NEWS OF THE DAY:
Rosneft Warns of Severe Oil Shortage
Olga Tanas, Dina Khrennikova, Bloomberg, June 7, 2021
Russian oil giant Rosneft PJSC warned of an impending shortfall in supply as global producers increasingly channel funds into a “hasty” energy transition.
“The world risks a severe deficit of oil and gas,” Rosneft Chief Executive Officer Igor Sechin said Saturday at the St. Petersburg International Economic Forum. “The world consumes oil but isn’t ready to invest in it.”
His comments echo those of Russian Deputy Prime Minister Alexander Novak, who this week rejected calls for a rapid shift away from oil and gas, saying starving the industry of investment would harm the global economy. But fossil-fuel producers are facing mounting pressure to switch to cleaner forms of energy as governments step up efforts to prevent damaging climate change.
“It shouldn’t be about rejecting oil, but about rejecting crude from environmentally unfriendly projects,” Sechin said on an energy panel that also included BP Plc CEO Bernard Looney and Glencore Plc boss Ivan Glasenberg. “Oil consumption will continue to grow despite a relative drop in its share in the global energy mix.”
The discussion comes in the wake of a controversial road map published in May by the International Energy Agency, which urged an end to new oil and gas investments to avert disastrous climate change. The report was dismissed by petrostates Saudi Arabia and Russia, with Novak warning of skyrocketing prices. Sechin said it will still take decades to develop economically efficient green technologies.
“Some ecologists and politicians urge for a hasty energy transition, yet it requires an unrealistically fast launch of renewable energy sources and faces issues with storage, ensuring reliability and stability of power generation,” he said at the forum.
Instead, oil and gas producers must allocate sufficient funds to avoid further depleting resources that are already dwindling in many regions and threatening the future stability of supply, he said.
“Based on existing estimates, about $17 trillion should be invested in the global oil and gas sector to support current output levels until 2040,” the CEO said. “That’s about a third of all global energy investments.”
OIL:
Oil hits two-year high above $72 on demand hopes, OPEC+ curbs
Alex Lawler, Reuters, June 7, 2021
Oil jumped to a two-year high above $72 a barrel on Monday, extending this year’s rally supported by recovering demand and OPEC+ supply curbs, before giving up the gains as investors took profits.
Demand is rising in the United States and Europe as COVID-19 restrictions are loosened and, in another hopeful step for fuel use, India eases its lockdown. read more
OPEC and its allies are sticking to agreed supply restraints through July.
Brent crude hit $72.27, the highest since May 2019, but by 1350 GMT was down by 6 cents, or 0.1%, to $71.83. U.S. West Texas Intermediate touched $70 for the first time since October 2018 and was last up 10 cents or 0.1% to $69.72.
“Oil demand has been rising this year and many traders have bet on the expected summer uptick, buying oil at cheaper prices before and now reaping the profits,” said analyst Louise Dickson of Rystad Energy.
“The strong levels are here to stay.”
Crude has risen for the past two weeks, and Brent is up by more than 37% this year, helped by supply curbs by the Organization of the Petroleum Exporting Countries and allies and demand recovering in part.
“With some improvement in the pandemic situation in India and the recovery in the U.S., China and Europe remaining on track, oil should remain a buy on dips,” said Jeffrey Halley, analyst at brokerage OANDA.
Investors may have sold off some contracts when WTI hit $70, said Avtar Sandu of Phillips Futures in Singapore. The chance of more Iranian supply and a drop in China’s crude imports also weighed analysts said. read more
Nonetheless, there is still solid price support from both the demand and supply sides, Commerzbank said.
“The tailwind that oil prices are currently finding from virtually all sides remains strong,” said Commerzbank analyst Eugen Weinberg, calling Monday’s price correction “hardly surprising” after recent gains.
GAS:
World LNG Report 2021
International Gas Union, June 3, 2021
The 12th annual World LNG Report looks back at an extraordinary year for the global gas industry.
The report provides unmatched insight into how the events of the exceptional 2020 that impacted the LNG market.
- Analysis of the key developments in demand, supply and pricing over the course of the period.
- Highlights LNG performance over other energy sources in its resilience during the crisis. Despite unprecedented circumstances, there was even a modest increase in global LNG trade last year to 356.1 MT.
- The LNG sector adjusted to great demand fluctuations with incredible agility during the year, navigating between huge drops in demand levels at the height of the pandemic lockdowns, through exceptional upward spikes of the winter deep freeze
- Global regasification capacity increased to reach a total of 850.1 MTPA as of February 2021 and continuing to expand access to clean and modern energy for more communities around the world.
- Myanmar and Croatia joined the ranks of LNG customers most recently, and by the end of 2021, Ghana, El Salvador, Vietnam, and Nicaragua could also gain access to the global gas market.
MINING:
Buffett And Gates Are Building A Nuclear Plant In Coal Country
Felicity Bradstock, OilPrice.Com, June 5, 2021
Bill Gates and Warren Buffett have chosen a top U.S. coal-producing state as the location for a new kind of nuclear reactor, using Natrium as its power source.
The natrium power plant, with an anticipated cost of $1 billion, will repurpose a coal plant for its operations in Wyoming, with the exact location to be announced by the end of 2021. The partners hope this will help the U.S. on its way to a carbon-zero future.
The development consists of a 345-megawatt sodium-cooled fast reactor with molten salt-based energy storage that could boost the system’s power output to 500MW during peak power demand. This would provide enough energy to power as many as 400,000 homes.
The project will be overseen by TerraPower and Pacificorp, founded by Gates and Buffett respectively. TerraPower has been key in exploring the potential of Natrium power as the U.S. energy department awarded the company $80 million in funding last year to demonstrate the potential power of this chemical.
“We think Natrium will be a game-changer for the energy industry,” Gates stated of the project.
President and CEO of TerraPower, Chris Levesque, adds “We need this kind of clean energy on the grid in the 2030s.”
Some experts are critiquing the plans, warning that advanced reactors may present a higher risk than their conventional counterparts. Reactor fuel needs to be enriched at a higher rate than conventional fuel, making the supply chain a potential target for groups trying to build a crude nuclear weapon.
However, advanced nuclear reactors have simpler designs than typical reactors, making them easier to build, more fuel-efficient, cheaper, and safer.
Wyoming Governor Mark Gordon believes “This is our fastest and clearest course to becoming carbon negative,” stating, “Nuclear power is clearly a part of my all-of-the-above strategy for energy.”
The project is expected to provide on-demand, no-carbon energy, as well as providing hundreds of short and long-term jobs in construction and plant operations. This will give a much-needed boost to Wyoming’s job sector following two decades of coal plant closures.
While two out of every three nuclear power reactors globally are scheduled for retirement in the near future, the U.S. is still investing heavily in nuclear power. For example, the Vogtle nuclear power plant in Georgia is expected to commence commercial operation in November 2021, at an estimated cost of $28 billion. It seems that despite a movement away from nuclear power in recent years we cannot overlook its potential as a global energy leader.
Following a decade of decline after major disasters such as Fukushima in 2011, which obliterated Japan’s nuclear power program, two countries, Belarus and the United Arab Emirates have recently commissioned new nuclear power plants. In addition, Japan is aiming to reintroduce nuclear capacities, with at least 5 safety-upgraded reactors expected to be recommissioned by 2025.
The Middle East and South Asia are expected to boost their nuclear power production by the end of the decade, with Turkey, Egypt, Bangladesh, China, and India all investing in nuclear reactors. This has sent uranium stocks up since late 2020, with two leading US-listed uranium miners, Uranium Energy Corp. and Cameco Corporation, both experiencing a steady climb.
Despite the recent decline in nuclear power, plans to invest in the recommissioning of existing reactors and develop new ones suggest that nuclear energy is not yet dead. Further, if Gates and Buffett are successful in developing their Natrium advanced reactor is could lead the way for future projects.
POLITICS:
Biden budget proposes $11 million to National Forests in Alaska
KINY, June 6, 2021
A proposal of over $11 million for Alaska’s National Forests is part of the Biden administration’s 2022 funding allocation.
The funding is through the Great American Outdoors Act.
According to the release, the projects that have been selected will provide economic development and employment opportunities in rural communities.
The funding will allow for project maintenance of recreation infrastructure, improving roads, visitor centers, campgrounds, and trails, and expanding visitor access and experiences.
Alaska Regional Forester Dave Schmid said that with more than 40 projects proposed for funding in 2022, they will be able to continue to grow the communities and make improvements to treasured areas in the communities.
CLIMATE CHANGE:
Putting Big Oil’s green spending in context
Ben Geman, Axios, June 7, 2021
An International Energy Agency report puts some context around how much the world’s largest oil companies are investing in clean energy.
The big picture: The chart above shows the combined investments of a collection of roughly 20 giants, including Shell, Exxon and BP, but also state-controlled companies like Saudi Aramco and China National Petroleum Corp.
- The data, part of a much wider IEA report last week, shows that investments are growing but still remain a small share of the companies’ total capital spending. (H/t to Bloomberg for flagging this section.)
Why it matters: There’s growing investor, activist and legal pressure on oil giants to act more aggressively on climate change and diversify more quickly.
- The trend was starkly apparent on a single day in late May, when activist investors thwarted Exxon management to install several new board members and a Dutch court ordered Shell to cut emissions faster.
The intrigue: While the oil industry’s overall capital spending outside core fossil fuel lines remains a small share, the European majors are increasing it more quickly.
- The IEA report notes that BP plans to increase annual clean energy investment to $3-$4 billion by 2025, while Shell is “is targeting a 25% share of investment on clean energy capital expenditure by 2025.”