Today’s Key Takeaways: U.S. oilfield service jobs increased in August. OPEC trims world oil supplies. 3 U.S. LNG projects begin construction. Commerce, Energy and Defense forge ahead on mining projects while DOI slams the brakes. Anti-ESG investor urges Chevron to produce more oil.
NEWS OF THE DAY:
USA Oilfield Services Employment Rises In August
Eldina Jahic, Rigzone, September 6, 2022
Employment in the U.S. oilfield services and equipment sector rose by an estimated 6,865 jobs to 648,914 in August.
Employment in the U.S. oilfield services and equipment sector rose by an estimated 6,865 jobs to 648,914 in August, according to preliminary data from the Bureau of Labor Statistics (BLS) and analysis by the Energy Workforce & Technology Council (Energy Workforce).
Gains in August make OFS employment the highest since the COVID-19 pandemic began, but still off the pre-pandemic mark in February 2020 of 706,528. Overall, U.S. employers added 315,000 jobs, down from July numbers but still representing a strong pace of growth.
“The August jobs increases are very encouraging as our sector continues to rebuild the energy workforce from pandemic losses,” said Energy Workforce & Technology Council CEO Leslie Beyer.
“Our industry is meeting the challenge of growing global demand by producing at almost pre-pandemic levels, reducing emissions industry-wide, all while continuing to make gains in the workforce. Every day, our energy workforce is powering the world while developing new, innovative technologies to ensure reliable, affordable energy is accessible across the globe. Through the powerhouse of American energy, we are lifting people from energy poverty, and providing economic and energy security for our nation and others throughout the world.”
Energy Workforce is the national trade association for the global energy technology and services sector representing 600,000 U.S. jobs in the technology-driven energy value chain. Member companies are involved in energy equipment manufacturing, drilling, well completions, well services, pressure pumping, renewable energy technology and servicing, geothermal development, and more.
The innovative men and women who comprise this sector are leaders in developing and deploying innovative technologies on a global scale that increase efficiency, improve environmental performance, and reduce greenhouse gas emissions.
Energy technology and services sector employment is estimated by analyzing data published by the U.S. Bureau of Labor Statistics and covers the economic activities of energy technology and services companies, which include oil and gas extraction, construction, and manufacturing. Total employment is estimated using the Quarterly Census of Employment and Wages, published by BLS, and jobs data reported by BLS monthly.
OIL:
OPEC+ makes small trim to world oil supplies as prices fall
Associated Press, September 6, 2022
The decision for October rolls back a mostly symbolic increase of 100,000 barrels per day in September.
OPEC and allied oil-producing countries, including Russia, made a small trim in their supplies to the global economy yesterday, underlining their unhappiness as recession fears help drive down crude prices — along with the cost of gasoline, to drivers’ delight.
The decision for October rolls back a mostly symbolic increase of 100,000 barrels per day in September. It follows a statement last month from Saudi Arabia’s energy minister that the OPEC+ coalition could reduce output at any time.
Oil producers such as Saudi Arabia have resisted calls from President Joe Biden to pump more oil to lower gasoline prices and the burden on consumers. OPEC+ has stuck with only cautious increases to make up for deep cuts made during the Covid-19 pandemic, which were finally restored in August.
Since then, growing worries about slumping future demand have helped send oil prices down from June peaks of over $120 per barrel, cutting into the windfall for OPEC+ countries’ coffers but proving a blessing for drivers in the U.S. as pump prices have eased.
The supply cut for October is only a small fraction of the 43.8 million barrels per day under OPEC+ production goals but wrong-footed several market analysts’ predictions of no change in output. Oil prices jumped after the announcement.
U.S. crude rose 3.3 percent to $89.79 per barrel, while international benchmark Brent was up 3.7 percent, to $96.50, after the decision.
Oil prices have gyrated in recent months: Recession fears have pushed them down, while worries of a loss of Russian oil because of sanctions over its invasion of Ukraine pushed them up.
Recently, recession fears have taken the upper hand. Economists in Europe are penciling in a recession at the end of this year due to skyrocketing inflation fed by energy costs, while China’s severe restrictions aimed at halting the spread of the coronavirus have sapped growth in that major world economy.
Those falling oil prices have been a boon to U.S. drivers, sending gasoline prices down to $3.82 per gallon from record highs of over $5 in June and offering a potential boost to Biden as his Democratic Party heads into midterm elections.
In June, fears that U.S. and European sanctions would take Russian oil off the market helped push Brent to over $123. Prices have fallen sharply in recent weeks as it became clear that Russia is still managing to sell significant amounts of oil in Asia, albeit at sharply discounted prices.
But concerns about the loss of Russian supply are still out there because European sanctions aimed at blocking most Russian oil imports won’t take effect until the end of the year.
Other factors are lurking that could influence the price of oil. For one, the Group of Seven wealthy democracies plan to impose a price cap on Russian oil aimed at battling high energy prices and reducing oil profits that Russia can use for its war in Ukraine.
That’s if the cap works as intended. Russia could refuse to supply oil to countries and companies observing the cap, which would take barrels off the market. The price cap has not been set, and its influence on the global price remains unclear.
Meanwhile, a deal between Western countries and Iran to limit Tehran’s nuclear program could ease sanctions and see more than 1 million barrels per day of Iranian oil return to the market in coming months. However, tensions between the U.S. and Iran appear to have risen in recent days: Iran seized two U.S. naval drones in the Red Sea, and U.S., Kuwaiti and Saudi warplanes flew over the Middle East on Sunday in a show of force.
OPEC+ countries’ energy ministers said yesterday that their September increase of 100,000 barrels a day was only for that month and that the group could meet again at any time to address market developments. The group said its chairman could call an extraordinary meeting at any time ahead of the next scheduled meeting Oct. 5.
GAS:
U.S. LNG export capacity to grow as three additional projects begin construction
International Energy Administration (IEA), September 6, 2022
The United States began exporting liquefied natural gas (LNG) from the U.S. Lower 48 states in February 2016. As of July 2022, the United States has more LNG export capacity than any other country and has exported more LNG than any other country. U.S. LNG exports averaged 11.1 billion cubic feet per day (Bcf/d) during the first half of 2022. The seventh, and most recent, U.S. LNG export project—Calcasieu Pass LNG—placed all of its liquefaction trains in service by August, ahead of schedule. In addition to Golden Pass LNG, which started construction in 2019, two more projects on the U.S. Gulf Coast have recently begun construction.
Golden Pass LNG is constructing standard-size liquefaction trains with peak LNG production capacity of up to 0.8 Bcf/d per train. In contrast, the other two projects under construction, Plaquemines LNG and Corpus Christi Stage III, use a modular technology with mid-scale refrigeration trains, which has a shorter project construction timeline. Calcasieu Pass LNG, which also uses mid-scale liquefaction technology, started LNG production 30 months after its final investment decision—the shortest construction period for any U.S. LNG export project so far.
Once completed, the three export projects under construction will expand U.S. LNG peak export capacity by a combined 5.7 Bcf/d by 2025:
- Golden Pass LNG consists of three standard-size trains, each with a peak capacity of 0.8 Bcf/d, for a total capacity of 2.4 Bcf/d. Golden Pass LNG is on the site of an existing regasification facility and will use shared infrastructure, which helps to reduce project costs and shorten the construction timeline.
- Plaquemines LNG consists of 24 mid-scale trains, each with a peak capacity of 0.07 Bcf/d. Each liquefaction train is part of a two-unit block for a total of 12 blocks with a combined peak capacity of 1.8 Bcf/d.
- Corpus Christi Stage III is on the site of an existing terminal with three liquefaction trains in operation. Each of the 14 new, mid-scale trains under construction has a peak capacity of 0.11 Bcf/d. Each train is part of a two-unit block for a total of seven blocks with a combined peak capacity of 1.6 Bcf/d.
The latest information on the status of U.S. liquefaction facilities, including expected online dates and capacities, is available in our quarterly database of U.S. LNG export facilities.
MINING:
Critical minerals war in the White House
Shane Lasley, North of 60 Mining News, September 1, 2022
DOI pumps brakes on efforts to ensure the U.S. has domestic minerals needed to achieve Biden’s clean energy objectives
The White House’s bold clean energy ambitions, which are intricately linked to the availability of reliable supplies of the metals needed to build electric vehicles and renewable energy infrastructure, are being slowed by a tug-o-war between departments within the Biden administration.
While the departments of Commerce, Defense, and Energy are forging ahead with programs and investments aimed at ensuring America has the minerals and metals needed to support the clean energy objectives outlined by the White House and enabled by the Bipartisan Infrastructure Law and Inflation Reduction Act, DOI is pumping the breaks on a domestic project that would produce the requisite raw materials.
The Interior Department’s yanking of the permits to build a road that would connect the rich deposits of cobalt, copper, zinc, and other metals in Alaska’s Ambler Mining District to markets demanding sustainable supplies of these mined materials underscores a disconnect within the Biden administration.
“They want to have this domestic supply of strategic and critical minerals, yet one department in the executive branch is doing everything it can to frustrate the development of those strategic and critical minerals that are so important to them realizing the policy priorities that they are trying to achieve,” Kyle Parker, a partner at the national law firm Holland & Hart told Mining News.
Exasperating counterefforts
President Biden has repeatedly touted his administration’s goals to bolster domestic supply chains for the materials needed to power clean energy manufacturing and clean energy jobs in the United States.
“When it comes to clean energy, China has spent years cornering the market on many of the materials that power the technologies that we rely on,” he said during a February roundtable discussion on critical minerals. “That’s why I committed us to build a clean energy supply chain stamped ‘Made in America’.”
On the same day the President was touting the need to expand critical mineral production on American soil, however, DOI announced that it had filed a motion to remand previously issued permits to build a road needed to deliver metals mined in Alaska’s Ambler District into the nation’s supply chains.
For Alaska Gov. Mike Dunleavy, DOI’s pulling of the Ambler Road permits for further review at a time when the departments of Commerce, Defense, and Energy are pushing forward the White House’s American critical minerals agenda demonstrates exasperating counterefforts within the Biden administration.
“This administration must speak with one voice – it wants critical minerals, or it doesn’t; it wants to lower energy prices, or it doesn’t; it wants to create jobs in the U.S., or it doesn’t; it wants to protect the environment, or it doesn’t; it cares about human rights, or it doesn’t,” he said during an Aug. 23 keynote address at the Alaska’s Minerals – A National Strategic Imperative summit in Fairbanks, Alaska.
Frustrated automakers
With the passage of the Inflation Reduction Act, this frustration has spread to the automotive sector.
Signed into law by President Biden on Aug. 16, this $750 billion piece of legislation includes a $7,500 EV tax credit that is tied to domestically produced critical battery materials. This starts at 40% in 2023 and rises 10% each year until 2027, at which point it will remain steady at 80%.
Additionally, EVs with battery components or critical minerals supplied by “foreign entities of concern” will be ineligible for the tax credit starting in 2024 and 2025, respectively. This takes companies in China, the primary global supplier of battery materials and other critical minerals, off the table.
Given the long lead times to permit and build mines and mineral processing facilities in the U.S. under ideal circumstances, American automakers are concerned that such a dramatic increase in domestically sourced battery materials and critical minerals will make the tax credit eligibility impossible to achieve.
Parker told Mining News that auto manufacturers that Holland & Hart have been working with “are extraordinarily frustrated” that the administration does not understand the gap between the domestic material component of the tax credit eligibility requirements in the Inflation Reduction Act and the time it takes to get a mine in production in the U.S.
Streamlining permitting
A streamlined mine permitting process that reduces the current timeline of nearly a decade to the two- to three-year mine permitting windows in Canada and Australia, countries with strong environmental protections, could help alleviate the frustrations felt by American automakers and mining companies alike.
Such permitting reform will be taken up by U.S. lawmakers when Congress reconvenes in September, thanks to Joe Manchin, D-West Virginia.
With Senate Democrats needing Manchin’s vote to pass the Inflation Reduction Act, the West Virginia senator negotiated a deal to take up mine permitting reform by October if he voted in favor of this key piece of legislation for the party.
Sen. Lisa Murkowski, R-Alaska, told attendees of the Alaska’s Minerals summit that she has seen a very early draft of the proposed permit legislation, and for some of her colleagues on Capitol Hill, “it is going to be a really, really tough pill to swallow because it will actually make a difference” when it comes to permitting large projects such as mines and renewable energy developments.
Alaska’s senior senator said an increasing number of lawmakers on both sides of the aisle understand the need for large project permitting reform in America. It is, however, currently unclear whether enough of them will be willing to swallow the pill to get such a permitting reform bill passed.
Standing up to DOI
Parker believes there is a quicker and more politically expedient way to ramp up domestic critical minerals supplies in a timeframe that meets the Inflation Reduction Act critical mineral policies – end the tug-of-war between DOI and the departments working toward the Biden White House’s climate goals.
He suggests that the Pentagon, departments of Commerce and Energy, along with the White House, should press the Interior Department to get behind the objective of domestically producing the minerals and metals critical to national security and a clean energy future.
“It doesn’t take a statutory fix to get this done,” Parker told Mining News. “What it really takes is the Biden administration to get a backbone and stand up to the constituencies that are pressuring from an environmental side to delay all these projects that are supposedly a policy priority.”
Sen. Dan Sullivan, R-Alaska, agrees and is pressuring the Pentagon to take the Ambler Road remand up with DOI.
This pressure began in July when the senator announced that he is placing a hold on the nominations of three senior DOD nominees until he gets some answers on why the DOI pulled the Ambler Road permits.
“I haven’t been able to get answers from anybody in the Pentagon or at the Department of the Interior,” the Alaska senator penned in a July 29 statement. “Therefore, while I believe these nominees are well qualified, I’m putting a hold on their nominations until I get answers.”
As of Aug. 22, Sullivan had still not received the answers he seeks.
“We are not moving these nominees until we get answers on Ambler,” he told the attendees of the Alaska’s Minerals summit.
More information on Sen. Sullivan’s hold on the DOD nominees can be read at Sen. Sullivan halts Defense nominees in the August 3 edition of Metal Tech News.
In the meantime, DOI has made little apparent progress on the remanded Ambler Road permits and has not put forward any timeline for completing its review – keeping its foot firmly pressed on a project that could deliver cobalt, copper, and zinc critical to building “a clean energy supply chain stamped ‘Made in America.'”
POLITICS:
Anti-ESG Activist Investor Urges Chevron to Increase Oil Production
Amrith Ramkumar, The Wall Street Journal, September 6, 2022
Vivek Ramaswamy is bringing ESG battle to oil patch by calling on Chevron to slow spending on its energy-transition plan
A conservative activist turned investor who has criticized Wall Street’s efforts to address climate change and other issues is publicly urging Chevron Corp. CVX -0.46%▼ to pump more fossil fuels over the next decade.
Vivek Ramaswamy, who launched an energy-focused exchange-traded fund nearly a month ago, is among the most prominent critics of so-called environmental, social and governance—or ESG—investing. He quickly turned his sights on Chevron, arguing the country’s second-biggest fossil-fuel company should slow spending on its energy-transition plan, which he said was partially motivated by pressure from top shareholders such as BlackRock Inc. BLK 1.29%▲
In the letter Tuesday to Chevron CEO Mike Wirth and the company’s board, Mr. Ramaswamy said he wanted to “liberate you from constraints imposed on Chevron by its ESG-promoting ‘shareholders.’” Mr. Ramaswamy writes that he looks forward to engaging with the company before next year’s proxy voting season.
Chevron didn’t immediately respond to a request for comment.
The author of “Woke, Inc.”, a book arguing businesses shouldn’t be affected by politics, Mr. Ramaswamy invested in Chevron through his Strive Asset Management’s ETF nearly a month ago. The ETF tracks an index of energy stocks. Strive, which counts investor Bill Ackman and tech executive Peter Thiel among its backers, is part of a pushback by conservatives against ESG investing. The fund has hit about $315 million in assets, a strong start for a new offering.
The Chevron effort is a response to last year’s proxy victory by hedge fund Engine No. 1 at Chevron rival Exxon Mobil Corp. that forced Exxon to accelerate energy-transition efforts. Strive’s letter calls for energy producers to dump their current strategy of limiting investments and returning cash to shareholders. It is one of the first formal calls for an oil giant to do so.
Mr. Ramaswamy, whose fund holds a roughly 0.02% stake in Chevron, would likely need support from large shareholders who have generally embraced Chevron’s current strategy to get the company to change course. He is unique in targeting a company that is posting stock-price gains and record profits. High oil-and-gas prices have lifted Chevron shares about 35% this year.
A former pharmaceutical executive, Mr. Ramaswamy says Chevron could earn a higher valuation relative to earnings if it addresses possible supply shortages over the next decade. That approach is more appropriate than limiting output and devoting resources to the energy transition, he says.
Large index-fund providers BlackRock, State Street Corp. and Vanguard Group own about 20% of Chevron. The asset managers have previously responded to criticism of ESG—the loosely defined practice of considering issues beyond short-term profits when making financial decisions—by saying companies that manage environmental risks and opportunities will be the most profitable over time. They don’t always oppose energy companies increasing fossil-fuel output and don’t always take the same stances on company proposals.
Heavy long-term spending on fossil fuels when demand is expected to fall in the decades ahead is a failing strategy, many investors and analysts say.
Mr. Ramaswamy’s letter marks a new front in this year’s war over ESG. Republican-led states such as Florida and Texas have recently taken steps to move their investments and retirement funds away from some Wall Street firms. Both sides have accused the other of being anti free market and inserting political views into business.
Mr. Ramaswamy is counting on large shareholders like Warren Buffett to help Chevron shift its strategy. Mr. Buffett’s Berkshire Hathaway Inc. is Chevron’s largest individual shareholder with a roughly 8% stake it has built as part of recent bets on U.S. oil companies, FactSet data show.
The letter says that the legendary investor’s independent thinking and opposition to ESG-disclosure proposals at Berkshire last year could make it easier for Chevron to fight the biggest Wall Street firms.
Mr. Buffett has typically invested in companies where he likes the management and has opposed activist investors. He has historically supported strategies that maximize long-term earnings and share prices.
Mr. Buffett’s largest bet this year is Occidental Petroleum Corp., one of the energy industry’s biggest backers of new climate technologies like removing carbon directly from the atmosphere. Mr. Ramaswamy said in an interview he thinks there is room for many company approaches in an investment portfolio as long as they maximize financial performance and nothing else.
Many investor campaigns are unsuccessful or end up having a limited impact, but any back-and-forth between Strive and Chevron could have implications for other companies that are defining their climate plans.
The letter comes as the energy industry enjoys boom times but faces an uncertain future. Chevron, based in San Ramon, Calif., and which had $11.6 billion in second-quarter profits, last year pledged to triple its low-carbon investments to $10 billion through 2028. Chevron in March said its capital spending would range from $15 billion to $17 billion annually through 2026.
CEO since February 2018, Mr. Wirth has said he plans for the company to continue raking in cash from fossil fuels while strategically investing in parts of the energy transition where the company has expertise. Many of those just became more attractive investments thanks to tax credits that are part of the Inflation Reduction Act. The company bought sustainable fuels company Renewable Energy Group for $3.15 billion earlier this year and has many startup bets tied to the energy transition.
Mr. Ramaswamy says the company is well suited for bold action after Mr. Wirth recently rejected President Biden’s claims that oil companies weren’t producing enough and were taking advantage of consumers. Chevron has moved slower than competitors like BP PLC and Shell PLC on renewables, potentially making some of Strive’s proposals easier to accept.
Engine No. 1’s campaign at Exxon last year won support from the largest asset managers, put new directors on the company’s board and forced the company to move more quickly to reduce its environmental impact. Chevron prepared for a similar campaign, then accelerated its energy-transition strategy, The Wall Street Journal previously reported.