OIL
US officials: report on oil and gas sale ban due by summer
Matthew Brown, Associated Press, March 9, 2021
The Biden administration said Tuesday that it will deliver an interim report on its suspension of oil and gas sales from federal lands and waters by summer, but officials declined to state how long the moratorium could remain in place.
A long-term ban on lease sales from the nation’s vast, publicly owned oil and gas reserves to address climate change would fulfill a campaign pledge from Democratic President Joe Biden.
The prospect has rankled Republicans and petroleum industry representatives, who have said that Biden is putting tens of thousands of jobs at risk as the economy reels from the pandemic.
Oil and gas from federal reserves in western states and the Gulf of Mexico make up about a quarter of U.S. production.
Lease sales to companies for drilling have been a frequent target of lawsuits from environmentalists who contend officials have ignored the oil and gas program’s climate impact.
Biden announced a temporary suspension of new sales one week after he took office.
Tuesday’s announcement offered the first details of a review of the Interior Department program that officials said will examine climate issues and whether taxpayers are getting a fair return on sales of energy leases to private companies.
Last month, the administration postponed lease sales in the Gulf and four states – Colorado, Montana, Utah, and Wyoming.
“The federal oil and gas program is not serving the American public well,” Interior Department Principal Deputy Assistant Secretary Laura Daniel-Davis said in a statement. “It’s time to take a close look at how to best manage our nation’s natural resources with current and future generations in mind.”
The administration has pledged to spend billions to assist in the transition away from fossil fuels such as oil, gas, and coal. Biden has said creating clean-energy jobs is a top priority.
There is no estimate on how long the review could take, agency spokeswoman Melissa Schwartz said.
Even a short-lived suspension on leasing will quickly affect companies, tying their hands as they seek to make drilling plans for coming years, said Erik Milito of the National Ocean Industries Association, which represents oil companies operating offshore.
“We will begin seeing companies starting to make decisions that will shift investments and jobs out of the U.S.” Milito said. The longer a suspension goes, he added, the more susceptible the administration will be to legal challenge.
Democrats, environmentalists, and left-leaning policy groups said the leasing program has remained unchanged for decades and needed to be reformed in the face of climate change.
“The oil and gas leasing program is broken, plain and simple,” said Jenny Rowland with the Center for American Progress, a liberal, Washington-based policy group that has been supportive of Biden’s agenda.
The Interior Department said it will host a livestreamed forum on the leasing program on March 25 to get input from industry representatives, labor and environmental justice groups and natural resource advocates.
A report outlining initial findings and the next steps in the review will be completed by early summer, officials said.
GAS
An Arctic LNG tanker is in drydock to repair damage from a winter test voyage
Malte Humpert, High North News, March 8, 2021
A highly ice-capable natural gas carrier suffered damage to one of its engine pods during a first-of-its-kind winter transit without icebreaker support on Russia’s Northern Sea Route. The Nikolay Yevgenov has arrived at a dry dock in France last month to undergo repairs, highlighting that Arctic navigation remains challenging.
Sea ice may be melting at record rates, but winter in the Arctic Ocean remains a formidable obstacle even for highly specialized ice-class vessels.
In January Russian natural gas company Novatek sent two Arc7 ice-class natural gas carriers on test voyages to deliver liquefied natural gas from its Yamal LNG plant in the Russian Arctic to China via the Northern Sea Route. Christophe de Margerie departed first followed by sister ship Nikolay Yevgenov a day later. In contrast to previous winter transits, the ships navigated independently without the assistance of Russian nuclear icebreakers.
Currently the navigation season on the Northern Sea Route lasts from July until December. But Novatek and its shipping partners hope to regularly ship LNG to Asia year-round where natural gas prices are generally higher than in Europe — which so far has been the sole destination for winter shipments.
MINING
Energy Transition Leads To Higher Oil Prices, Metals Shortage
Irina Slav, OilPrice.Com, March 8, 2021
Three billion tons: this is how much metals and minerals the energy transition will require, according to a World Bank report. Demand for some of these, such as copper, lithium, cobalt, and graphite, is set to increase 500 percent by 2050, according to the same report. And the market for some of them—namely copper—is already near a deficit.
Copper prices are close to record highs last seen in 2011, and one analyst at least expects demand to exceed supply before this year’s end. Demand, Natalie Scott-Gray from StoneX said last month, as quoted by Mining.com, will rise by 5 percent this year while supply will only inch up by 2.3 percent. The longer-term problem is that additional supply takes time to come.
“We see the use of electric vehicles, wind farms and solar requires up to five times the amount of copper,” Jeremy Weir, chief executive of Trafigura, said at this year’s edition of CERAWeek, as quoted by Reuters. “You can’t turn on the switch and produce more copper.”
Weir added that copper mines take between five and ten years to develop, which means a tighter supply in the observable future. The situation is similar to other minerals that are essential for the energy transition. Cobalt prices are on the rise, too, at the moment, because of expectations that supply will tighten due to rising demand. And Tesla’s Elon Musk recently inked a deal to make the company a technical adviser at the Goro mine in New Caledonia to secure its long-term nickel supply—another key battery metal.
POLITICS
From the Washington Examiner, Daily on Energy:
THE LATEST ON BIDEN PLANS: The Interior Department announced this morning it is planning to propose updates to the federal oil and gas leasing program, suggesting the Biden administration might be leaning toward reforming fossil fuel leasing rather than outright banning it.
Interior is hosting a forum March 25 on its oil and gas leasing program, which will inform an interim report the agency plans to release in early summer that will offer next steps and recommendations for Congress.
President Biden has imposed an indefinite pause on issuing new oil and gas leases on federal lands and waters. Industry officials and states reliant on royalties from federal oil and gas production, including states run by Democrats, have been watching to see whether Interior tries to turn the pause into a ban. Biden promised a ban during the campaign, but his Interior secretary nominee Deb Haaland assured Republicans during her confirmation hearing that the leasing pause won’t be a “permanent thing.”
Possible reforms to look for: The new steps outlined by the Interior Department suggest it instead might be looking to work with Congress on imposing changes to the leasing program to make it harder and costlier to develop oil and gas on public lands.
Interior provided data showing that most of the leased land is banked by speculators without leading to immediate production. Onshore, of the more than 26 million acres under lease to the oil and gas industry, nearly 13.9 million of those acres are non-producing. Onshore and offshore, the oil and gas industry currently holds about 7,700 unused, approved drilling permits.
“This forum will help inform the Department’s near-term actions to restore balance on America’s lands and waters and to put our public lands’ energy programs on a more sound and sustainable conservation, fiscal and climate footing,” said Laura Daniel-Davis, Interior’s principal deputy assistant secretary of land and minerals management.
Multiple bills have been introduced recently in Congress, including measures raising royalty rates companies pay to the government, increasing public input into the leasing process, requiring cleanup and remediation of orphan wells, and cracking down on methane emission.
Everybody at the table: The upcoming forum will include panel discussions involving fossil fuel industry representatives and labor and environmental justice groups.
Many environmental groups issued statements this morning supporting the forum and review of the leasing program, but some left-leaning ones are still hoping for a ban.
“If done correctly, [the review] will show that federal fossil fuel programs must come to an orderly end. The Biden administration did the right thing by suspending fossil fuel leasing of our federal lands and waters. Now it needs to be made permanent,” said Taylor McKinnon, senior campaigner at the Center for Biological Diversity.
The group America’s Offshore Energy Industry said it “stands ready to work” with the Biden Administration, but it expects the review to lead to a resumption of leasing “more quickly.”
CLIMATE CHANGE
Shopify becomes carbon removal startup’s first customer
Ben Geman, Axios, March 9, 2021
Carbon Engineering,a startup looking to commercialize tech that sucks CO2 out of the atmosphere, today launched its business for permanent carbon-removal purchases and said e-commerce giant Shopify is the first customer.
Why it matters: The Canada-based direct air capture (DAC) startup — whose backers include Bill Gates, Occidental and Chevron — said Shopify’s deal for 10,000 tons of CO2 removal is the largest publicly announced corporate DAC buy ever.
Driving the news: The Canadian company is planning to build industrial-scale capture facilities with the development company 1PointFive, a venture between Occidental Petroleum and Rusheen Capital Management to deploy Carbon Engineering’s tech.
What’s next: Carbon Engineering hopes to have its first commercial-scale plant in operation in 2024.
Under the newly launched removal service, customers will pay a deposit, with the balance due once the removal has occurred and been independently verified. Higher volumes bring discounts.
What we don’t know: The costs of Shopify’s deal. Carbon Engineering declined to provide the per-ton removal cost.
The big picture: DAC is one of the various methods for removing atmospheric CO2.
- Removal doesn’t replace the need for steep emissions cuts to meet the Paris Agreement goals.
- But a major 2018 report by the UN’s science panel found that pathways to limiting warming to 1.5ºC — the Paris deal’s most ambitious goal — rely on varying levels of removal.
- Carbon removal methods are more broadly part of wider efforts to contain warming and are drawing increasing investment from big companies like Amazon, Microsoft, and United Airlines.
Yes, but: DAC is in its infancy but companies like Carbon Engineering and the Swiss firm Climeworks are looking to make it mainstream. It would need to scale up by orders of magnitude — and costs would need to come down — to become an important tool against global warming.
What they’re saying: Carbon180 President Noah Deich said the growth of corporate emissions targets — which many big companies are now adopting — will be an important early driver of DAC and help drive down costs.
- “There is this huge corporate demand for something better than you can get on the voluntary offset market,” said Deich, whose nonprofit group is centered on the development and deployment of CO2 removal.
- “It costs a lot more than voluntary offsets you would buy off the shelf, but it makes a much, much more credible case that you are removing a ton of CO2 for every one that you emit,” he adds.