Record operating costs are slowing the U.S. shale drilling revival
David Wethe, World Oil, September 29, 2021
America’s oil producers are boosting output at a slower place as record costs hammer the shale patch, according to a survey of industry executives.
Out of 47 responding companies that supply producers with everything from software to workers, just one reported lower input costs in the third quarter, according to a report released Wednesday by the Federal Reserve Bank of Dallas.
Hiring has become a big headache for oilfield service companies trying to meet increased demand from explorers. Of those reporting difficulties in attracting workers, 70% blamed it on a lack of qualified applicants. Wages are up 20%, and companies are poaching employees from competitors, according to an unidentified survey respondent.
“Labor is causing major problems,” the person said. “We are finding it difficult to increase prices to match our increase in costs.”
The outlook comes as a global energy crunch sends prices for oil, natural gas, and power soaring, roiling everything from manufacturing to food production. U.S. drillers are keeping output in check as they respond to investor pressure to pay down debt and return cash to shareholders, adding to the inflationary pressure.
Of all the labor shortages that are wreaking havoc on the U.S. economy — from cashiers to chefs — few are as thorny or potentially as permanent as the one that has a grip on the oil sector. Thousands of roughnecks and engineers are wary of returning to jobs like the ones they lost when the pandemic sent the price of crude oil crashing last year.
Meanwhile, supply-chain snarls mean it’s “taking longer for companies to receive inputs,” the Dallas Fed said. The index for supplier delivery time rose to the highest since the survey’s inception in 2016.
For most of this year, oilfield service companies have mostly been able to pass along input costs to their clients in the form of higher service prices, but that’s also generally kept them from booking extra profits, Citigroup Inc. has said. Inflation could reach 12% or more by the end of this year for the sector in North America, analysts including Scott Gruber wrote in a June investor note.
One respondent to the Dallas Fed survey pinned the blame for inflation on closely held shale explorers that aren’t beholden to investor demands for discipline. Private producers are running the most drilling rigs in almost two years.
“Increased activities by private E&P firms is leading to cost inflation,” the respondent said. “Continued oilfield services consolidation may contribute to it further.”
OIL:
OPEC: Oil will be world’s No. 1 energy source for decades
Associated Press, September 29, 2021
While acknowledging the inevitable advance of alternative energy sources and technology, OPEC said that oil would be the leading energy source for decades to come as crude prices reached three-year highs yesterday.
In its annual World Oil Outlook, OPEC acknowledged that more electric vehicles on the road and the push for alternative and renewable energy will indeed usher in an era of declining demand for oil in rich countries.
But the energy needs of expanding economies in other parts of world mean that oil will be the world’s No. 1 source of energy through 2045, OPEC said yesterday.
The long-term report from OPEC arrives as economies emerge from the most severe economic shocks from the pandemic, snarling supply lines and creating tight supplies of nearly everything, including oil. Brent crude touched $80 per barrel yesterday while the U.S. oil benchmark crude wasn’t far behind, both reaching three-year highs. Hurricane Ida slammed into a critical port that serves as the primary support hub for the Gulf of Mexico’s deepwater offshore oil and gas industry in the U.S., worsening the supply situation, at least temporarily.
The average price for gasoline in the U.S. rose again over the weekend, according to the Lundberg Survey, and now costs $1 more per gallon than it did last year at this time.
After being stung by deep production cuts in 2020 during the depths of the pandemic, OPEC has increased production slowly.
“What is clear in this year’s WOO is that energy and oil demand have picked up significantly in 2021, after the massive drop in 2020, and continued expansion is forecast for the longer-term,” OPEC said. “Global primary energy demand is expected to increase by 28% in the period between 2020 and 2045, with all energies required, driven by an expected doubling in size of the global economy and the addition of around 1.7 billion people worldwide by 2045.”
Only coal will see less use, while other sources of energy will see increasing demand, though the share will shift to include a bigger proportion for renewables, nuclear and natural gas, according to the group.
The 340-page report sketches out a future of declining demand for oil in wealthier countries that belong to the 38-member Organisation for Economic Co-operation and Development, as efforts to fight climate change take hold in the form of renewables and alternative fuels in cars, airplanes, and ships. It forecasts that the world’s vehicle fleet would grow by 1.1 billion to 2.6 billion by the end of the report’s time frame in 2045 — and that 500 million of those would be electric powered, or 20% of all vehicles.
But growing populations and expanding middle classes in the rest of the world including China and India will mean increased demand for oil between 2020 and 2045, although much of that increase will take place in the earlier part of that period, said the report, produced by OPEC’s secretariat in Vienna.
Oil will satisfy 28.1 percent of the world’s energy demand by 2045, down from 30 percent in 2020 — but ahead of natural gas with 24.4 percent and coal with 17.4 percent. Hydroelectric, nuclear and biomass energy sources and other renewables such as wind and solar make up the rest.
A key reason cited for declining energy use in the more-developed world was demography: shrinking and aging populations that usher in lower economic growth.
GAS:
World Bank takes its anti-LNG stance to the IMO
Sam Chambers, Splash 247.Com, September 30, 2021
The World Bank has taken its anti-LNG stance to the International Maritime Organization (IMO).
Ahead of November’s gathering of the Marine Environment Protection Committee (MEPC) at the UN body’s London headquarters, the World Bank has renewed its attacks on liquefied natural gas as shipping’s fuel of the future.
The bank shocked many in shipping in April with the publication of a maritime decarbonisation report in which it specifically recommended countries pull back from investing in further LNG bunkering infrastructure.
Now the bank has decided to take the matter up with shipping’s governing body, sending the IMO various documents in submission for member states to deliberate at MEPC.
Among the documents submitted, the bank states that it sees green ammonia and green hydrogen as the most promising options to decarbonise international shipping. The bank goes on to state: “LNG is likely to play a limited role in shippingʹs decarbonization, and countries should avoid new public policy that supports LNG as a bunker fuel, reconsider existing policy support, and continue to regulate methane emissions to put shipping on a Paris-aligned GHG emissions trajectory”.
Going on to highlight why it is concerned about the growing number of newbuilds coming out of Asian yards with LNG capabilities, the bank stated: “Methane leakage can occur at each stage of LNGʹs lifecycle (i.e. during extraction, distribution, and combustion), and represents the accidental release of a gas which is 86 times or 36 times more potent than CO2 over a 20-year or a 100-year period, respectively. Therefore, even small volumes of methane leakage can diminish any GHG and climate-related justifications for using LNG as a low-carbon substitute for oil-derived fuels.”
The bank then went on to take down arguments for greener gas forms that backers of LNG have been proposing lately.
Analysis was undertaken by the World Bank to examine a transitional role for LNG, whereby LNG infrastructure and ships could be reused from 2030 onward with compatible zero-carbon bunker fuels such as liquefied biomethane (LBM) and liquefied synthetic methane (LSM). However, evidence showed that there are expectations of limited availability and therefore lack of price competitiveness of sustainably sourced LBM, and that the production of LSM is expected to be more expensive than alternatives such as ammonia or hydrogen.
Conversely, the World Bank reckons natural gas in its non-liquefied state may play a different and more important role as a feedstock in kick-starting the commercial production of zero-carbon bunker fuels. In the early stages of decarbonisation, before enough renewable electricity supply becomes available to generate green hydrogen or green ammonia economically and at scale, natural gas with carbon capture and storage (CCS) could offer a viable way of reducing GHG emissions significantly on the way toward full decarbonisation, the bank has suggested.
In terms of gross tonnage, latest data from Clarksons shows 28.8% of today’s bumper order book is for LNG fuel capable tonnage.
Keen to dismiss the methane leakage argument, two LNG bunker lobby groups revealed details earlier this year of an independent, peer-reviewed study that claims GHG reductions of up to 23% are achievable now from using LNG as a marine fuel, depending on the marine technology employed. This is compared with the emissions of current oil-based marine fuels measured from well-to-wake.
This report used the latest primary data to assess all major types of marine engines and global sources of supply with data provided by original equipment manufacturers including Caterpillar MaK, Caterpillar Solar Turbines, GE, MAN Energy Solutions, Rolls Royce (MTU), Wärtsilä, and Winterthur Gas & Diesel, as well as from ExxonMobil, Shell, and Total on the supply side. Methane emissions from the supply chains as well as methane released during the onboard combustion process – also known as methane slip – have been included in the analysis.
Peter Keller, chairman of lobby group SEA-LNG, commented on the publication of this review: “Often based on outdated data, methane slip has become an overused argument for those wishing to justify inaction.”
The study claims that by 2030 methane slip will have been “virtually eliminated” as technological improvements continue.
The 77th gathering of MEPC is due to be held from November 8 to 12, coinciding with COP 26, a major international climate summit, also taking place in the UK. Splash will be bringing readers updates from both events.
MINING:
How the decarbonization megatrend is disrupting mining investment
Mining.Com, September 29, 2021
The mining and metals sector will see sweeping changes from the transition to a low carbon economy out to 2030, says market analyst Fitch Solutions in its latest industry report.
Some of these changes have already begun and will be accelerated in 2021 and beyond as government policy becomes increasingly stringent and investors’ pressure on ESG credentials rises. The transition will require large investments to reduce miners’ emissions and to increase exposure to new growth markets, Fitch points out.
“It will also disrupt industry trends for almost all sub-sectors, dooming the coal industry, reviving copper and green steel, and prompting the emergence of new sectors including lithium. As such, it poses key risks and opportunities to the entire mining and metals sector.”
The decarbonisation megatrend will bring risks to the sector, as it will require large investment to adapt processes and reduce emissions. It will also disrupt businesses linked to the commodities in decline, which include coal, along with low-quality iron ore, steel, and zinc, says Fitch.
Opportunities for mining and metal players
While the energy transition will require the sector to adapt deeply, these shifts also present a number of key opportunities for the mining and metal players, Fitch predicts. Overall, large players will likely benefit, the analyst says, from being able to rely on stronger investment capacity and more robust risk management functions. This could help them gain market share at the expense of junior miners, which will struggle to adapt to the low carbon economy.
There will be key direct business opportunities for players producing or operating in the space of the critical materials for the battery revolution, the boom in renewables capacity or the for the ‘zero carbon economy’ which include copper, nickel, aluminium, tin, lithium, cobalt, and low-carbon steel.
Mining and metal players that have reduced significantly their emissions or that have developed new techniques to produce low-carbon products (low-carbon aluminium, steel, ‘zero-carbon lithium, etc) will also likely be able to command a price premium, as their clients strive to reduce their own scope-3 emissions, Fitch says.
Business strategies starting to evolve
Companies have already started to position themselves and invest to benefit from these trends since 2020. This will be strongly encouraged by earnings at multi-year highs in FY2021 (and likely into FY2022), Fitch says, and as mining and metal players are planning on increasing significantly their capital expenditures.
In July, Rio Tinto committed $2.4bn to its Jadar lithium mine project in Serbia, a project which is expected to begin production in 2026 and which would help make the company among the top 10 lithium producers globally. Rio Tinto could look at acquiring other lithium-related projects in the coming years. The company is also moving forward with the Winu copper-gold project in Australia and the Oyu Tolgoi expansion in Mongolia.
Meanwhile, BHP has identified in 2020 nickel, copper, and potash as priority investment sectors, under its “future facing” commodities initiative, as the company shifts away from fossil fuels.
In April 2021, Vale said it is exploring spinning off of its base metals business from the iron ore business to unlock value for its nickel and copper businesses amidst the EV battery value chain boom.
Vale is the largest producer of nickel ore globally and aims to increase copper output in the coming years, with the development of a new deposit (Hu’u) in Indonesia.
Meanwhile, Russian aluminium producer Rusal, the world’s largest aluminium producer outside China, is in the process of demerging its high-carbon smelters and refineries into a new company so that it can focus on the fast-growing market for “green” aluminium.
(Read the full report here)
POLITICS:
Harris’s poll numbers rise as Biden’s fall
Amie Parnes, The Hill, September 30, 2021
Vice President Harris has rebounded in recent weeks, regaining her footing with approval ratings that now stand higher than President Biden’s.
Harris got off to a rocky start at the beginning of the administration, including a botched response on why she hadn’t traveled to the Mexican border, when she said she hadn’t been to Europe either.
But her allies say Harris, whose difficult start provoked questions about her ability to be a future presidential candidate for the party, “has found her place” in the White House.
“I think there’s definitely a feeling that things have been smoother,” said one ally. “It seems like they have ironed out some of the initial wrinkles.”
Julian Zelizer, a professor of history and public affairs at Princeton University, said Harris has “started to solidify her position and strengthen the office, gaining a sense — always difficult for a VP — of what her role should be in the administration.”
“The key will be how those numbers hold as policy controversies continue and politics heats up,” he added.
A Gallup poll last week showed 49 percent approved of Harris’s job as vice president, 6 points higher than Biden’s 43 percent approval rating. It’s a significant change for both Biden and Harris. The president fell 6 points since August and 13 points since June. Harris’s current approval rating is the same as Biden’s in 2009, when he served as Barack Obama’s vice president.
The Sept. 22 Gallup poll — conducted earlier in the month — also revealed that the vice president performed better than Biden with independents, a stunning revelation for a man who was catapulted to the White House because of support from that demographic.
It’s unclear why Harris’s numbers have risen higher than Biden’s in some surveys, though Biden in the last two months has gone through the most difficult phase of his presidency so far. Biden has received bipartisan criticism related to the U.S. withdrawal from Afghanistan and has also taken some hits over the prolonged coronavirus pandemic.
The president has also been criticized over his handling of the border and immigration, taking hits from the left and the right over an influx of migrants from Haiti for the last few weeks.
Harris, in contrast, has been more in the background than the foreground on those controversies, though she did win headlines for criticizing the way some Haitian migrants were being treated by border agents.
Most Democratic strategists and observers say Harris hasn’t had a singular moment or two that has boosted her in the public realm.
“Nothing specific,” said Basil Smikle, the Democratic strategist and former executive director of the New York State Democratic Party, when asked if there has been a standout moment for the vice president.
He suggested the White House could actually benefit by doing more with Harris.
Smikle said that while Harris has been accessible, for example by appearing at Howard University’s homecoming, “the White House could bring her in more closely — as other administrations have — but they seem to keep her at a little distance, which may have been helpful to her in the long run.”
Other strategists say Harris has benefitted from Republicans setting their sights on Biden in recent weeks. They have portrayed him as weak on the border and Afghanistan.
“My instinct is to say that so much fire has been aimed at Biden, Harris’s numbers have gone up by sheer virtue of being out of the spotlight,” Democratic strategist Christy Setzer added. “She’s not giving anyone fresh reason to dislike her, so her polling numbers revert to the mean, with the country about evenly divided on the Black woman in the No. 2 spot.”
But Harris has appeared to settle into more of a role in her vice presidency. Last week, she hosted the leaders of Zambia, Ghana, and India separately. On Wednesday, she hosted a meeting with five Latino small-business leaders. Harris has been increasingly active politically too, giving a forceful speech for Calif. Gov. Gavin Newsom (D), fundraising for Virginia Democratic gubernatorial candidate Terry McAuliffe and attending an event at George Mason University for National Voter Registration Day.
To be sure, Harris’s polling numbers are not spectacular. The same Gallup poll that showed her with a 49 percent approval rating showed she had a 49 percent disapproval rating. Other polls in the last month also show her with support in the low or mid-40s, though some polls in August had her hovering in the mid- to high 30s.
Not everything has gone to plan for Harris either. Aides and allies grew frustrated last week after she was scheduled for an in-studio interview on “The View,” but two of the hosts were pulled from the set after they tested positive for COVID-19.
Harris conducted the interview virtually as a precaution, even though she had flown from Washington to New York for the program. The hosts subsequently tested negative, and the tests were ruled a false positive.
The Harris ally called the incident “unfortunate” while saying Harris needs to continue to up her national stature for her own political prospects.
“I think we’re all happy to see her settle into her role and find her bearings, but I think even she knows she has a long way to go,” the ally said
CLIMATE CHANGE:
Climate Change Is Causing ‘Eco-Anxiety’ Among Young People: Study
Tashafi Nazir, The Logical Indian,
A recent study, comprising of 10,000 young respondents from across 10 countries, has stated that their generation is experiencing “high levels of psychological distress” due to climate change. The government’s inaction has further worsened the growing crisis.
Rising temperatures, intense heat waves, tornadoes, floods, hurricanes, fires, loss of forest, and glaciers, combined with disappearing rivers and desertification can, directly and indirectly, can impact human health and wellbeing. Now, a recent study has stated that the young generation is experiencing “high levels of psychological distress” due to climate change. The government’s inaction has further worsened the growing crisis. In the study, which is being termed as a one-of-its-kind survey, responses from as many as 10,000 young people (between 16-25 years) were recorded. It was led by Bath University in collaboration with five universities, reported BBC.
What Are The Key Findings?
Amongst them, 45 per cent believed that anxiety and stress due to climate change was impacting their daily lives and affecting the proper functioning of normal chores. As part of the survey, 10,000 youths and teenagers were selected by the authors of the study from 10 different countries. India was also selected among the United States, Australia, Nigeria, and the Philippines. After the completion of the study, three-fourth of young adults believed that “Their future is frightening,” and 65 per cent of them believed that their respective governments were not doing their bit to curb such catastrophes exacerbated by climate change.
The countries with the highest proportion of respondents who felt ‘very tensed’ or ‘extremely tensed’ by climate change were the Philippines (84%), followed by India (68%) and Brazil (67%). These countries have been hard-hit by climate change. Portugal — where wildfires are becoming highly severe — had the highest level of very worried or extremely worried respondents (65%) amongst the high-income nations surveyed, which included France, Finland, Australia, and the United States. “A dreadful picture of widespread climate anxiety in our children and young people has come out from this study,” Caroline Hickman, co-lead author of the study stated, according to Nature. Hickman is also a professor and researcher at the University of Bath in the United Kingdom.
Psychological Distress Linked To Government Inaction
Described as the first large-scale study of climate anxiety, it was assisted by human rights activists, academics, and mental health experts, including Dr. Eric Lewandowski, a New York University clinical associate professor. It was funded by AVAAZ, a U.S. nonprofit organisation that promotes global activism, and it is expected to be published in The Lancet Planetary Health. “For the first time, the study has suggested that high levels of psychological distress in the young generation is linked to the government inaction,” Hickman explained, as reported by Nature. When asked about how governments are responding to climate change, 65 per cent of the surveyed adults agreed with the statement that governments are failing the young generation, 64 per cent agreed that they lie about the impact of actions taken by the government and 60 per cent agreed they were dismissing people’s distress. Only 36 per cent agreed that governments are acting appropriately as per science. However, young adults do feel reassured when governments act. “Our children’s anxiety is entirely a rational reaction, given the inadequate responses to climate change they see from governments. What more do the authorities need to hear to take action?”
Experts React To The Study
As climate change contributes to deadly weather events, more organisations are getting active over time to control it. Quill Robinson, vice-president for government affairs of the American Conservation Coalition, a conservative advocacy organisation, tries to prepare young adults around market-based environmental action. “Unfortunately, I am not surprised that the young generation is so worried and scared of climate change,” Robinson said. “Both young as well as old need to tell a factual story about climate change,” he added. The survey comes at a time when the young generation has voiced their thoughts about the issue of climate change. A worldwide youth-led “climate strike,” with rallies planned in thousands of cities, was conducted on Friday, 24th September. “Young people all over the globe are very well aware that the people in power are failing us,” Greta Thunberg, the world-famous teenage climate activist was quoted in the study.