NEWS OF THE DAY:
Santos-Oil Search merger timetable slips again
Angela MacDonald Smith, Financial Review, November 10, 2021
Santos’ $21 billion merger with Oil Search faces another slight delay after the Papua New Guinea National Court again deferred the date for the first court hearing for the transaction.
The hearing, which was due to take place on Wednesday under the revised schedule given by Oil Search on October 29, has now been pushed back to Thursday at the request of the court, Oil Search advised on Wednesday.
The full documentation for the transaction, which was proposed in July and firmed up in September, had been expected by the market on Wednesday, including an independent expert’s report that would assess the value of the deal for Oil Search shareholders.
The latest delay is understood to be merely a scheduling or administrative issue, rather than anything more fundamental that could seriously derail the deal timetable.
PNG Prime Minister James Marape has welcomed the deal and the opportunity it brings for increased resource development in the country, effectively scotching speculation he may look to use the PNG approval for the deal as a lever to extract additional concessions from Santos around investment and jobs.
The first court hearing in PNG for the deal was originally due to take place on October 27 under the schedule advised by the companies in September. That timetable envisaged a vote by Oil Search shareholders on the deal on November 29, a date that will now slip into December, but which sources say is still expected this year.
The merger will create a top-20 global oil and gas producer, with production in Australia and Papua New Guinea and with a promising oil project in Alaska, although Santos is widely expected to review ownership of that venture for a potential sale.
Chief executive Kevin Gallagher, who will head the merged group, has said the two companies will be “stronger together” and act as a “regional champion” of oil and gas for Asia, as well as investing more in cleaner energy projects.
However, some investors in Port Moresby-based Oil Search are not yet convinced the deal offers enough value considering the long life of their company’s reserves and its low cost, cash-generative business, and will be examining closely the independent expert’s report. That report, commissioned by the Oil Search board, is now expected to be released on Thursday.
Under the merger terms, Oil Search shareholders get 0.6275 new Santos shares for each Oil Search share. At Santos’ price shortly before the close of $6.905, that values Oil Search shares at $4.33 apiece. Oil Search shares were at $4.235 at the same time.
On completion, Oil Search shareholders will own 38.5 per cent of the merged company and Santos shareholders the rest.
OIL:
Alaska North Slope oil and gas lease sale nets state six bids for $467,000
Elwood Brehmer, Alaska Journal of Commerce, November 9, 2021
Alaska’s second North Slope lease sale of the year was a quiet one, garnering just six bids totaling $467,609 for state coffers.
Division of Oil and Gas officials announced bids Nov. 3 in the fall 2021 North Slope oil and gas lease sale, in which independent explorer Lagniappe Alaska collected five new state leases covering approximately 12,800 acres.
Savant Alaska, a subsidiary of Denver-based Savant Resources and operator of the Badami Unit, submitted the other bid of $38,476 for 1,280 acres.
All of the tracts are in the eastern portion of state land on the North Slope, between Prudhoe Bay and ExxonMobil’s Point Thomson gas field, and come with an initial 10-year lease term.
Explorers have shown more interest in eastern Slope areas in recent years. The area was partly explored in the 1980s and some oil was found, but for several reasons was not developed.
No bids were submitted for the North Slope foothills and Beaufort Sea areas.
Lagniappe is a relatively new venture of Denver-based wildcatter Bill Armstrong, whose namesake company Armstrong Oil and Gas led discovery of the large Pikka prospect, and more broadly the suddenly popular Nanushuk sands formation. The Nanushuk is the basis of ConocoPhillips’ large Willow project and numerous smaller oil discoveries on the North Slope in recent years.
Lagniappe also collected 13 leases in the first 2021 North Slope sale of the year, held in January. That sale netted about $7 million from over 115 bids. The latest bids bring Lagniappe’s holdings to roughly 180,000 acres in the area, according to a Division of Oil and Gas statement.
Both of this year’s sales continued a recent trend of declining activity in the state’s sealed-bid North Slope auctions. There was no sale in 2020 for administrative reasons, according to Oil and Gas officials, and the 2019 sale generated $7.8 million in winning bids. More than $28 million was collected in 2018 for 141 bids covering nearly 245,000 acres of North Slope land and the near-shore Beaufort Sea.
The 2018 sale was the last in a series of busy state and federal North Slope sales as oil prices recovered and explorers sought new acreage in search of Nanushuk prospects.
Oil industry insiders mostly said they believe the recent quieter lease sales are largely due to a lack of prime acreage available following several years of high activity. Companies that bought up rights to large swaths of state land in prior years are now evaluating its potential.
Division of Oil and Gas Director Tom Stokes generally concurred with that assessment in a statement following the bid opening. According to Stokes, 45% of the state’s near-shore Beaufort Sea leases are spoken for and roughly 40% of the North Slope is under lease as well.
“When you combine that fact with the limited available acreage around known exploration targets throughout the North Slope, and some banks’ current hesitance to lend money for Arctic exploration, it’s understandable that the modest interest in today’s lease sale focused on opportunities close to development infrastructure,” he said.
GAS:
Zero-emission natural gas power plants are coming to US, UK
Kristen Houser, Free Think, November 9, 2021
A new kind of natural gas power plant is beginning to catch on across the globe — one that makes it possible to generate electricity from fossil fuels while capturing the CO2 produced during the process.
The challenge: To combat climate change, we need to transition away from carbon-emitting sources of electricity, such as coal-fired power plants, and toward sources that don’t emit greenhouse gases, such as renewables and nuclear power.
However, while renewables are cheap and clean, they’re also inconsistent because they can depend on the time of day and weather conditions. Nuclear power is clean and consistent, but it takes a lot of time and money to build new plants.
Natural gas: Right now, the U.S.’s primary source of electricity is natural gas. It’s cheap, abundant, and reliable, and while it isn’t as environmentally friendly as renewables or nuclear, it is better than coal, producing about 50% less CO2 per megawatt-hour.
It is possible to make a natural gas power plant more eco-friendly by capturing, filtering, and sequestering (storing or burying) the CO2 it produces. However, the add-on facilities used for that purpose are extremely expensive, energy-intensive, and imperfect — some CO2 is still released.
A cleaner plant: In 2018, a new type of zero-emission natural gas power plant came online in Texas.
Built by energy startup Net Power, this pilot plant incorporated energy-efficient carbon-capture tech directly into its design — not as an afterthought — and it could stop nearly 100% of the CO2 produced from being released into the atmosphere.
At the time, they hadn’t quite worked out how to make their fuel (a mixture of gas, CO2, and pure oxygen) burn consistently. But in the years since, it seems they’ve dialed in the perfect mix — all without releasing CO2 and air pollutants (including very harmful compounds like NOx) into the air.
Now, the company is in plans to build two more of its unique natural gas power plants in Colorado and Illinois — those will be commercial-scale plants, producing 280 megawatts of electricity each, compared to the 50 MW test facility in Texas.
Net Power has also announced plans to build a zero-emission natural gas power plant in Canada — it’s expected to start producing power by 2025. A large 300 MW plant in the U.K. is also under development — given regulatory approval, it could begin generating power by 2025, as well.
The big picture: As long as the world is relying heavily on natural gas to generate electricity, as it will for much of the foreseeable future, we need to make the process as clean as possible. In that respect, Net Power’s innovative design is a huge leap over not only coal but also existing gas and carbon capture plants.
Yet even if every natural gas power plant in the world relied on Net Power’s carbon-capture design, gas still wouldn’t be the most environmentally friendly energy source. Gas wells and pipes leak methane into the atmosphere and other contaminants into soil and groundwater.
The long-term goal of a world with net-zero emissions ultimately requires a transition to renewables, geothermal, and nuclear — and, hopefully one day, the holy grail of clean energy: fusion.
MINING:
Investors Pushed Mining Giants to Quit Coal. Now It’s Backfiring
Thomas Bieshuevel, Bloomberg, November 8, 2021
It was supposed to be a big win for climate activists: another of the world’s most powerful mining companies had caved to investor demands that it stop digging up coal.
Instead, Anglo American Plc’s exit from coal has become a case study for unintended consequences, transforming mines that were scheduled for eventual closure into the engine room for a growth-hungry coal business.
And while it’s a particularly stark example, it’s not the only one. When rival BHP Group was struggling to sell an Australian colliery this year, the company surprised investors by applying to extend mining at the site by another two decades — an apparent attempt to sweeten its appeal to potential buyers.
Now, after years of lobbying blue-chip companies to stop mining the most-polluting fuel, there’s a growing unease among climate activists and some investors that the policy many of them championed could lead to more coal being produced for longer. Senior mining executives say the message from their shareholders is evolving to acknowledge that risk, and they’re no longer pushing as hard for blanket withdrawals.
BHP may end up holding on to the Australian mine it was battling to sell, Bloomberg reported last week. Earlier this year, Glencore Plc sounded out a major climate investor group before announcing it would increase its ownership of a big Colombian coal mine, according to people familiar with the matter.
“Everyone in the industry is starting to be more sophisticated, more nuanced and more careful on the way they think these issues through,” said Nick Stansbury, head of climate solutions at Legal & General Group Plc.
Who should own the world’s coal mines is a question that resources giants and their investors may be grappling with for years to come. At the global climate talks in Glasgow, world leaders have fallen short on the U.K. host’s ambition to “consign coal to history.” It continues to dominate the world’s electricity mix and energy shortages in Europe and China this year have only reinforced the message that the world remains deeply dependent on coal.
The campaign to force coal out of the hands of the biggest diversified miners kicked off about a decade ago, with limited success. That changed after some of the world’s most powerful investors, including Norway’s $1 trillion wealth fund and BlackRock Inc., began introducing policies to limit their exposure to coal.
POLITICS:
Alaska redistricting board pairings draw criticism
Becky Bohrer, Associated Press, November 10, 2021
A divided Alaska Redistricting Board voted Tuesday on House district pairings for Senate seats for the Anchorage area that one member said would leave open the board to “an unfortunate and very easily winnable argument of partisan gerrymandering.”
Board member Nicole Borromeo said she opposed pairing part of Anchorage’s Muldoon area with an Eagle River district on those grounds.
She requested the five-member board reconsider its 3-2 vote to finalize Senate pairings for the Anchorage area, which included plans to split the conservative Eagle River area into two Senate seats. The board voted 3-2 against reconsidering.
The board late Tuesday released a revised map that board staff said included some changed numbers for House districts.
The board is charged with rewriting Alaska’s political boundaries following the U.S. Census, conducted every 10 years. The board aims to finish its work by Wednesday. The overall plan, once finalized, can be challenged in court.
Tuesday’s actions followed pointed exchanges on proposed maps for the area Monday and extended executive sessions.
Board member Melanie Bahnke had proposed pairing two Eagle River-area House districts to make a Senate seat and pairing two House districts that comprise the Muldoon area for a Senate seat. Member Bethany Marcum proposed pairing an Eagle River House district with an Anchorage district that includes a military base and another Eagle River district with one of the Muldoon districts.
Marcum had argued there were strong ties between the base and Eagle River and socio-economic ties between Muldoon and Eagle River.
Voting with Marcum on Tuesday were members Budd Simpson and John Binkley. Marcum and Simpson were appointed to the board last year by Republican Gov. Mike Dunleavy; Binkley was appointed by then-Senate President Cathy Giessel, a Republican.
Borromeo was appointed by then-House Speaker Bryce Edgmon, an independent, and Bahnke by then-Alaska Supreme Court Chief Justice Joel Bolger.
Borromeo said Tuesday she did not believe that the arguments Marcum had made and “the sound, sound legal advice that we got from counsel in executive session supports this pairing” of the Muldoon area and Eagle River districts.
“It defies logic that we would do a minority reach-in to south Muldoon and pair it with a very white district 8 miles away on highway that crosses one mountain range and expect the court to believe with any satisfaction that we have satisfied the public trust in the process,” she said.
Binkley later cautioned Borromeo against attacking Marcum as Borromeo sought to continue what she was saying.
“Be careful, please,” Binkley told Borromeo during a tense exchange.
“I am being careful, and you know what? She should have been careful when she exposed this board to liability yesterday,” Borromeo said.
Marcum did not get involved in the discussion, which took place as the board was meeting in Anchorage.
Bahnke, in remarks, described what transpired as a surprise. “I thought that we had achieved consensus. I will accept the outcome, for now,” she said.
She said the pairings she had proposed “eliminated questions around dilutions of minority voters’ ability to elect somebody into office.” She said the board’s actions would have the effect of stifling the voices of voters in the Muldoon area, which she described as racially diverse.
Eagle River currently has one senator, Republican Lora Reinbold.
CLIMATE CHANGE:
Hurdles abound in race to build more clean energy
Amy Harder, Cipher, November 10, 2021
As conference attendees were waking up last week for the annual United Nations climate conference underway in Glasgow, Scotland, voters in Maine were rejecting a proposed power line sending Canadian hydropower to Massachusetts.
The two may not seem particularly related, but they are.
Countries are touting their pledges in Glasgow to meet net-zero carbon emissions goals by 2050. But to meet those goals, innumerable local and national decisions must be made that will enable rapidly evolving clean electricity technology to power a net-zero economy.
Maine’s parochial fight over a modest, 150-mile power line project may not seem consequential. On its own, it’s not.
But it’s not just Maine.
It’s Midwestern states who helped torpedo a 700-mile power line that would have sent massive amounts of Oklahoma wind power to the East Coast.
It’s farmers in Australia not wanting a power line traversing their potato fields.
It’s rural residents in New York, Oregon, Ohio, Kentucky, Texas and more who don’t want solar farms around them.
It’s people in Spain and Germany protesting large-scale wind and solar farms.
These are snapshots of a global dilemma.
because of transmission challenges, according to a government study earlier this year. The time it takes to get there for those who do is increasing (the success rate is even lower for wind and solar).
Opponents in each of these battles say that any number of unique circumstances make these projects uniquely bad.
In Maine, opponents cited several issues, including an unpopular utility company pushing the project and the route’s proposed pathway through dozens of miles in Maine’s Western forest (much of it is already cleared for the line).
“The urgency of climate change shouldn’t justify bad projects,” said Pete Didisheim, advocacy director of the Natural Resources Council of Maine, an environmental group opposing the powerline. “We completely recognize that a build-out of transmission lines is going to be necessary.”
| Developers of the Maine project say they will keep fighting in court despite last week’s vote, though the ballot outcome has significantly dimmed its outlook. In a future where 85% of the world’s total energy mix (not just electricity) comes from renewables (chiefly wind and solar), renewables would need to increase six times over their current amount, according to BloombergNEF. Even in a future energy system heavily dependent on technologies capturing carbon emissions from coal and natural gas plants, we would still need to triple the current amount of renewable energy. Heather Zichal, CEO of The American Clean Power Association, a newly formed group comprised of wind producers and other clean energy developers, says companies are already approaching limits of new energy production in some parts of the country because of a dearth of power lines. Solutions are shaping up to be a mix of better collaboration and more aggressive government action. Developers, alongside state and local governments, should better incorporate local community input in planning processes, according to pretty much everyone I talked to for this story, including Didisheim in Maine and Andrew Bray, national director at RE-Alliance, an Australia-based environmental nonprofit. “There has to be a relationship of trust between a company and the landholders involved in the project and with the surrounding communities,” Bray wrote by email. His organization supports expediting the clean energy transition by facilitating better community engagement with new projects. That includes both effective engagement and tangible benefits, Bray writes: “At the end of the day, the company has to be able to answer the very reasonable question from local communities, ‘what’s in it for us?’ ” The bipartisan infrastructure bill awaiting President Biden’s signature includes a measure aimed at expediting the review of interstate power lines. The Federal Energy Regulatory Commission would receive expanded powers in certain situations to issue siting permits if state agencies deny them. But U.S. Energy Secretary Jennifer Granholm told me in our September interview that a federal agency usurping states’ authorities should be a “last resort.” Bray said that a similar government tool in Australia—called compulsory acquisition—should only be used as a “last resort.” Some longtime energy experts say that’s where we’re at. “Anyone who looks honestly at time frames here should realize we’re already at the last resort,” said Jason Grumet, president of the Bipartisan Policy Center, a Washington, D.C. think tank. Grumet, noting his prior work on behalf of Northeastern states, continued: “I can say with absolute confidence if we’re not prepared to pre-empt states, it’s hard to imagine we can create a nationwide, low-carbon infrastructure in the next 20 years.” |