Today’s Key Takeaways: France moving to reduce nuclear plant construction times. Since 2007, ConocoPhllips Alaska has earned $24B and paid the state $33B. Shell’s LNG trading division loses $1B in Q3. Canada orders China to divest from lithium miners. Attacking Big Oil – last-gasp effort before election – will it work?
NEWS OF THE DAY:
MACRON PUSHES TO REDUCE NUCLEAR PLANT CONSTRUCTION TIMES: French President Emmanuel Macron introduced draft legislation that will accelerate the construction of new nuclear projects, seeking to bring new facilities online as France grapples with its aging nuclear fleet and a looming winter energy crisis.
The draft bill, which was presented yesterday to the French parliament, seeks to reduce the overall construction time for new facilities by more than two years—largely through streamlining certain bureaucratic processes and reducing the amount of red tape needed to bring new projects online.
If approved, it would allow French nuclear plant owner EDF to begin preparatory earthworks and the construction of other buildings as it awaits government approval to begin constructing core nuclear facilities.
Why it matters: Inrecent months, more than half of the country’s 56 reactors have been shut down due to corrosion, as well as maintenance and technical problems—sending France’s nuclear power generation plummeting to a 30-year low and raising fears about one of Europe’s key sources of power as it braces for its first winter without Russian fossil fuels.
France relies on its reactors to generate 70% of its electricity annually. Macron also announced plans earlier this year to bring six new reactors online, making nuclear power generation center to France’s push to reach carbon neutrality by 2050.
From the Washington Examiner, Daily on Energy
NEWS RELEASE November 3, 2022
2022 Third Quarter Alaska Earnings Review ANCHORAGE, Alaska – In connection with ConocoPhillips’ third-quarter 2022 earnings announced earlier today, ConocoPhillips Alaska reported the following 2022 earnings.
ConocoPhillips Alaska reported net income of $580 million in the third quarter of 2022.
ConocoPhillips Alaska incurred an estimated $763 million in taxes and royalties in the third quarter of 2022, which includes $580 million to the State of Alaska and $183 million to the federal government.
Additionally, in the third quarter of 2022, ConocoPhillips Alaska invested $269 million in capital in the state and remains on track to invest approximately $1 billion in 2022.
“ConocoPhillips continues to invest on the North Slope to produce new barrels and generate revenue for Alaska,” said Erec Isaacson, president, ConocoPhillips Alaska. “Alaska’s existing fiscal regime is key to promoting a stable environment for ongoing investment. Over the last three years of significant oil price volatility, ConocoPhillips Alaska has incurred $4.2 billion in taxes and royalties, while still investing $2.8 billion in capital in the state since January 1, 2020. Our net income was $2.5 billion during that same time.”
Since 2007, ConocoPhillips Alaska has incurred more than $42 billion in taxes and royalties to the State of Alaska and the federal government.
Of that amount, about $33 billion went directly to the state. In that same period, ConocoPhillips Alaska’s earnings have been approximately $24 billion.
Shell’s Flagship LNG Trading Division Made Big Loss In Q3
Alex Kimani, OilPrice.Com, November 3, 2022
- Reuters: Shell’s giant LNG trading division made $1 billion loss in Q3.
- Gas trading divisions by Shell’s peers performed much better.
- Nevertheless, Shell was still able to post its largest quarterly profit at $9.45B from $4.13B during last year’s corresponding period.
Shell Plc’s (NYSE: SHEL) flagship LNG trading division reported a loss of nearly $1B, sources have revealed to Reuters. The loss is attributed to serious whiplash after the company’s LNG traders were caught flat-footed by the surge in natural gas prices following Russia’s gas supply cuts to Europe. The latest revelation is, however, hardly surprising given that Shell has issued a weak update issued earlier in October.
“Earnings estimate (US$8.2bn) is 8% below consensus and we believe the gas trading issues in Q3 could extend to 4Q if the JKM-TTF differential widens again,” Jefferies said after the update while maintaining a Buy rating for SHEL stock.
The loss was a result of a wrong bet on the difference between benchmark Asian and European gas prices over the summer months, with European prices far oustripping those by their Asian brethren. JKM (Japan-Korea Marker) generally acts as a satellite price to the more liquid European benchmark TTF (Title Transfer Facility) gas hub price. Growth in spot trading liquidity has seen JKM increasingly used as the basis for physical trades (both in and outside Asia) as well as increasingly a contract reference point for derivatives (e.g. JKM swaps) and even medium to longer term supply contracts.
Nevertheless, Shell was still able to post its largest quarterly profit at $9.45B from $4.13B during last year’s corresponding period. Shell also raised its dividend for Q4 by 15% and announced plans to buy back another $4B of shares in the quarter, bringing total share repurchases for the year to $18.5B.
Canada Orders Three Chinese Firms to Divest From Country’s Lithium Miners
Jacob Lorinc, Bloomberg, November 3, 2022
- Trio of miners caught up in Canada’s push to protect minerals
- China says Canada’s practice will hurt supply chain stability
The stocks of three junior lithium explorers tumbled after Canada’s government ordered their Chinese investors to divest under tougher foreign investment rules around the nation’s critical minerals sector.
Shares of Power Metals Corp. sunk as much as 21% on the TSX Venture Exchange in Toronto, its biggest intraday decline since April 2020. Ultra Lithium Inc. fell nearly 13%, while Lithium Chile Inc. slid as much as 10% before recovering.
The plunge came after Canada’s government said in a Wednesday statement that it’s ordering three Chinese firms to divest from the trio due to strengthened guidelines to protect the country’s minerals wealth.
“Though the divestiture order is not likely to affect the business operations of those three Chinese firms in the near term because all three lithium mining projects are still under early-stage exploration status, the latest attitude from Ottawa underscores the global competitions for critical battery minerals,” Susan Zou, senior analyst at RystadEnergy, said in a note to clients.
Will Democratic attacks on Big Oil pay off with voters?
Nico Portuondo, E & E Daily, November 2, 2022
Democrats have launched a last-gasp effort to change the narrative around high gasoline prices ahead of next week’s midterm elections, in a move some strategists say could shield candidates from Republican attacks.
On campaign stops and press conferences, Democrats are coalescing around attacking oil company profits. While the average price of gasoline remains above $3.70 a gallon nationwide — and above $4 in Western states — Exxon Mobil Corp. and Chevron Corp. reported more than $30 billion in combined third-quarter profits.
President Joe Biden, in response, threatened Monday to work with Congress on legislation to impose a tax on windfall profits. Since then, other Democrats have escalated the narrative against Big Oil.
“Their profits are a windfall of war,” Biden said in reference to the conflict in Ukraine. “Any company receiving historic windfall profits like this has a responsibility to act beyond their narrow self-interest of its executives and shareholders.”
Pennsylvania Democratic Lt. Gov. John Fetterman — who is courting moderates from both parties and recently delivered a strong endorsement of fracking — penned an op-ed on Fox News against oil profits.
“We have to do more to bring down costs and curb inflation,” wrote Fetterman on Tuesday. “It starts with cracking down on the huge corporations and big oil companies that have been raking in record profits.”
And during a Fox News town hall event Rep. Tim Ryan (D-Ohio), who is running against Republican J.D. Vance for Senate, received applause when he noted energy companies were making record profits while Americans struggled.
“I think that’s wrong. And I think we need to crack down on it,” Ryan said.
Sen. Sheldon Whitehouse (D-R.I.) and Rep. Ro Khanna (D-Calif.) participated in a Twitter event Tuesday in which they accused Republicans of selling out to oil companies by opposing legislation against windfall profits.
Whitehouse and Khanna this year proposed the “Big Oil Windfall Profits Tax Act” — S. 3802 and H.R. 7061 — to impose a 50 percent per-barrel fee on the difference between the current price of oil and the average price between 2015 and 2019.
“When big special interests ominously spend a billion dollars on a handful of Republican Senate candidates, it’s unreasonable to expect that those Republican Senate candidates will pay attention to anybody other than the folks who spent a billion dollars to get them there,” said Whitehouse. “So, have some confidence the Democrats will take on Big Oil.”
Several major oil companies and groups have made major contributions to political action committees helping Republicans in their quest to regain control of the House and Senate, according to a review of records by E&E News (E&E Daily, Oct. 26).
Too little, too late?
Democratic strategists applauded the recent messaging from the president and candidates as a politically effective and easy-to-understand concept for voters to a problem that is rooted in a complicated global oil market.
Democrats have similarly been railing against OPEC for working with Russia in announcing production cuts meant to keep international prices high (E&E Daily, Oct. 11).
“The dichotomy between high gas prices and record profits is a very favorable contrast to be showcasing,” said Jonathan Voss, a strategist at Lake Research Partners, a Democratic polling firm. “It does make sense to me to highlight that over OPEC, rhetorically, just given how clear that contrast is for people in their everyday lives.”
A POLITICO/Morning Consult survey from May showed that 77 percent of voters would support a federal government ban on energy price gouging, including 83 percent of Democrats and 76 percent of Republicans. Voss said those results suggest that going after oil companies with accusations of price gouging has crossover appeal with voters.
Democrats have been laying the groundwork for their campaigns against the oil industry for months. The House passed H.R. 7688 to investigate price gouging, and Senate Finance Chair Ron Wyden (D-Ore.) worked with Majority Leader Chuck Schumer (D-N.Y.) on the “Taxing Big Oil Profiteers Act,” S. 4768, which also targets oil company profits and would end industry allowances.
But talk of the legislation has failed to gain traction on the campaign trail, perhaps because the bills themselves have failed to advance, particularly in the evenly-divided Senate (E&E Daily, Oct. 19).
During a debate this month, Sen. Raphael Warnock (D-Ga.) brought up oil company profits when Republican challenger Hershel Walker accused Democrats of putting America’s energy independence in peril.
Warnock said, “There’s no question that people are feeling pain, at the grocery store, at the pump, at pharmacy counters. And while we are paying record prices, a lot of our corporate actors are seeing record profits — the oil and gas industry, the pharmaceutical industry.”
With polls showing voters remain worried about inflation and the economy, and they generally favor Republicans on the issue, Democrats are hoping they can still shift the narrative. A problem for the party is that there may not be enough time.
“Although I think what Biden said on Monday was incredibly effective, so many people have voted or already decided I’m not sure how much it’s going to affect votes before next Tuesday,” said Democratic strategist Calvin Dark, co-founder of RC Communications DC.
Oil industry, Republican backlash
Republicans have stood firmly behind their message that Biden and Democrats are to blame for high gasoline prices because of the party’s green energy agenda and limiting new drilling leases on public lands and waters.
Republican National Committee Chair Ronna McDaniel this week said that the president “was lying” and that the “best way to lower gas prices is to vote Republican.”
Donald Bolduc, the Republican Senate nominee in New Hampshire, who was endorsed by former President Donald Trump, said during a recent debate that Democrats’ actions on drilling “put us in this spot.”
Analysts have long said blaming Biden and Democrats for high gasoline prices is misleading and that GOP solutions would have little immediate impact (E&E Daily, March 15). Analysts have similarly been skeptical when the White House says its Strategic Petroleum Reserve sales have been key to lowering prices.
“Every voter sees the dollar amount of how much gas costs. And that’s just something we have to live with.”
The Democrats’ preelection messaging against the oil and gas industry is also clashing with the administration’s work with oil companies to increase production. Energy Secretary Jennifer Granholm has helped lead those efforts.
“I think it was a really outrageous statement that the president made [Monday], on top of an unserious policy proposal,” said American Petroleum Institute CEO Mike Sommers said during a call Tuesday. The group was among those that donated to pro-GOP efforts.
“The truth of the matter is, is that this industry, time and time again, has done what the world has required, which is to continue to produce the energy that the world needs during times of crisis,” said Sommers.
With less than a week before Election Day, and both houses of Congress in play, it appears unlikely Democrats will pull back the rhetoric.
“Every voter sees the dollar amount of how much gas costs,” said Dark. “And that’s just something we have to live with.”