Today’s Key Takeaways: AK oil and gas jobs playing catch-up. Saudis won’t let oil stay at $75. The undoing of the latest U.S. LNG boom? Will Australia have coal for China buyers?
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NEWS OF THE DAY:
Alaska job market still recovering in 2023, report says
Sabine Poux, KDLL, January 5, 2023
Alaska’s job market will continue on a path of recovery this year, though it’s still a long way from where it was before the pandemic.
That’s according to the 2023 job forecast from the state Department of Labor. Karinne Wiebold is an economist with the state and authored the report in the department’s monthly magazine.
“Pretty much every industry is forecasted to grow next year,” she said. “But a lot of them are just returning to pre-pandemic levels. So this is just kind of a return to normalcy.”
The state’s job market took a huge blow in 2020 when the pandemic hit. Wiebold said that was less true for the Kenai Peninsula than other regions of the state, in part because the peninsula didn’t see such big losses from canceled cruise ships.
“In fact, the Kenai Fjords National Park had one of its best years ever in 2021,” she said. “And that was propelled by local visitors as well as some independent, non-cruise-based travelers.”
That’s a big contrast from Denali National Park, for example, which gets a majority of its visitors from cruise ships.
Since those early pandemic days, the state has been gaining jobs across all regions — slowly.
Some factors are limiting growth nationwide, like low labor force participation.
But on the whole, Alaska’s recovery is slower than other states’. Wiebold said national challenges are compounded by factors like Alaska’s reliance on tourism and oil.
“Oil’s really taken a wild ride,” she said. “And exactly why our oil jobs have been slower to recover than some of the other Lower 48 is a little bit hard to tell. But it might have to do with our more remote location, and it’s just a little bit harder to get things going again.”
Another limiting factor, she said, is that Alaska came into the pandemic in a weak position, following a three-year recession. The state was just starting to add jobs back from that recession when COVID-19 hit in early 2020.
At least one piece of legislation is expected to bring jobs this year: The federal infrastructure bill, passed by Congress in 2021. On the Kenai Peninsula, that money is expected to boost airports and harbors, among other fish passage and bluff stabilization projects.
“But what’s really difficult at this point is really tracking down where that money’s going and when it’s going to hit the road,” Wiebold said.
Construction is one industry that’s forecasted to be above its pre-pandemic levels this year, as is transportation and warehousing.
“That’s pretty much it,” she said. “Those two are going to grow above pre-pandemic levels. Everybody else is still playing catch-up. Oil and gas is a really good example of that.”
Even with forecasted growth this year, Wielbold said employment levels in that industry will still be down 25 percent from where they were before the pandemic — a difference of more than 2,000 jobs.
“So there’s plenty of industries that have a long way to grow,” Wiebold said.
And she said Alaska’s job market is still a workers’ market, since there are so many job openings. She said that provides a lot of opportunity for workers to decide how and where they want to be employed.
OIL:
Saudi’s Won’t Let Oil Stay At $75: Pioneer CEO
Julianne Geiger, OilPrice.Com, January 5, 2023
OPEC is likely to cut oil production again, Pioneer Natural Resources CEO said at a Goldman Sachs Conference in Miami on Thursday.
“Saudi is not going to let Brent stay around $75 a barrel,” Scott Sheffield said, adding that it wouldn’t surprise him “if they had another cut.”
Sheffield believes that oil futures will stay in backwardation going forward, because “there is no liquidity in the market”. No one is hedging, Sheffield said, so there’s nothing to bring up the forward prices.
As for where Pioneer’s CEO sees oil headed, Sheffield sees the $80 a barrel mark as the base, with an upside of $150.
Back in the United States, Sheffield sees production from U.S. shale’s most prolific basin, the Permian, eventually hitting 7 million barrels per day. But after reaching this volume, it will plateau, with only Chevron, Pioneer, and Conoco having the ability to produce upwards of a million barrels per day of oil equivalent in the Permian by 2030. This, however, will be achieved with flat—or declining—rig counts as services prices run at what Sheffield feels is an untenable high.
BMO Capital Markets said last month that more than two-thirds of the Permian’s premium land has already been drilled, leaving oil companies to look for permits beneath Midland. World Oil cited unknown analysts that projected the Permian could plateau within five years, with Permian’s two main zones pumping less oil per foot drilled in each new well.
According to research firm Enverus, U.S. shale—carried mostly by the Permian—has provided 90% of the United States’ oil production growth over the last ten years. This slowdown in U.S. crude oil production and the prospect that U.S. shale can no longer respond quickly to changing market conditions has emboldened OPEC. The group led by Saudi Arabia likely now feels that it can keep prices elevated without a production response from the United States, Bank of America said last month.
GAS:
The LNG Boom Could End With Billions In Stranded Assets
Irina Slav, January 4, 2023
- U.S. LNG exports to Europe have grown exponentially since the Russian invasion of Ukraine.
- Over the short term, the U.S. will remain Europe’s top LNG supplier.
- In the long run, Europe’s renewable energy plans could diminish the demand for U.S. LNG, resulting in stranded assets.
A few years ago, the notion that the United States could become the largest LNG exporter in the world would have sounded fantastical. And yet last year, it did just that: the U.S. exported as much liquefied natural gas as Qatar in 2022, at over 81 billion cu m. And it’s going to export more this year. But the boom may end sooner than many expect. Most of the gas liquefied at Gulf of Mexico terminals last year went to Europe, which was blown off its course towards a fossil fuel-free future by the war in Ukraine and its own reaction to the Russian invasion, which took the form of sanctions that prompted an unsurprising response from Moscow in the form of lower gas deliveries.
Few expected that U.S. LNG producers would be able to fill the gap left by Russian gas, especially after Freeport LNG went offline following an explosion, remaining offline until the end of the year. Yet mild weather for most of the time since the start of heating season in Europe helped, and it ended 2022 with sufficient gas supply.
This year is expected to be even tougher on European countries, with a lot less Russian gas coming in than last year. Even with higher imports from the United States, there might be a supply gap, which will, in all likelihood, push LNG prices even higher and destroy more demand. And this could ultimately be the undoing of the latest U.S. LNG boom.
MINING:
China coal buyers may be left wanting in Australia even after ban lifted
Reuters, Mining.Com, January 5, 2023
China is preparing to resume coal imports from Australia after a two year freeze as it looks to stave off a domestic shortage, but it may be forced to pay higher prices given that Australia’s miners have already found new customers.
China’s state planner has allowed three central government-backed utilities and its top steelmaker to resume coal imports from Australia for the first time since Beijing imposed an unofficial ban on coal trade with Canberra in 2020, Reuters reported on Wednesday.
Australia was China’s second-largest coal supplier before the ban, which followed a souring of diplomatic relations. The ban eventually expanded to wine and foodstuffs worth billions of dollars.
The coal ban’s end follows a thawing of relations after a change in Australia’s government, highlighted by a meeting between the countries’ foreign ministers in Beijing last month and messages between their two leaders.
But in the meantime, Australia sold more coal to existing customers and found new ones, as the war in Ukraine left European power producers seeking to replace Russian coal.
“Most of the Australian coal producers’ order books are pretty much chock-a-block full. The problem Chinese buyers have had is that they have left this so long, miners have found happy customers elsewhere,” said analyst David Lennox of fund manager Fat Prophets in Sydney.
POLITICS:
Mapped: The Most Innovative Countries in the World in 2022
Visual Capitalist, December 2022
