Today’s Key Takeaways: Wood Mac’s Top 5 energy trends for 2023. Plastics drive oil demand higher. Backlash from banning gas stoves. Sweden home to Europe’s largest, rare-earth deposit. Pro-resource development policies from new House Natural Resources Committee.
NEWS OF THE DAY:
Five Major Energy And Resources Trends To Look Out For In 2023
Bojan Lepic, Rigzone Staff, January 12, 2023
The year ahead carries a multitude of trends that should be closely watched, and analyst company Wood Mackenzie has listed five of the most important ones for energy and natural resources.
1. The world is adapting, but no end in sight for the energy crisis
The worst of the crisis may now have passed. Wood Mackenzie expects gas prices in Europe to be lower this year, albeit still at multiples of historical averages. Warm weather in Europe has eased the immediate pressure, and the market has begun to rebalance.
Gas demand in Europe fell 13% from July to December and developers have started to push through a wave of LNG project FIDs to boost supply. It is worth noting that no additional gas volumes of any scale will reach the market until 2025. Until then, gas prices in Europe and Asia will stay structurally high.
Power markets in Europe also remain severely stretched. Improved hydro availability and falling gas prices late in 2022 have softened prices – by the end of the year, German baseload for 2023 was almost 80% down from the summer’s extraordinary high of more than 900 EUR/MWh.
More wind and solar capacity added through 2022 and in 2023 helps. But with the French nuclear fleet continuing to underperform, Europe will rely on expensive gas and coal to keep the lights on – higher emissions are the unavoidable consequence. We expect German baseload prices to average 15% to 20% below 2022’s level but that’s still four to five times above the levels seen before Russia invaded Ukraine.
The risks? First, gas – a resurgent Chinese economy could pull LNG supply away from Europe next winter. Second, over-zealous intervention in gas and power markets creates more problems than it solves. Third, a big wildcard – war spreads into Europe, threatening disruption to non-Russian gas supplies into the region.
OIL:
Why Can’t Tesla Drive US Oil Demand Lower? Plastics
Javier Blas, Bloomberg, January 10, 2023
It’s the battle that will define the US oil market this decade. On one side, the combination of rising sales of electric vehicles, more efficient conventional cars, and the impact of working-from-home is pushing down gasoline demand; on the other, the ever-growing popularity of plastics combined with a growing population is boosting consumption of petrochemicals.
In short, one can call it “Tesla against the plastic industry.”
If Tesla and its electric-vehicle rivals win the battle, oil demand will peak soon, helping to meet global climate change goals by reducing consumption of fossil fuels. For now, however, plastics have the upper hand, keeping overall oil demand growing.
On Tuesday, the Energy Information Administration, the statistical arm of the US Department of Energy, released its first forecast for the 2024 oil market. The look is tentative but provides early clues about its direction. Every January, the EIA is the first of the three major public bodies to publish its outlook for the next year. The International Energy Agency will release its take in June, and OPEC will follow up a month later.
The EIA analysis shows that US oil demand will rise next year to 20.63 million barrels per day, surpassing the most recent peak, set in 2018 and 2019, and within a whisker of the all-time high set between 2004 and 2007 when demand averaged 20.7-20.8 million barrels per day just before the onset of the global financial crisis.
GAS:
Banning gas stoves gets Americans’ blood boiling
Liz Leek, The Hill, January 12, 2023
Sometimes it’s the little things – the one indignity too many – that cause people to revolt. Banning new gas stoves, as a commissioner on the Consumer Product Safety Commission (CPSC) has suggested, could be the diktat that finally brings Americans to rebel against the government’s incessant, autocratic and ultimately insulting intrusion into our daily lives.
The European Union found that out the hard way. Just weeks before the British went to the polls to vote on whether they wanted to remain in the EU, reports leaked that the unelected bureaucrats in Brussels planned to ban electric teakettles that were a staple of British kitchens, because they used too much electricity.
MINING:
Europe’s largest, rare earths deposit found in Sweden
Cecelia Jamasmie, Mining.Com, January 12, 2023
Swedish state-owned mining company LKAB said it had found Europe’s largest known deposit of rare earths close to Kiruna, the country’s northernmost town.
The discovery could help the continent break away from China’s dominance in the sector. The nation produces about 98% of the group of 17 minerals used in electric vehicles (EVs), portable electronics, wind turbines and military equipment.
The Per Geijer deposit, just north of the company’s largest iron ore mine in the Swedish Arctic, is estimated to contain more than 1 million tonnes of rare earths, LKAB said.
Work is still in an exploratory phase, the miner noted, and the full extent of the deposit is not known.
“It will be at least 10 to 15 years before we can actually begin mining and deliver raw materials to the market,” chief executive officer Jan Mostrom said in the statement, citing a timeline derived from other permitting processes in the industry.
LKAB plans an application for an exploration concession this year, before seeking permits.
POLITICS:
INTERVIEW WITH WESTERMAN: Republican control of the House Natural Resources Committee will mean a significant change in direction after two terms with Rep. Raul Grijalva at the helm, when environmental justice and climate change were at the fore.
Don’t expect more of the same under the leadership of Chairman Bruce Westerman, who flaunted his subpoena power and threatened the Interior Department’s appropriations in an interview discussing where he wants to take the committee.
More from the interview: The party’s goal, Westerman said just after Republicans took the majority in November, will be to “stop bad policy” of the Democrats as much as it will be to pass their own policies.
Blocking President Joe Biden may well be most of what they’re able to do with a Democratic Senate, but Westerman said he plans to take up legislation early on energy, as well as mining, to facilitate more domestic sourcing of critical minerals.
“The country’s got to come to grips with where we want to go with this electric economy, and if we do, are we going to be totally dependent on China and other countries like that to supply the materials we need to do the electrification?” Westerman told Jeremy. “And I think the answer to that is, no, we’re going to produce these elements and minerals on our own.”
Democrats have promoted more domestic mining with changes they made to the clean vehicle tax credit in the Inflation Reduction Act, although some members and the administration have opposed some major mining projects over environmental concerns.
The Biden administration has proposed to withdraw mineral-rich acreage in the Rainy River watershed in Minnesota, where the Twin Metals sought to mine copper, nickel, and other metals, to protect it from any mineral leasing for a 20-year period.
Another major project, the Resolution Copper mine project in Grijalva’s home of Arizona, has been held up by litigation. The Biden administration in 2021 withdrew a decision by the Trump administration to advance a land exchange for the mine, and Grijalva introduced legislation last Congress to prohibit the Forest Service from handing over the land, which is sacred to some Native American groups.
Westerman said these kinds of decisions don’t align with the scale of expansion necessary to meet demand, adding that he and his fellow committee members on Natural Resources plan to make it a priority to poke holes in these components of the Democrats’ green energy agenda.
“It’s a ‘not in my backyard’ policy, and we saw a Democratic majority in the House in the last Congress that wasn’t just neutral on the issue. They actually attacked mines,” the Arkansan said.
Permitting reform priorities: Talk of reforming environmental review and permitting laws has been muted so far early in this Congress, overtaken by initial housekeeping work and other immediate legislative priorities. Westerman said it’s high on the list, though, and said he’s talked with Sen. Joe Manchin, whose permitting bill sought to speed up the review of all categories of energy infrastructure projects but failed to pass.
“I hope to work with him. I hope to work with others that want to get something done,” Westerman said. “It’s not just that you can’t permit gas and oil. You can’t permit a lot of these so-called green energy projects. It’s not that you can’t just permit a natural gas pipeline, you can’t permit a cross country electrical transmission line.”
This is one of a few areas ripe for compromise in the new Congress. Republicans have long advocated reforms to implementation of the National Environmental Policy Act and other environmental laws, and Senate Democrats, including some “climate hawks,” overwhelmingly supported Manchin’s bill. Biden approved of Manchin’s bill, too.
From the Washington Examiner, Daily on Energy