Today’s Key Takeaways: Wind too expensive for UK. “Big Oil” putting money where their mouth is. Exxon plans to double LNG portfolio. Alaska’s Graphite One project enjoys strong support. U.S. worldwide leader in climate litigation.
NEWS OF THE DAY:
1.4GW Wind Project in UK Cancelled as Costs Soared
William Mathis, Bloomberg/Rigzone, July 20, 2023
Vattenfall AB will stop the development of an offshore wind project in the UK after costs surged, posing a major setback for a key part of Britain’s climate plans.
The Swedish utility said a wind farm planned in the North Sea, which would provide power for 1.5 million UK homes, is no longer viable after costs for the technology soared 40 percent. Vattenfall will take a hit of 5.5 billion Swedish krona ($537 million) because of the decision, it said in a report released Thursday.
“Although demand for fossil-free electricity is greater than ever, the market for offshore wind power is challenging,” Vattenfall Chief Executive Officer Anna Borg said in a statement. “Higher inflation and capital costs are affecting the entire energy sector, but the geopolitical situation has made offshore wind and its supply chain particularly vulnerable.”
Vattenfall’s decision follows years of soaring costs for materials, logistics and financing — threatening the viability of a technology that’s key to cutting reliance on gas and coal-fired power stations. Nowhere is the dependence on offshore wind greater than in Britain, which plans to nearly quadruple its fleet of wind farms at sea by the end of the decade.
Vattenfall’s 1.4-gigawatt Norfolk Boreas wind farm was key to realizing the UK’s plans in the near term. It’s among projects at an advanced stage of development, and a final investment decision was expected later this year. Last year, the company received a government-backed contract for the project that would have locked in record-low power prices for 15 years. But the low price may have ultimately doomed the project.
Big Oil Is Backing Rhetoric With Capital, Per Goldman Sachs
David Blackmon, Forbes, July 20, 2023
Throughout this year, executives from oil majors and big independents have detailed plans to commit larger shares of their capital budgets to their core businesses of finding and developing reserves of oil and natural gas. A new report from Goldman Sachs shows “Big Oil” companies putting their money where their mouths have been in those public statements.
A New Investment Boom
Citing the arrival of this new “investment boom,” Goldman’s 20th annual analysis of the energy sector, “Top Projects,” shows the industry collectively has 70 major projects underway in 2023, a 25% increase over 2020. The number of major projects as defined by Goldman Sachs analysts peaked in 2014 at 107, and had gradually dropped over the next half-decade to 74 due to chronic underinvestment in exploration for new reserves. That decline in investment was caused by a variety of factors, most prominently pressures from ESG investor firms that control trillions of dollars in investor capital and demands from investors for higher returns after the U.S. drilling boom from 2009 through 2015.
But the bottom dropped out of such investments in 2020. As the COVID-19 pandemic wreaked havoc, forcing companies to idle rigs and cancel projects worldwide in order to conserve capital, Goldman’s tally of major projects in that year fell to just 56. The report’s authors say that period of underinvestment in new reserves will impact supply growth for years to come, given that many projects have five to six years time to market. “So we are still paying for that underinvestment we saw in the 2015 to 2021 period. That’s why even with the capex increase, it is very unlikely that non-OPEC producers can come back to output growth,” the report finds.
Exxon Looks To Double Its LNG Portfolio By 2030
Charles Kennedy, OilPrice.Com, July 20, 2023
ExxonMobil aims to nearly double the volumes of liquefied natural gas it is handling to more than 40 million tons per year by 2030, a top executive at the U.S. supermajor has told Nikkei in an interview.
“We’re very bullish about the growth opportunities in natural gas and LNG. When you think about that in the portfolio with a corporation, investing in more LNG is certainly part of the strategy,” Andrew Barry, vice president in charge of LNG marketing at Exxon, told the publication.
Currently, Exxon is estimated to handle around 22 million tons of LNG annually.
LNG is one of the oil and gas giant’s priority investment areas this decade, alongside the U.S. Permian Basin, Guyana, and Brazil. Exxon’s corporate plan through 2027 includes expectations that its upstream earnings potential is set to double by 2027 compared to 2019, resulting from investments in high-return, low-cost-of-supply projects. More than 70% of capital investments by 2027 will be deployed in strategic developments in the Permian, offshore Guyana, Brazil, and LNG projects around the world, Exxon said in December.
Exxon is developing LNG projects in Mozambique and Papua New Guinea, while it signed last year an agreement with QatarEnergy to take 25% in a joint venture, which in turn will own 25% of the entire North Field East project, including four LNG trains with a combined nameplate capacity of 32 million tons per year. First LNG from North Field East, one of Qatar’s flagship megaprojects to boost its LNG export capacity, is expected in 2026.
QatarEnergy and ExxonMobil also have a joint project in the United States, the Golden Pass LNG Terminal in Sabine Pass, Texas, which is expected to start up in 2024. Last autumn, Exxon and the Qatari state-owned firm agreed to independently market Golden Pass LNG volumes. ExxonMobil will market 30% of Golden Pass LNG volumes.
Strong support for Graphite One project
Shane Lasley, North of 60 Mining News, July 19, 2023
From the $37.5M Pentagon grant to a $5M loan from an Alaskan gold mining company, domestic graphite supply chain plan is broadly backed.
From the U.S. Department of Defense and policymakers in Washington, DC, to private Alaska companies and the governor of the 49th State, Graphite One Inc. is receiving broad support as it pushes to establish an all-American supply chain that begins in Alaska and ends in the lithium batteries powering electric vehicles, military hardware, and countless electronic products that are no longer tethered to an electrical outlet.
“All of us at Graphite One want to express our thanks for the strong support we’ve received from public officials whose mission it is to advance Alaska’s and America’s best interests,” Graphite One CEO Anthony Huston said upon a July 17 announcement that the company had been awarded a $37.5 million Defense Department grant.
This substantial funding to accelerate the finalization of a feasibility study for the development of a mine in Alaska and advanced graphite processing and recycling facility in Washington state is partially due to the support from Alaska’s Washington delegation and governor, and partially due to the fact that the company’s Graphite Creek project hosts America’s largest known deposit of the graphite desperately needed for a U.S. economy and military that is transitioning to electrified transportation.
“As the United States and the world transition to an era of dramatically increased mineral use, it is crucial for us to rebuild our domestic supply chains-especially for natural graphite, which we have not produced for more than 30 years and currently depend on China and other nations for the entirety of our supply,” said Sen. Lisa Murkowski, R-Alaska. “The Graphite One project is in a league of its own, in terms of the scope of the resource in the ground in Alaska and the vision the company has for manufacturing anode materials and recycling batteries in Washington state.”
Alaska-based Taiga Mining Company has long believed in this vision, which is why the private gold mining company is currently the largest Graphite One shareholder and recently loaned the company $5 million to transform the company’s vision into reality.
U.S. “CLIMATE LITIGATION” INCREASINGLY PREVALENT
Tim Tarpley, Energy Workforce & Technology Council, July 19, 2023
A recent report jointly produced by the London School of Economics, Columbia Law School and the Center for Climate Change Economics and Policy analyzed litigation data worldwide to look at where and how so called “climate related cases” were being filed.
Somewhat surprisingly, the United States is the worldwide leader in these types of cases. In fact, since 1986, U.S. litigants are responsible for 70% of these cases filed globally. In fact, as a comparison, there have been 1,590 of these types of cases filed in the United States, where in the same time period there has been 102 filed in the United Kingdom and 35 in Canada.
Who is actually bringing these cases, and how are they being decided? Well, the majority of the cases are being filed by non-governmental organizations. In the United States, nearly 70% of these cases have been filed by NGOs and 13% by trade associations. Additionally, the authors went through and studied the outcome of these cases and looking at some 549 in particular — over 55% of the cases were decided favorably to the litigant.
This is important given the prevalence of the filings and the growing strategic nature in which they are being filed. More and more often these cases are being filed in a coordinated and strategic way within the United States in order to target fossil fuel infrastructure, not necessarily to go after the individual merit of a particular project.
This fact has led to the significant permitting slowdowns we have seen in recent years that are slowing the building of energy infrastructure of all kinds. Litigation reform will be a necessary component of any future permitting reform package in an effort to curb many of these non-meritorious cases that are clogging the courts and threatening America’s energy expansion.