Oil Giants Wider Approach To Energy Transition

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Today’s Key Takeaways: Saudi actions could affect AK’s finances.  Chevron view of renewables, lithium and COP28, Natural gas is king in electricity generation.   Mixed progress on Ambler road.  Senator Sullivan promoting AKLNG in Japan. 


Saudi Arabia’s oil production cut could affect Alaska’s state finances
James Brooks, Alaska Beacon, June 7, 2023

Alaska’s state budget for the next fiscal year hasn’t even been signed into law yet, but its expectations for oil revenue may already be out of date.

On Tuesday, the U.S. Energy Information Administration raised its estimates for oil prices in the second half of this year and in 2024. The revised estimate came two days after Saudi Arabia announced that it will cut oil production by 1 million barrels of oil per day.

The EIA now estimates that Brent crude — a key measure of oil prices — will average $79.54 per barrel for the rest of this year and $83.51 per barrel next year because diminished supply will cause prices to rise.

EIA acknowledged that the forecast comes with “significant uncertainty” around global economic growth, a key driver of demand for oil.

A barrel of North Slope oil was worth $75.75 per barrel on Monday; that was about a dollar below the Brent price. The two prices are closely correlated.

Alaska’s budget for the 12 months that begins July 1 expects that North Slope oil prices will average $73 per barrel over those 12 months. Oil revenue represents about two-fifths of Alaska’s general-purpose state revenue and is the second-largest source of that revenue, behind only an annual transfer from the Alaska Permanent Fund.

If prices exceed the revenue threshold, the budget contains a “waterfall provision” that automatically deposits some of the excess earnings into the state’s Constitutional Budget Reserve. 

Some of the excess earnings would also be set aside for a boost to the as-yet-unset 2024 Permanent Fund dividend. 

Oil forecasts are notoriously erratic. The April EIA forecast projected oil at $85 per barrel this year and $81 next year; that fell in the May forecast to $79 in 2023 and $74 in 2024.

Alaska’s oil revenue is even more uncertain because it also depends upon the amount of oil produced on the North Slope and estimates of how much companies will claim in tax deductions.

The windfall provision itself is uncertain, too. Gov. Mike Dunleavy has yet to sign this year’s budget into law, and the governor has the ability to veto that section of the budget, potentially deleting the section entirely, an act that would leave the excess earnings on the table for future debate by legislators.


Chevron’s CEO talks renewables, lithium and COP28
Ben Geman, Axios, June 7, 2023

Chevron CEO Mike Wirth doesn’t rule out getting into the lithium business but shows no interest in wind and solar.

Driving the news: Wirth noted lithium — a key EV battery input — can be extracted from brines produced through oil and gas development.

  • “We’ve looked at … adjacencies to our business, and lithium could be one of those,” he told Axios exclusively on Tuesday.

State of play: Wirth cautioned he didn’t want to overstate the possibility of lithium ventures (Chevron previously sold its interest in a California effort).

  • But he contrasted it with wind and solar. “There’s a lot of good developers out there in the U.S. and around the world that can do wind and solar projects better than we can.”

Why it matters: Wirth’s posture says plenty about the oil giant’s wider approach to energy transition. The comments also crystallize a strategic split between Exxon and Chevron, compared with European peers like Shell and BP.

The big picture: European majors, which have been more aggressive on climate, include wind, solar and power services in their diversification efforts.

  • U.S. giants are focusing more narrowly on areas they see as adjacent to their fossil fuel business and expertise, such as carbon capture, hydrogen, and renewable transport fuels.
  • Wirth also cited Chevron’s investments in startups working on geothermal, which requires drilling and subsurface knowledge.



U.S. electricity generation from natural gas was highest on record this past winter
U.S. Energy Information Administration, June 7, 2023


Court filings provide mixed picture of Ambler road progress
Yereth Rosen, Alaska Beacon, June 6, 2023

A federal decision on the controversial plan to build a 211-mile road through the Brooks Range foothills to provide access for mining development might come a few months later than previously anticipated, according to recent court documents. However, other recent legal developments indicate positive signs for the road’s prospects.

The Bureau of Land Management, the federal agency overseeing the project permitting, told a federal court last month that a revised review of the environmental impacts will be completed later than expected.

In a May 19 status report, the BLM said it will complete its revised analysis by early 2024. Previously, the agency said that the revision would be completed by the end of this year.

The process to issue a supplemental environmental impact statement was launched last year in response to a pair of lawsuits filed in U.S. District Court in Anchorage that challenged the Trump administration’s 2020 approval of the road. In February of 2022, the Biden administration’s Department of the Interior suspended the Trump administration’s approval, formally acknowledging some deficiencies in the environmental studies that led up to it.

The new analysis takes a closer look at subsistence and cultural impacts of the road, which would give access to an isolated Northwest Alaska district where there are several mines primarily targeting copper that are being explored. The main company conducting the exploration – and the potential beneficiary of a road that could make the mines commercially viable — is Ambler Metals, a partnership of Vancouver-based Trilogy Metals Inc. and Australia-based South32. Ambler metals also has a partnership with Native-owned NANA Regional Corp.