Today’s Key Takeaways: 88 Energy will spud Merlin-2 well at Peregrine in AK next week – massive oil reservoir. Alaska LNG well positioned to provide strategic, clean energy. Manchin begins conversation on reduced version of Build Back Better. Kinross Gold Corp. suspends all activities at projects in Russian Far East. Copper Valley Electric considering cheaper, greener alternative to diesel- a microreactor.
NEWS OF THE DAY:
Manchin, Murkowski ready bill to ban Russian energy imports
Manuel Quinones, Jeremy Dillon, E & E News, March 3, 2022
The legislation would create a national emergency and seeks to limit oil and gas shipments to the U.S.
Senate Energy and Natural Resources Chair Joe Manchin and former Chair Lisa Murkowski are working on legislation to ban the importation of Russian energy.
The West Virginia Democrat and Alaska Republican are working on the bill as countries look to punish Russia for its ongoing invasion of Ukraine. Russia relies on energy exports to Europe and elsewhere to keep its economy afloat.
The bill, according to a document obtained by POLITICO, would create a national emergency with respect to the ongoing Russian aggression, and would push the president to ban the importation of oil and natural gas.
Several Democrats and Republicans have introduced energy bills since the invasion. Manchin has been vocal in wanting the U.S. to stop using Russian fuel and expand domestic production (E&E Daily, March 2).
Top Dems question oil group
House Democrats, meanwhile, called out a leading oil and gas industry trade group last night for voicing continued support for imports of Russian energy.
Led by Energy and Commerce Subcommittee on Energy Chair Bobby Rush (D-Ill.), a letter questioning the American Fuel & Petrochemical Manufacturers comes as an increasing number of Capitol Hill lawmakers are looking to undercut the Russian invasion of Ukraine by stopping the U.S. use of Russian fossil fuels.
The letter, signed by five other Democrats, called on AFPM to clarify its position on Russian imports, especially as its member groups represent a significant purchaser of fossil fuels from the country.
“Because any purchases of Russian barrels would now finance its war with Ukraine, continuing this activity has become unconscionable,” the lawmakers said. “It is time for American refineries to stop purchasing Russian crude oil and petroleum products.”
AFPM for its part said the lawmakers were misinterpreting its stance and backed a Russian prohibition.
“AFPM fully supports the suspension of all future purchases of crude oil and petroleum products from Russia,” President and CEO Chet Thompson said in a response letter. “To protect consumers, however, any import prohibition should exempt products currently in transit to the United States.”
OIL:
88 Energy targets massive oil reservoir in Alaska
Matt Birney, The West Australian, February 28, 2022
Alaska-focused oil explorer 88 Energy Limited is poised to spud the Merlin-2 well at its wholly owned Peregrine oil project in Alaska in the week commencing 7 March. The company reports all operations are on track and the mobilization of the drilling rig to site is complete. The Merlin-2 well is permitted to a total depth of just over 2.4 kilometers and is targeting a prospective resource of 652 million barrels of oil as assessed by an independent consultant to the company.
Managing Director and CEO, Ashley Gilbert, said success at Merlin-2 has the clear potential to be “transformational for our shareholders.”
Management noted the Artic Fox drilling rig was on site and pre-spud operations were continuing as it entered the final phase at the Merlin-2 appraisal well. Spudding involves the process of beginning to drill an oil well with a larger drill bit initially used to clear a surface hole.
Merlin-2 will initially be drilled to approximately 600 meters, followed by installation of surface casing and testing of the blow-out preventer system. This stage is projected by the company to take about one week. Drilling to the total depth of 2.4km is anticipated to take a further four weeks including wireline logging.
A production test programmed has been designed for the Merlin-2 well with equipment placed on standby at the well site. The company said flow testing of Merlin-2 is contingent upon the wireline results, especially MDT results, as well as government approvals and the weather.
MDT is the modular formation dynamics tester that makes real-time resistivity measurements at the wireline probe to differentiate between oil formation fluids and other muds and fluids. When contamination of the oil formation fluids is low enough, the formation fluid may be tested or sampled. Hydrocarbon properties and in-situ reservoir conditions can be assessed in real time using a dual packer system to isolate sections of the drill hole. In-situ pressure and fluid measurements can then be used to build predictive reservoir models and compositional gradation downhole.
The Peregrine project is one of four Alaskan oil and gas projects and the largest wholly owned by Energy 88. It covers 195,373 acres or approximately 79,000 hectares immediately north of the existing Umiat oilfield.
88 Energy purchased the Umiat oilfield in January 2021. Umiat is a shallow oilfield discovered in 1945 and has reserves independently estimated at 123.7 million barrels of oil.
The company spudded the Merlin-1 well at Peregrine in March 2021 and successfully found oil at three targets with 12.5m of potentially productive and profitable light oil across the three targets.
88 Energy is set to drill a massive oil target adjacent to a known oil field in a highly productive oil region of northern Alaska. The company holds 100 per cent of the project giving it maximum upside exposure. If the company strikes success and delivers on the potential of 650-odd million barrels of oil, it expects the result will see 88 Energy enter a whole new league.
GAS:
Alaska gas can help unlock national strategic, economic and climate goals
Frank Richards, Alaska Journal of Commerce, March 1, 2022
Russia’s invasion of Ukraine and the halting of Russia’s Nord Stream 2 natural gas pipeline illustrate the world’s long-term reliance on natural gas for energy, light, and heat. Due to its proximity to Russia, Europe draws 40% of its natural gas from Putin, Inc. But even here in the U.S., New England has also been repeatedly forced to rely on Russia’s natural gas because environmental chokeholds prevent the expansion of new domestic transmission to the Northeast.
What does any of this have to do with Alaska? Alaska is sitting on one of the world’s largest reservoirs of natural gas but lacks the infrastructure to deliver it to energy-starved residents in Interior Alaska and to U.S. allies around the world. Every day on the North Slope, enough natural gas is produced to meet the needs of California, Oregon and Washington combined, but it is reinjected into the ground because there is no way to get it to market.
Adding Alaska’s natural gas to overall U.S. export capacity strengthens our ability to provide energy and economic security to our allies around the world. Bringing Alaska LNG to Japan, Korea, and other allied Asian markets along the Pacific rim frees U.S. Gulf Coast LNG providers to better serve European allies.
Fortunately, there is a lot of recent progress on the Alaska LNG Project to report. A just-completed analysis by the respected global analytics firm Wood Mackenzie concludes that, for the first time, Alaska LNG can deliver LNG to Asia at more competitive prices than Gulf Coast-based LNG projects.
Wood Mackenzie studied improvements made to Alaska LNG over the past five years, including revising the economic model for the project and reducing project expenses, and determined that Alaska LNG has been able to reduce our cost of supply to Asia by 43%. Wood Mackenzie forecasts that global LNG demand will continue to accelerate through 2050, strengthening the need for new projects like Alaska LNG.
The recent Federal Infrastructure legislation, backed by our Congressional delegation and signed by President Biden, includes more than $26 billion in federal loan guarantees for Alaska LNG. Utilizing these loan guarantees will further reduce the project’s development costs and improve its cost effectiveness. I applaud our lawmakers for deploying our natural resources for strategic, economic, and climate reasons.
Natural gas burns cleanly, making it a preferred energy source, particularly in rapidly growing Asian markets confronting air pollution created by other energy sources. Here at home, we see the same air quality problems in parts of Alaska winter after winter. Because of these problems, the American Lung Association identified Fairbanks as “the most polluted city in the nation.”
China alone emits 28% of the world’s carbon dioxide, about the same as the United States, the European Union, and India combined. Asian energy needs are massive and growing. Just last year, China built “more than three times more new coal power capacity than all other countries in the world combined,” according to the New York Times, the equivalent of adding more than one large coal plant each week.
Because energy projects compete on environmental and economic measures, AGDC, the state corporation currently leading Alaska LNG, commissioned a study to understand the project’s climate impacts. Third-party experts determined that replacing a portion of China’s regional coal use with equivalent energy from Alaska LNG will eliminate 77 million metric tons of annual carbon dioxide equivalent emissions, a 50% reduction.
According to the EPA’s Greenhouse Gas Equivalencies Calculator, 77 million metric tons of carbon emissions is the annual equivalent of taking 19 coal-fired power plants offline, removing 16.8 million passenger cars from the road for a year, eliminating the emissions generated by powering 9.3 million homes or the emissions from burning 8.7 billion gallons of gasoline.
Alaska has some of the most stringent environmental regulations in the world, assuring that natural gas will be produced with minimal impacts on wildlife, air, and water versus other parts of the world with looser standards and limited enforcement. Each LNG tanker round trip from Alaska will be about a month shorter than from Gulf Coast ports, further contributing to Alaska LNG’s emissions and economic savings.
AGDC is in the process of identifying new private sector leadership to take over the development of Alaska LNG because this project is simply too complex to be managed by the State of Alaska alone. The recent favorable economic and climate studies about Alaska LNG have added momentum to these discussions.
Because natural gas is a key ingredient for hydrogen production, the increasing global demand for zero-carbon hydrogen is also fueling progress for Alaska LNG. U.S. policymakers and the private sector are investing tens of billions of dollars over the next few years to drive the creation of new U.S. hydrogen production hubs and carbon capture hubs, and Alaska is well situated to compete.
With Alaska LNG under development, Alaska is well positioned to remain a reliable provider of strategic clean energy for the next hundred years. To learn more about the recent reports examining the economic enhancements and climate benefits of Alaska LNG, visit AGDC.us.
Related: Italy Halts Funding For $21 Billion Arctic LNG 2 Project
MINING:
Kinross to shutter Russian gold mine
Shane Lasley, North of 60 Mining News, March 3, 2022
Deeply concerned about the loss of life and destruction being caused by Russia’s invasion of Ukraine, Kinross Gold Corp. has decided to suspend all activities at its gold projects in the Russian Far East.
Kinross’ Kupol Mine in the Chukotka region of eastern Russia produced 481,108 ounces of gold-equivalent, which includes the value of both the gold and silver produced, during 2021. This one mine accounted for roughly 23% of the gold-equivalent oz produced by the company last year.
Despite being the second largest and lowest cost gold mine in its portfolio, Kinross has decided to wind down operations at Kupol and Udinsk, where the company had been working toward developing another gold mine in Russia’s Far East.
While suspending operation at Kupol will significantly impact 2022 gold production, gold output at this mine was already slowing and cost increasing as the grades of ore decreased and the veins are getting narrower.
In its production guidance released earlier this year, Kinross anticipated Kupol to produce 350,000 oz of gold during 2022, accounting for 13% of the 2.65 million oz expected from all the company’s operations this year.
Kinross says the winding down of Kupol and its other activities in Russia are focused on the safety and well-being of its more than 2,000 employees, while also recognizing its obligations to manage and mitigate the Kupol’s environmental impact moving forward.
Expressing sympathy and support for the Ukrainian people suffering due to the Russian invasion, Kinross is donating $1 million to the Canadian Red Cross Ukraine Humanitarian Crisis Appeal to assist those people most in need.
The global gold mining company is hopeful for a peaceful and diplomatic solution in Ukraine.
POLITICS:
Manchin proposes dramatically scaled down version of Build Back Better
Alexander Bolton, The Hill, March 2, 2022
Sen. Joe Manchin (D-W.Va.), who torpedoed President Biden’s Build Back Better agenda at the end of last year, on Wednesday laid out a dramatically scaled down version that he says he could vote for under the special budget reconciliation process.
Manchin said he could support a reconciliation package that reforms the tax code and lowers the cost of prescription drugs if the money raised is split between spending on new climate change proposals and deficit reduction and fighting inflation.
The West Virginia senator clarified he hasn’t made any formal counterproposal to the White House but is sketching the outlines of a proposal that he could support along with the rest of the Senate Democratic Caucus.
Whatever Manchin ultimately agrees to would have a different name than the Build Back Better Act, which he said in December he couldn’t support.
“There’s not a proposal, there’s just a conversation,” he said of informal talks with White House officials.
“It just makes all the sense in the world. The one thing that we as Democrats all agreed on was the 2017 tax cuts were weighted unfairly. So, if you want to fix the tax cuts and make everyone pay their fair share, whether it’s the very wealthiest or the corporations that pay nothing — I think the president identified that last night — then you have to fix the tax code,” he said.
“Then you find out what revenues you have from that if you fix it,” he added.
Manchin also said there is broad agreement among Democrats on passing legislation to reduce the cost of prescription drugs and suggested that modeling a program on what the Department of Veterans Affairs does to negotiate lower prices for military veterans would be a good idea.
“The other thing that we should all agree on is the high pharmaceutical prices, so you allow the negotiations. And I just said the organization that does the best job is the VA, the veterans administration gets some of the lowest prices. Maybe we should look at them and let them basically do [that] for our Medicaid and Medicare [recipients],” he said.
Manchin says half of the revenue raised from tax reform and prescription drug reform should be used to lower the deficit and fight inflation and the other half should be spent on whatever 10-year program has the most support in the Democratic caucus.
He suggested spending on an array of initiatives to fight climate change would likely unify his Democratic colleagues.
“Half of that money should be dedicated to fighting inflation and reducing the deficit,” he said. “The other half you can pick for a 10-year program, whatever you think is the highest priority and right now it seems to be the environment — and that’s a pretty costly one — would take care of it.”
White House negotiators last year hammered out the outlines of a scaled-down agreement with centrist Sen. Kyrsten Sinema (D-Ariz.) and other Democratic senators to lower the cost of prescription drugs, but it didn’t go as far as some liberals, such as Sen. Bernie Sanders (I-Vt.), initially wanted.
Asked to clarify whether he wants the prescription drug proposal deal with Sinema, and other lawmakers renegotiated, Manchin said he wasn’t intimately familiar with the details of that proposal.
“I’m just throwing it out,” he said of his idea for prescription drug reform.
Asked about what he thought of the work already done on the issue with Sinema, Manchin responded: “I haven’t seen it.”
Manchin also declined to comment on the details of the tax reform he would like to see enacted.
“I’m just saying reconciliation is for getting your financial house in order,” he said, adding that whatever tax reform comes to the floor may be different than what White House officials and senators negotiated last year.
“I’m talking about a fair tax system,” he said, declining to take a position on the wealth surtax that the White House unveiled as part of its framework in the fall.
But he insisted that he’s not engaged in any formal talks with the White House.
“Everybody knows pretty much where I am,” he said. “This is nothing new. What I just told you all … is nothing new. I’ve been saying it for a year.”
CLIMATE CHANGE:
Copper Valley Electric Association is considering a nuclear power plant
Tim Ellis, KUAC Fairbanks, March 2, 2022
Copper Valley Electric Association is considering a nuclear microreactor similar to the one scheduled to begin operating on Eielson Air Force Base by 2027.
Right now, the utility relies on inexpensive hydro power during the warmer months of the year but switches in the winter to more costly oil-fired power generation.
Copper Valley chief executive Travis Million says the utility has been trying for years to find a cheaper and greener alternative to its diesel- and naphtha-fueled generators.
“There’s no predictability of the cost,” he said. “Just this year alone, between December and January, we saw a 44% price increase for the diesel fuel that we use.”
Million says Copper Valley’s board adopted a policy last year to reduce the utility’s greenhouse-gas emissions, and co-op staff studied wind, solar and other renewables.
He says they found none would reliably provide electricity in the winter without backup from the expensive fuel-fired generators. So, they turned to nuclear-powered generation.
“The technology has been there a long time,” Million said, “but there just hadn’t been a way to manufacture these types of reactors.”
Micro-modular reactors are small, self-contained reactor systems that can be brought onto a site and replaced every 20 years for refueling. The 10-megawatt facility that Copper Valley is considering would be similar to a 5-megawatt microreactor planned for Eielson Air Force Base.
“With the advanced manufacturing technologies that are out there today, it now makes it feasible to where they can mass-produce these types of smaller-scale reactors,” Million said.
After studying the industry, Copper Valley began working with Seattle-based Ultra Safe Nuclear Corp. Company officials came to Alaska last summer to survey the co-op’s facilities and service area, which includes the Copper River Valley, areas along the Richardson Highway from Valdez to Gakona and the Glenn Highway from Glennallen to the Mat-Su boundary.
The company’s now working with the utility on a feasibility study that’ll be completed in July, when the co-op’s board will decide whether to move ahead with the project.
So far, million says it looks promising.
“This could be possibly the answer that we’ve been looking for for decades — a generation source that is a stable, cost-efficient way to produce electricity,” he said.
Million says he hopes the study will show that the microreactor will help keep the cost of electricity down to somewhere around 20 to 25 cents per kilowatt hour. He estimates the plant would cost $80 million to $100 million to build, which compares to the University of Alaska Fairbanks’ $245 million, 17-megawatt coal-fired power plant that went online in 2018.
Million says the federal infrastructure bill could help pay for the co-op’s microreactor.
“There was $2.4 billion for demonstration projects for advanced nuclear reactors,” he said.
Other utilities have expressed interest in Copper Valley’s proposal.
“We’re really excited to be able to follow the progress that’s happening at Eielson and Copper River,” says Meadow Bailey, a spokesperson for Golden Valley Electric Association. “If it ends up being something that is safe and reliable and cost-effective, then in the future it’s definitely something that we would consider.”
If Copper Valley’s board decides to move ahead on the project, it would be Alaska’s first commercial nuclear-powered electrical-generating station. Two others were proposed in recent decades, one for Galena and one for Ester, but neither panned-out.
The Army built a nuclear powerplant on Fort Greely that operated for about 10 years before it shut down in 1972.