ore, it is hypersensitive to news from China, and the recent worry sparked by Covid lockdowns weighed on copper prices. This worry, however, cannot trump fundamentals, and copper’s fundamentals are tight.
The copper market’s tightness will change soon enough, according to RBC Capital Markets, as several new mines come online this year. Still, the long-term price outlook for the basic metal remains bullish.
Meanwhile, lithium is up by 432 percent over the past year, which is partly why Tesla announced those price hikes this month. And miners are still not investing more, although, per the WSJ report, they are producing more lithium and cobalt.
It seems that miners are, like their peers in oil and gas, for once focusing almost exclusively on returning cash to shareholders. This is what is slowing down growth in oil supply in the United States, and this is what appears to be slowing down growth in the supply of basic metals and minerals necessary for renewable energy installations and electric vehicles.
Then there is, again, like in oil and gas, the issue of overall inflation, which is pushing up the costs related to new developments. The chief executive of Freeport McMoran acknowledged this recently on an earnings call, saying, “Things are just piling up that are adding to the supply constraints,” as quoted by the WSJ.
This is exactly the same sentiment that oil and gas producers have as a result of equipment shortages, workforce shortages, and other shortages that are driving up the costs associated with new products.
The mining investment problem, however, may have more significant repercussions than the shale oil investment problem. Because while shale wells may take a few months from start to finish, a mine takes years, often a decade or more, to go from final investment decision to start of production.
Earlier this year, at a mining industry event in Saud Arabia, insiders spoke a lot about this issue, warning it could threaten the progress of the energy transition, making it a lot more expensive and slowing down the adoption of renewable energy and EVs for lack of raw materials. Another problem is a sort of hidden inflation: falling ore grades across mines are pushing development costs higher. This is the result of natural depletion at already existing mines and is irreversible. The solution could be more new mines, but in addition to the extensive lead times, these also tend to be in politically unstable jurisdictions, which adds to challenges in securing the future supply of transition metals and minerals.
Goldman Sachs recently downplayed concerns about metals supply, saying in a note that it expected lithium prices to “correct for the rest of the year and remain under pressure from increasing supply over the next few years.”
The note sparked a strong reaction from those of a more bullish stance on the ultimate EV metal, who pointed out the time it takes for new supply to hit the market—those long lead times for new mines—and the continued supply chain snags that are creating headaches for virtually every industry that is trying to return to normal.
Given the investment plans of the biggest miners in the world, those Goldman critics have a good reason to expect further price increases in the metals market. As in oil, the lower the supply, the higher the price, and higher prices tend to erode demand, be it for gasoline or solar panels.
Al Gross withdraws from Alaska’s U.S. House campaign
Anchorage Daily News, June 20, 2022
Independent Al Gross said Monday he was withdrawing as a candidate from both the special and general elections for U.S. House in Alaska, and urged supporters to consider voting instead for Democrat Mary Peltola or Republican Tara Sweeney.
Gross is in third place after the June 11 special primary election with 48 candidates, and with most ballots counted, was set to advance to the ranked choice election in August along with Peltola, who is fourth, and two Republicans, former Gov. Sarah Palin, and businessman Nick Begich III, who are first and second.
“It is with great hope for Alaska’s future that I have decided to end my campaign to become our state’s next Congressman,” Gross said in a written statement Monday night. “There are two outstanding Alaska Native women in this race who would both serve our state well, and I encourage my supporters to stay engaged and consider giving their first-place vote to whichever of them best matches their own values. Thank you for your support.”
Gross’ campaign said he was referring to Peltola, a former state lawmaker from Bethel, and Sweeney, who was assistant secretary of Indian Affairs in the U.S. Interior Department during the Trump administration.
Sweeney was in fifth place as of Monday.
The final round of ballot counting in the special election is scheduled for Tuesday. The top four advance to the August ranked choice special election to fill out the term of Alaska Rep. Don Young, who died in March after serving 49 years in the House. A separate primary election will be held in August, with a ranked choice election in November to select the candidate that will fill Alaska’s lone U.S. House seat for a full two-year term starting in 2023.
The deadline to withdraw as a candidate for the regular primary is Saturday. The deadline to withdraw as a candidate for the special election is noon on Sunday.
Tiffany Montemayor, a spokesperson for the state Division of Elections, was asked by the Associated Press if the fifth place finisher in the special primary would be bumped to fourth if Gross withdraws by the deadline. She said the division was “looking into this” and she did not have an immediate answer.
The June 11 election was the first under a system approved by voters in 2020 that ends party primaries and institutes ranked choice voting in general elections.
The deadline to withdraw as a candidate for the special election is noon on Sunday.
Gross, an orthopedic surgeon from Petersburg, said he was withdrawing from both races. He ran unsuccessfully in 2020 against Republican U.S. Sen. Dan Sullivan with the endorsement of state Democrats. Gross benefitted this year from name recognition bought with more than $19 million spent by his campaign in 2020.
This year, he was harshly criticized by Democrats after he filed as an independent and told the Daily News early in the campaign that he wouldn’t necessarily organize with House Democrats, suggesting he might caucus with whichever party was in the majority in the House. “He’s not a liberal, he’s not a Democrat and he sure as hell doesn’t share your Democratic values, but pandering Al Gross still has the audacity to beg for your money after saying he’d caucus with Republicans,” Alaska Democrats said on Facebook in May. Gross later changed his position and said he would organize with Democrats.
Gross’ campaign said Monday he was not doing interviews at this time. Messages seeking comment also were sent to the campaigns of Peltola and Sweeney.
Several other candidates have withdrawn in recent days after failing to make the top four, among them Democrats Chris Constant and Adam Wool and Republican John Coghill.
Palin is the former Alaska governor who resigned in 2009 after running for vice president. Begich, a businessman and member of a prominent Alaska political family, is a former campaign chairman for Young who launched his campaign last fall. Peltola is a former Alaska state legislator from Bethel. Sweeney served as assistant secretary for Indian affairs in the Interior Department in former President Donald Trump’s administration.
Gross’ announcement comes days after his campaign touted the endorsement of an electrical workers union and posted fundraising appeals on social media that took swipes at Palin. One such video post featured the word “quitter” over Palin’s face. Palin resigned as governor in 2009, partway through her term.
Hours before the announcement, Gross’ campaign posted a picture of him at a brewing company in Anchorage over the weekend.
Most of those running in the special primary reported no fundraising to the Federal Election Commission. But Gross reported receiving about $545,000 between March 23 and May 22, about $86,000 less than Palin over roughly the same period.