Quote of the Week
[In Europe] “One in every three cars registered in February 2018 was an SUV. Small and mid-size SUVs led the growth for the segment in February, whilst compact SUVs also had a strong month.”
Green Car Congress
Graphic of the Week
Contents
1. Oil and the Global Economy
2. The Middle East & North Africa
3. China
4. Russia
5. Nigeria
6. Venezuela
7. The Briefs
1. Oil and the Global Economy
After an up-and-then-down week, oil and gas markets closed slightly higher Thursday ahead of the Easter holiday weekend. All major U.S. and European stock exchanges and markets were closed Friday for Good Friday, which coincides with the Passover holiday that starts Friday at sundown.
The first quarter ended with London hovering around $70 and New York at $65. New York’s discount to London futures has grown to more than $5 a barrel, the biggest since January, making Brent-linked crudes less attractive to refiners than U.S. oil. While rising geopolitical concerns – declines in Venezuela and fears that the U.S. will step up the confrontation with Iran – are pushing up crude prices, the rapid increase in US shale oil production is keeping a lid on prices.
A new Reuters poll suggests that oil prices are likely to rise this year thanks to supply disruptions and the extension of the OPEC-led deal to limit production, but doubts over the future of compliance with the OPEC agreement and rising U.S. production could stem the upward momentum.
Offshore oil production, including deepwater, is growing closer to the cost of shale oil production thanks to new production technologies, a senior Chevron executive said last week. Chevron is laying pump networks on the ocean floor, connecting new wells with already installed platforms, cutting its costs considerably and bringing deepwater oil closer to competing with shale on an equal footing. The upbeat attitude is not limited to Chevron executives. Transocean’s CEO, Jeremy Thigpen, said that currently most of the 29 deepwater oil projects in the Gulf of Mexico have a breakeven of between $40 and $45 a barrel. If these claims are anywhere near true, they represent a major improvement in the costs of producing deepwater oil which is usually said to be around $80 a barrel or higher.
US gasoline prices are moving higher with the national average for regular now at $2.66 a gallon, some 33 cents a gallon higher than a year ago and 12 cents higher in the last month. In the past, sharp increases in gasoline prices have stifled demand for gasoline in the US.
Natural gas prices are likely to increase this summer. Cold temperatures across the US in December and January pushed up demand by about 3.5 billion cubic feet per day. Coupled with the increasing exports of US LNG and more utilities burning gas to make electricity, US natural gas inventories are now about 16 percent below the five-year average. So far there has not been a major impact on natural gas prices as the boom in shale drilling continues to increase US natural gas production.
Barclays sees natural gas output growing by 6.4 billion cubic feet per day this year which should be enough to satisfy demand. However, much of this gas is not in the right places. There are not enough pipelines coming out of the shale oil fields to move all this gas to market, and some believe the lack of a way to move natural gas production to markets could result in a slowing of shale oil production in the coming months. If prices were to remain where they currently are, there would be a larger coal-to-gas switch happening for electricity generation and the US could enter next winter’s heating season with too little gas available to maintain low prices. A warmer summer this year would not help the situation.
The OPEC Production Cut: In recent months there have been rumors that OPEC and Russia are looking at ways of establishing some form of permanent cooperation that would extend beyond the current production cut agreement. Last week Reuters reported that Russia and OPEC are working on a much more ambitious long-term understanding. In an interview, Saudi Crown Prince bin Salman said “We are working to shift from a year-to-year agreement to a 10 to 20-year agreement.” “We have agreement on the big picture, but not yet on the detail.”
If a new Russia-OPEC is signed, it would have major implications for the future of the global oil industry. Moscow was never interested in joining OPEC as it did not want its oil production policies jerked around to meet the needs of the Saudis and other Middle Eastern oil exporters. The success of the recent OPEC/Non-OPEC production cut which moved oil prices from the $40s to circa $70 a barrel has saved Moscow and other oil exporters from much financial hardship. This success has brought about the realization that those dependent on oil exports for much of their incomes are better working together to keep oil prices high. Russia’s recent campaign to become a great power again and to win friends in the Middle East is adding to the impetus for this agreement.
Combining OPEC, Russia, and their oil exporting allies together would lead to an agreement that controls nearly 50 million b/d of oil exports or about half of global oil consumption. Where this goes is a complex question. The new Russia-OPEC cartel would be facing the major oil importers – the US, China, and Europe – who would not be happy about supply restrictions forcing higher oil prices and have many ways of kicking back. There are also the ever-present questions of lower demand for oil and climate change which will continue to become more important.
Several oil exporting countries recently have talked about a six-month extension to the oil supply cut deal taking the production freeze into 2019. These statements suggest that OPEC is not ready to ease up or eliminate the production caps, with top officials signaling a desire to keep the cuts in place into next year. This might require changing the definition of a “balanced” oil market. OPEC has consistently held up OECD inventories as the measure on which it was basing the time to end the production freeze. The goal of the freeze was to drain inventories back down to the five-year average. With OECD inventories only about 44 million barrels above that threshold in February – down from a roughly 300-million-barrel surplus at the start of 2017 – the goal will likely be achieved at some point this year, perhaps in the second or third quarter.
While the fear that a sudden end to the freeze would quickly force oil prices lower is likely the impetus to keep the freeze intact as long as possible, it is possible that some are hoping for still higher oil revenues without increasing production. In the past year, OPEC has been fortunate to have the Venezuelan situation where production drifts ever lower at no cost to the rest of the cartel.
US Shale Oil Production: Last week saw several stories concerning problems that may affect US shale oil production. The International Energy Agency predicts that the US will add about 3.7 million b/d of oil production between now and 2023, and 2.7 million – or more than 70 percent –will come from the Permian and the Eagle Ford oil plays. Most of the problems cited in the recent spate of press stories center around the rapidly increasing costs of drilling and fracking new wells and the problems of getting the oil and gas to markets.
The latest Dallas Fed Energy Survey has found that oilfield service providers are increasing their prices, confirming what producers began to complain about last year when oil prices started recovering. The survey found the index of input costs for oilfield services jumped to 46.8 from 30.9 this quarter from last. US shale companies expect a double-digit cost increase for services, in the Permian in particular, as the industry has recovered from the downturn and is now growing rapidly. The Permian is the leader of U.S. oil production growth, and service costs in shale play are set to continue to rise as drilling contractors, fracking crews, and fracking sand are in high demand. As one headline put it – It is “Payback Time” for the oil services companies, many of which have been working at a loss for the last three years just to stay in business.
Another downside to the Permian’s boom is an acute labor shortage. Unemployment is at the lowest level in years in areas that encompass the Permian Basin. Nearly all of the workers who want jobs in the Permian’s 17 counties are employed. In February, Permian Basin Regional Planning Commission examined the workforce in the region and found that its unemployment rate is at 2.9 percent, much lower than the Texas rate of 4 percent.
Surging production and the exploration and production companies’ focus on keeping costs in check have prompted drilling rig makers to shift their technology offering to solutions for increased productivity. National Oilwell Varco for example, is offering upgrade kits for some of its rigs that are already in the field. The kits extend the lifecycle of the rigs and increases the drill’s torque to meet the problem of longer laterals.
The miles-long laterals that are being drilled these days are running onto land that the drillers do not control. Last week, shale producer Concho Resources said longer horizontal wells are among the factors spurring its $8 billion deal for rival RSP Permian Inc., with well spacing and sharing infrastructure needs also playing roles. In many cases, RSP Permian controlled the land that Concho wanted to drill into.
If the US is to swamp the world with oil from the Permian Basin in the next few years, it will only be possible if there is a commensurate construction boom for pipelines to move all of that oil to market. There already has been a significant increase in the capacity of pipelines leaving the region during the last few years. Between 2012 and 2014, while the surge in production from the Permian was impressive, it was also constrained by the lack of pipeline capacity, which forced producers to sell their product at a discount. The problem is that oil production is set to double in West and South Texas over the next five years, which means that another pipeline wave will be required if the U.S. is to expand oil production by as much as everyone thinks it will.
Last week saw the first decline in the US drilling rig count in a month. Rigs targeting oil were down 7 units to 797 but were up 135 units from the 662 rigs drilling for oil the same week a year ago. It is far too early to say whether we are beginning to see a crack in the thesis that US oil production will increase by nearly 4 million b/d in the next five years, but the optimism has got to end somewhere.
2. The Middle East & North Africa
Iraq: According to Oil minister al-Luaibi, Iraq’s crude oil reserves may be much higher than current estimates. Last year, Iraq updated its estimate of proven reserves to 153 billion barrels from 143 billion barrels but now Luaibi is suggesting the figure could be double the 2017 estimate. If true, Iraq would have the largest oil reserves in the world, ahead of Venezuela, which claims reserves just above 300 billion barrels, and ahead of Saudi Arabia which claims 260.8 billion barrels. Nearly all of these self-proclaimed reserve numbers need to be viewed skeptically.
Sixteen companies—including Exxon, Chevron, and Total—have expressed interest in taking part in Iraq’s next bidding round which will award the rights to develop 11 oil and gas fields. The Oil Ministry has set April 15 as the deadline for companies to submit bids. At a recent industry event, however, oil minister al-Luaibi said Iraq will pay foreign companies less in new contracts. Iraq has been unwilling to follow the world standard of sharing oil production with the foreign companies who provide the investment and do the work. The Iraqi model has been one of service contracts, which the government claims are more favorable to the Iraqi people and do not involve giving away Iraq’s oil to foreigners. If the new model contract provides for still less revenue going to the contractors for their efforts, Baghdad may have trouble in this bidding round.
The partnership between the Russian national oil company, Rosneft, and Kurdistan’s Regional Government is running into problems. Last year Rosneft and the Kurds signed a contract that gave the Russians considerable access to drill for and market oil from within parts of Kurdistan. After the failure of the independence referendum and Baghdad’s recapture of the Kirkuk oil fields, the situation changed markedly. The Iraqi government has said that the Rosneft-Erbil contract needs Baghdad’s approval or it was not valid. Since then Rosneft, Erbil, and Baghdad have been in lengthy discussions on a range of oil and gas issues.
Saudi Arabia: After weeks of speculation about the Saudi Aramco IPO, the company announced last week that it would be “ready” for an initial public offering in the second half of 2018 according to Amin Nasser, the chief executive officer of the state oil company. Whether the “readiness” of the company is the same as an actual IPO remains to be seen. The company could be floated either domestically or internationally late this year, Saudi Energy Minister al-Falih told Reuters last week. US investors will have the chance to buy shares al-Falih said at a speech at MIT in Boston last week. Some investors are focused on how much money Aramco will distribute as dividends to shareholders once it goes public; Bloomberg quoted al-Falih as saying “We are going to have to face that when we list Aramco and have a conversation about how much cash will be given to investors.”
The Aramco stock issue, however, may never get much further than Saudi Arabia’s Tadawul exchange. While the government would prefer the stock be listed on the New York and London exchanges, transparency issues required by the N.Y and London exchanges and the threat of lawsuits stemming from the 9/11 attacks may limit the IPO to a domestic-only issue. The Tadawul exchange is preparing new rules to ensure stable prices if such a large issue is only traded on a relatively small exchange.
Saudi Arabia’s sovereign-wealth fund and Japan’s SoftBank announced plans to launch the world’s biggest solar-power-generation project. The development would start this year with a $1 billion investment from the Saudi-SoftBank Vision Fund and is expected to grow into a $200 billion project that provides about 200 gigawatts of power by 2030. That would be more power than Saudi Arabia needs for the entire country by 2030. The project is 100 times larger than any other proposed in the world and features plans to store electricity for use when the sun isn’t shining with the biggest utility-scale battery ever made.
3. China
China’s new yuan-denominated oil futures contract surged after its long-awaited debut Monday. Beijing hopes the contract will eventually give the country an oil benchmark to rival those in the US and Europe. The contracts, which are open to foreign investors, end years of delays and setbacks since China’s first attempt to list the securities in 1993. By week’s end, however, the Shanghai contract was at parity with the US market, as state oil majors and local traders piled on more bearish positions amid concerns about domestic refinery demand.
China is taking its first steps towards paying for imported crude oil in yuan instead of the US dollar, according to people with knowledge of the matter. A pilot program for yuan payment could be launched as early as the second half of this year. This is a key development in Beijing’s efforts to establish its currency internationally. Shifting just part of global oil trade into the yuan is potentially huge as oil is the world’s most traded commodity. The oil trade has an annual trade value of around $14 trillion, roughly equivalent to China’s gross domestic product last year.,
PetroChina is planning to replace its oil-linked long-term LNG contracts with shorter, more flexible deals, a senior company official said last week. PetroChina Vice Chairman and President Wang Dongjin said that existing oil-linked long-term contracts from Qatargas, Yamal, and Gorgon will not be renewed. These contracts amount to a combined total of 14 million tons per annum and will expire during the 2025-2038 period. Last year, China became the world’s second-largest LNG importer, after Japan.
Until last week, there were concerns that President Trump’s tariff plans could cause such a backlash that China would even consider foregoing US-sourced LNG and shale oil imports. Tuesday night, however, Alaska Gasoline Development Corp. (AGDC) officials said that Bank of China and Goldman Sachs have agreed to serve as the global capital coordinators for the Alaska LNG project. State-owned AGDC became the sole remaining project partner after ExxonMobil, ConocoPhillips, and BP pulled out of the project in 2016. Both entities will help AGDC raise equity to fund full-scale development once all the necessary permits are in place.
4. Russia
The Danish government is facing fierce lobbying by Russia, EU allies, and the United States over the $11.7 billion Nord Stream 2 project championed by President Vladimir Putin and financed by five Western firms. As Moscow’s relations with the West continue to deteriorate, EU regulators are proposing to extend the bloc’s energy market rules to regulate offshore pipelines including Russia’s planned gas line to Germany. This move adds to a series of conflicting opinions from EU legislators on whether the bloc should have a say over the Nord Stream 2 project to pump Russian gas under the Baltic Sea to Germany, bypassing traditional routes through Ukraine. The project is backed by Germany, which approved its construction on Tuesday.
Denmark is under increasing pressure to rule on whether the new Russian pipeline supplying gas to Germany can be built near its Baltic coast. Helsinki does not want to act alone in resolving one of the biggest foreign policy quandaries that the small nation has faced since the Cold War. Its search for a united EU stance on the proposed pipeline is deadlocked by divisions among member states over whether to do more business with Moscow despite its military incursions in Ukraine and Syria and accusations it used a nerve agent in an attempted assassination on British soil.
Saudi Arabia and Russia are working on a long-term pact that could extend controls over world crude supplies by significant exporters for many years. Saudi Crown Prince bin Salman told Reuters that Riyadh and Moscow were considering a deal to greatly extend a short-term alliance on oil curbs that began in January 2017. “We are working to shift from a year-to-year agreement to a 10 to 20-year agreement,” the crown prince told said in an interview in New York last week. The prince said, “We have agreement on the big picture, but not yet on the detail.” A pact between OPEC and Russia (and a few allies from the former Soviet Union) would bring about a major change in the global oil market as the alliance would control a major share of world exports.
Rosneft announced that it will open a research and development center focusing on petrochemicals and shipbuilding technology in Qatar, following meetings between Russian and Qatari officials last week. The move is the latest sign that Russian companies are expanding bilateral cooperation with OPEC member countries following the oil production deal. To date, Rosneft’s key cooperation with Qatar has been the Qatar Investment Authority’s stake in Rosneft.
5. Nigeria
The three layers of government might not share revenue from the month of February owing to shortfalls in revenue presented by the Nigeria National Petroleum Corporation. According to insider sources, the Petroleum Corp. remitted N74.06 billion into the federal government, as the oil revenue generated in the month of February 2018 as compared to the collection of N111.84 billion in January. The February collection of N74.06 billion was lower by 33 percent, a figure the federal government and the states rejected. The Minister of Finance told reporters that revenue sharing was suspended until figures were reconciled with those of the state-owned petroleum company. Nigeria has a long history of “losing” billions of dollars in oil revenue. Some of the problem this time may be the high costs of importing so much oil product to keep the gas stations open in the face of collapsing domestic refining.
Thousands of oil workers in Nigeria may lose their jobs after a wave of picketing against several service companies by members of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN). The new protests follow allegations that the service companies are refusing to allow their workers to unionize. Leaders from the umbrella workers’ organization the Petroleum Technology Association of Nigeria are discussing ways of avoiding a crisis, with its chairman accusing PENGASSAN of not being a good sport amid all the problems the local oil industry has been having.
6. Venezuela
The EIA reported Venezuelan oil production dropped from 2.4 million b/d in 2015 to an average of 1.6 million b/d in January. “A combination of relatively low global crude oil prices and mismanagement of Venezuela’s oil industry has led to the accelerated decline in production.” The International Monetary Fund estimates inflation in Venezuela could run as high as 13,000 percent this year, while the economy shrinks by 15 percent. With more than $8 billion in bond payments due this year, a general default is possible, EIA stated.
Venezuela is one of the largest crude oil exporters to the US, accounting for about 41 percent of the nation’s total exports last year. Those exports, however, are on the decline as the US draws more on suppliers like Canada and Mexico. “The fall in exports to the United States is especially harmful to Venezuela’s economy because American refiners are among the few customers that still pay cash for Venezuela’s crude.” Last year the Trump considered tightening sanctions on Venezuela, a move that would have created problems for the United States because the refineries concentrated on the US Gulf Coast are designed to process the heavy Venezuela crude oil.
Caracas was hoping to pay off its $3.15 billion debt to Russia with its new cryptocurrency, the “petro.” Those hopes were lost when the Russian Finance Ministry announced last week that it wouldn’t be accepting the digital currency. In November last year, Russia threw a life-line to Venezuela when the two countries signed a deal to restructure $3.15 billion worth of Venezuelan debt owed to Moscow. Under the terms of the deal, Venezuela would repay the debt over the next ten years, of which the first six years include “minimal payments”. The following month, Venezuelan President Nicolas Maduro announced that his country would be issuing an oil-backed cryptocurrency, which it did in February. The US already has prohibited transactions made with Venezuela’s digital currency.
7. The Briefs (date of an article in Peak Oil News is in parentheses)
In Europe, diesel-powered passenger vehicle sales are declining as governments put more pressure on automakers to cut production and sales in the post-Volkswagen diesel emissions cheating scandal landscape. In February, diesel car share dropped to 39 percent of the share from 46 percent a year ago. (3/28)
UK North Sea’s oil production is expected to revert to a decline again next year, after a brief period of growth since 2015, according to consultants at Bernstein. Since peaking at 2.6 million b/d in 1999, the UK Continental Shelf production had been in decline until 2014, after which, thanks to start-ups and improved production from existing fields with infill drilling, oil production stabilized for two years. (3/27)
Southeast Europe pothole: Since the dissolution of the Eastern Bloc, energy production in Southeast Europe has been stymied by chronic underinvestment. As a result, infrastructure in the region is struggling to meet demand, is unreliable and is in dire need of modernization. At the same time, it must conform to EU climate and air quality regulations. In short, Southeast Europe is heading toward an energy crisis. (3/30)
Russia’ arctic gas shipments growing: Since Novatek launched production at its Yamal LNG plant, out-shipments of more than one million tons of liquefied gas has been made. A total of four new and powerful LNG carriers now shuttle to and from the project terminal of Sabetta on Yamal, and another 11 vessels of the same kind are under construction. The ships have powerful icebreaking capacities and can travel along the Northern Sea Route during much of the year. In late December 2017, the Eduard Toll made it through the Bering Strait and all the way to the Yamal Peninsula without icebreaker assistance. (3/28)
Rosneft said Thursday that it has agreed to open a research and development center focusing on petrochemicals and shipbuilding technology in Qatar, following several meetings between Russian and Qatari officials this week. The move is the latest sign that Russian companies are expanding bilateral cooperation with OPEC member countries following the OPEC/non-OPEC crude oil production cut deal. (3/29)
Israel’s bonanza: Thanks to the estimated 2.1 billion cubic feet of natural gas lying in the Karish and Tanin gas fields, along with the previously-discovered Tamar and Leviathan deposits , Israel is looking to become energy-independent for the first time in the nation’s history. The economically ambitious country is already organizing a push into foreign markets, becoming an exporter of natural gas. (2/28)
In South Korea, Hyundai Motor’s union chief warned its workers might face a similar crisis to the one hitting General Motors’ South Korean unit as sales in key markets slide, adding that electric cars were ‘evil’ and will destroy jobs. Electric cars could wreak havoc on traditional auto jobs as they don’t require engines and transmissions. Hyundai’s union has predicted a drastic shift into electric cars could lead to a loss of 70 percent of Hyundai jobs in a worst-case scenario. (3/27)
In China, the Winter Olympics in 2022 will have a low carbon footprint with the host city committing to more renewables. Beijing and the city of Zhangjiakou are co-hosts for the 2022 games. (3/27)
In Algeria, oil majors Anadarko, Total, ENI, and Statoil have expressed interest in helping the nation start offshore drilling, according to state news agency APS. Algeria has been struggling to attract foreign energy investment because of tough terms and bureaucracy. But, in a bid to improve the investment climate, the government has been drafting amendments to the energy law to introduce more incentives for investors. (3/29)
In Sudan, a recent shortage of fuel and cooking gas has renewed in Khartoum and other states over the past two days. People reported to Radio Dabanga that buses and trucks have been lining in queues in front of fuel stations for long hours. (3/30)
In Liberia, Exxon designed an oil deal to skirt anticorruption scrutiny. The idea was to have a Canadian company buy the rights from a Liberian oil operator whose ownership was murky. Then Exxon would buy a controlling stake in the project from the Canadian outfit. Exxon completed the deal for $120 million in 2013. (3/31)
Korean gas pipeline: A decade-old idea of a Russian gas pipeline to South Korea via North Korea could be revived if the security situation on the Korean peninsula improves. Gazprom had the idea to deliver ten bcm of natural gas to the resource-poor and import-dependent South Korea by pipeline, but its route has to pass through the territory of North Korea. (3/31)
Offshore Brazil, Exxon Mobil Corp roared into the nation’s prolific offshore oil fields again on Thursday, clinching eight blocks in partnership with other oil firms to gain control of the country’s best prospects ahead of presidential elections later this year. Exxon along with Petrobras and Qatar Petroleum Intl paid $844 million for a block in Brazil’s offshore Campos basin as Exxon seeks to replace dwindling reserves. Chevron Corp, Repsol SA, Royal Dutch Shell Plc, BP Plc and Statoil ASA also paid top dollar to lock down stakes. (3/30)
In Argentina’s Neuquen province, where most of the country’s tight oil and gas supplies are found in the Vaca Muerte formation, governor Omar Gutierrez says more permanent reforms are needed. “We eliminated gas and oil retentions and installed a pricing regime that has encouraged development. We also have done away with consumption subsidies and allowed prices to rise. With drilling costs half of what they were, unconventional oil and gas now have a greater share of our province’s total production, and 20-22 percent of Argentina’s.” (3/28)
Tierra del Fuego, the southernmost province of Argentina, launched an exploration licensing round Tuesday for two onshore blocks and announced plans for an offshore tender later this year, as it seeks to tap growing interest in the country’s oil and natural gas production potential. Interest is reviving in Argentina’s oil and gas sector after more than a decade of populist rule kept away many companies. Mauricio Macri, the country’s business-friendly president, has removed the capital, currency and trade controls of his predecessors since taking office in 2015, and is pushing a reform agenda to make it cheaper and easier to do business. (3/28)
Mexico’s proven oil and gas reserves dropped again last year after new certified discoveries—mostly by private foreign operators—were unable to keep pace with current production. (3/27)
Offshore Mexico, European oil majors are swarming into the shallow waters of the Gulf of Mexico as the country races to attract investment before the coming election. Royal Dutch Shell, BP, Total, Eni, Repsol, Russia’s Lukoil and Deutsche Erdoel all won blocks — a number of them in partnership with state-owned PEMEX. (3/30)
Mexico’s government estimates more than $8 billion will be invested over the lifetime of oil and gas contracts awarded in shallow waters in the Gulf of Mexico. The government said it awarded 16 contracts to 14 companies grouped into 12 bidders during its latest auction for offshore contracts. (3/29)
In Mexico, PEMEX said it signed on with a partner to help extract natural gas from the Eagle Ford shale reservoir in the country. Pemex said it signed an exploration and extraction contract with the Mexican subsidiary of Lewis Energy to invest $617 million in developing the Olmos field in the Mexican state of Coahuila. Lewis has drilled more the 500 wells in the Texas section of the Eagle Ford shale, setting itself up as the third-largest producer in the state. (3/28)
Alberta is pursuing an aggressive campaign to fight global warming. There’s just one problem: the same place is also home to some of the dirtiest oil in the world. Alberta is boosting its use of renewable energy, closing power plants that burn coal and in January increased its tax on carbon emissions by 50 percent, moves that will help Canada curb emissions under the global Paris climate agreement. (3/27)
The US oil rig count declined by 7 to 797, the first cut in three weeks even as crude prices hover near three-year highs. Yet oil rigs were still up 135 compared to one year ago, according to Baker Hughes. Gas rigs were up by 4 to 194. (3/31)
SPR’s dirty oil? Three firms that bought crude oil last year from US emergency stockpiles raised concerns about dangerous levels of a poisonous chemical in the cargoes. Problems with crude quality would make the US Strategic Petroleum Reserve (SPR) less useful in an emergency because refiners would need to spend time and money removing contamination before producing fuel. (3/30)
Exxon case dead end: A federal judge has put an end to Exxon’s attempt to sue the district attorneys of New York and Massachusetts for investigating the company with relation to the alleged cover-up of its knowledge of climate change and the effects its business had on the environment. Manhattan judge Valerie Caproni dismissed as “implausible” Exxon’s argument that New York’s DA Eric Schneiderman and Massachusetts’ Maura Healey were on a political quest against the company, seeking to violate its constitutional rights. The dismissal of the case was made with prejudice, meaning Exxon cannot bring it again. (3/31)
Arctic RFI: The US government published a call for information in the Federal Registry on Thursday regarding a proposed opening for drillers in Alaska’s Arctic waters. The proposal, still in the draft stage, is part of a five-year lease plan that would go into force in 2019 if approved in its current form. (3/30)
Refineries speed bump: An author of a recent Boston Consulting Group report observed that changes in the automotive sector – tied to consumer attitudes, government policies, and technology – could mean significant challenges as well as opportunities for US refiners. (3/27)
Energy R&D funded: The $1.3 trillion spending bill signed in late March will prevent previously proposed funding cuts to the Department of Energy. The DOE’s Office of Energy Efficiency and Renewable Energy was slated to be cut by 65 percent, according to the president’s Fiscal Year (FY) 2018 budget request. Instead, the spending package increases the office’s budget by 14 percent to $2.32 billion. (3/26)
Undoing MPG isn’t easy: The EPA has readied a final determination that calls for the rolling back of corporate average fuel economy (CAFE) standards. The current standards would require automakers to sell vehicles that average 54.5 miles per gallon by 2025. This move by the White House will likely be subjected to litigation. Putting regulations in place requires a lot of legwork and several years of procedure. Undoing them is not all that much easier. (3/27)
Biofuel bailout: A deal to wipe out refiner Philadelphia Energy Solution’s biofuel credit debt would effectively shrink the 2018 US biofuel mandate by 2%, which would cut renewable fuel demand and weaken Renewable Identification Number prices. (3/28)
Biofuels hot potato: President Donald Trump is seriously considering abandoning efforts to remake the nation’s biofuel laws after wading deep into an issue that divides some of his core constituencies – farmers and oil companies. Advisers have urged Trump to let Congress tackle the biofuel reforms while using the threat of administrative action to help rival lawmakers come together and solve the intractable issue. (3/31)
Offshore wind bonanza? Almost every state along the Atlantic coast — 12 out of 14 — has offshore wind potential that exceeds its current electricity needs. Bringing the electricity generated by offshore Atlantic wind farms ashore could help meet future electricity demand created by activities — transportation and the heating of homes and businesses — that are currently powered by gasoline, natural gas, and other fossil fuels. (3/29)
An EV’s carbon footprint depends on whether its power comes from renewables or fossil, and quantifying exactly how clean EVs are compared to gasoline-powered vehicles has been tough – until now. New data shows that in every corner of the United States, driving an EV produces significantly fewer greenhouse gas emissions than cars powered only by gasoline, regardless of the local power mix. Today, an average EV on the road in the US has the same greenhouse-gas emissions as a car getting 80 miles per gallon (MPG). (3/27)
Battery advance? Researchers led by a team from MIT, with colleagues from Oak Ridge National Laboratory, BMW Group, and Tokyo Institute of Technology have developed a fundamentally new approach to alter ion mobility and stability against oxidation of lithium ion conductors—a key component of rechargeable batteries. The new approach could accelerate the development of high-energy solid-state lithium batteries, and possibly other energy storage and delivery devices such as fuel cells. (3/27)
Better well closure: A Norwegian company has successfully pilot-tested in Canada a new technology that will permanently plug oil wells and ensure that no greenhouse methane gas escapes. Norwegian company Interwell has developed a possible solution that uses thermite—a metal-chemical powder that has very stable components and causes a non-violent reaction that can be controlled. The thermite burns at around 3,000 degrees Celsius (5,432 degrees Fahrenheit) and melts the well’s pipe into the surrounding rock, by creating “artificial magma,” like in volcanoes. (3/26)
Fukushima: The decommissioning of the Fukushima nuclear power plant will cost an annual $2 billion until 2021. But the $6 billion for the three years is only part of the total estimated cost for taking Fukushima out of operation. The total decommissioning tally came in at $75 billion, as estimated by the specially set up Nuclear Damage Compensation and Decommissioning Facilitation Corp. That’s four times more than the initial estimate of the costs around the NPP’s decommissioning. (3/31)