Today’s Key Takeaways: CERA consensus: the world needs more oil and gas while going green. Offshore oil & gas sees highest growth in decade. AK Senators rally for US LNG exports to allies. “Lithium OPEC” in South America?
NEWS OF THE DAY:
Energy Industry Wrestles Over Going Green Too Fast
Colin Eaton, The Wall Street Journal, March 5, 2023
While the race to develop cleaner energy intensified over the past year, an uneasy consensus emerged on a parallel track: At least in the short term, the world needs more oil and gas, too.
The dueling—and sometimes conflicting—imperatives are expected to be core topics in Houston starting Monday when oil executives, climate hawks and government officials gather at the industry’s premier annual energy summit.
For an industry accustomed to extreme cycles of boom and bust, the current environment is less binary and more complex than usual. Even as the biggest companies post record profits, huge questions linger.
In particular, the geopolitical and market realignments that followed the Russian invasion of Ukraine have spurred the industry to re-evaluate how the energy transition will work, said Dan Yergin, vice chairman of S&P Global, which organizes the conference known as CERAWeek by S&P Global.
“We’re going to hear companies talking more about decarbonization and their low-carbon strategies, even as they also talk about stepping up conventional investment to meet the needs of a world that has suddenly become quite insecure about energy supplies,” Dr. Yergin said.
In an off-script moment during his State of the Union speech last month, President Biden, who had campaigned with promises to crack down on fracking, said, “We’re still going to need oil and gas for a while.” He also proposed quadrupling the tax on corporate stock buybacks, to push companies to plow capital into oil production.
Dan Pickering, founder and chief investment officer at Houston-based Pickering Energy Partners, said it appears investors’ push on ESG has plateaued for now, but oil companies have made progress on reducing emissions and are no longer behind the curve. More executives support global decarbonization as two polar-opposite camps—climate-change skeptics and people who advocate for an immediate switch from fossil fuels—have grown smaller, he said.
“There’s a much broader push for decarbonization globally, and there’s also a much broader realization that we are ‘stuck’ with hydrocarbons until we can achieve that decarbonization,” Mr. Pickering said. “A bunch more people are saying it’s going to take time.”
Offshore Oil And Gas Is Back With More Than $200 Billion In New Investment
Rystad Energy, OilPrice.Com, March 7, 2023
- Offshore oil and gas is set for the highest growth in a decade in the next two years.
- Offshore activity is expected to account for 68% of all sanctioned conventional hydrocarbons in 2023 and 2024.
- One of the leading global drivers is the sizable expansion of offshore activities in the Middle East.
The offshore oil and gas (O&G) sector is set for the highest growth in a decade in the next two years, with $214 billion of new project investments lined up. Rystad Energy research shows that annual greenfield capital expenditure (capex) will break the $100 billion threshold in 2023 and in 2024 – the first breach for two straight years since 2012 and 2013.
As global fossil fuel demand remains strong and countries look for carbon-friendly production sources, offshore is back in the spotlight. Offshore activity is expected to account for 68% of all sanctioned conventional hydrocarbons in 2023 and 2024, up from 40% between 2015-2018. Comparisons against this period are prudent as it predates the Covid-19 pandemic and related oil price crash. In terms of total project count, offshore developments will make up almost half of all sanctioned projects in the next two years, up from just 29% from 2015-2018.
These new investments will be a boon for the offshore services market, with supply chain spending to grow 16% in 2023 and 2024 , a decade-high year-on-year increase of $21 billion. Offshore rigs, vessels, subsea and floating production storage and offloading (FPSO) activity are all set to flourish.
One of the leading global drivers is the sizable expansion of offshore activities in the Middle East. For the first time, offshore upstream spending in the region will surpass all others, lifted by mammoth projects in Saudi Arabia, Qatar and the UAE. The area’s offshore spending growth looks set to continue at least for the next three years, growing from $33 billion this year to $41 billion in 2025. These countries are tapping into their vast offshore resources to meet rising global oil demand, backed by the necessary capital and infrastructure to outpace other producers.
Senators Urge Administration to Rally Support for U.S. LNG Exports to Allies
U.S. Senators Dan Sullivan (R-Alaska), John Barrasso (R-Wyo.), Joe Manchin (D-W.Va.), Lisa Murkowski (R-Alaska), Cynthia Lummis (R-Wyo.), Ted Cruz (R-Texas), Bill Cassidy (R-La.), and John Kennedy (R-La.) today sent a letter to U.S. Ambassador to Japan Rahm Emanuel urging the Biden administration to publicly support the export of abundant U.S. natural gas to America’s allies in Europe and Asia, particularly Japan, which has prioritized energy security in its term leading the G7. The senators asked Ambassador Emanuel to work with Japanese officials to build G7 support for public and private investment in natural gas supply chains, and to streamline permitting and regulations that could otherwise impede natural gas projects.
“Following Russia’s brutal invasion of Ukraine, G7 leaders quickly agreed to reduce and eliminate dependence on Russian gas as soon as possible,” the senators wrote. “One year later, however, there remains a gap between the political commitment to backfill the supply of Russian gas taken off the market and the necessary policies to fill that gap. Excessive restrictions on public financing of gas projects and unnecessary delays in approving privately-financed projects impede the development of critical infrastructure to expand output and exports. These impediments must be addressed immediately, as U.S. allies and partners continue to face energy insecurity, with many forced to increase reliance on or return to higher-emitting energy sources.”
Sen. Sullivan has previously recounted conversations with senior Japanese officials who told him that White House Climate Czar John Kerry has discouraged them from pursuing the import of American liquefied natural gas (LNG) to meet their country’s energy needs.
Below is the full text of the letter.
South America looks at creating “lithium OPEC”
Cecelia Jamasmie, Mining.Com, March 6, 2023
Argentina, Chile, Bolivia and Brazil are analyzing the creation of a lithium cartel of sorts in charge of expanding South America’s processing capacity, turning more of their mined lithium into batteries and tapping into the electric vehicles (EVs) manufacturing sector.
The group would emulate similar schemes, such as the Organization of the Petroleum Exporting Countries (OPEC), in terms of coordinating production flows, pricing and good practices, representatives of the Argentinean delegation said at the annual PDAC Convention, held this week in Toronto, Canada.
Argentina, Chile, Bolivia have been negotiating since July last year, when foreign ministers of each country met at the Community of Latin American and Caribbean States (Celac) conference in Buenos Aires.
The three countries make up the so-called lithium triangle, which has about 65% of the world’s known resources of lithium and reached 29.5% of world production in 2020.
HOCHSTEIN RECONCILES CLIMATE PUSH WITH OIL NEEDS: Amos Hochstein sought to reconcile the administration’s intent to enable a phasing out of fossil fuels over the long term with Biden’s demand for more production.
Hochstein, who is helping to lead the administration’s energy task force with Europe, said the administration is committed to displacing oil demand over time but that the economy “can’t afford” lower levels as things stand.
“How can you tell us that you want us out of business, ultimately, and you’re asking us to produce more?” Hochstein said yesterday at CERAWeek, summarizing what he’s hearing from oil and gas companies. “And the answer is, we don’t see a conflict.”
“We do want to eventually — we want to see a reduction in demand for oil, but we can’t afford that right now,” he added.
Industry executives, in remarks throughout the conference, have been talking up their intent to increase production and welcomed Biden’s invitation.
Biden wants low energy prices, jobs, and investment at home, John Hess, CEO of Hess Corporation, said this morning.
“Oil and gas check all three boxes,” he said.
From the Washington Examiner, Daily on Energy