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NEW CRITICISM OF LNG EXPORT BOOM: The war in Ukraine and its fallout triggered immense new commercial interest in U.S. potential to export additional liquefied natural gas, so much so that U.S. suppliers have inked more than four dozen long-term contracts and contract expansions since the war in Ukraine began.
There are two prevailing accounts of this war-driven surge worth taking a look at as the war approaches its one-year mark. One story, the one being told by environmental NGO Friends of the Earth and liberal watchdog group Public Citizen in their new LNG report this morning is that the sector has unethically cashed in on the war’s effects to energy markets and that President Joe Biden enabled it by endorsing more exports.
Incidentally, that energy companies have leveraged the war to the advantage of their business is an argument Biden has made repeatedly with regard to the oil market, but the similarities end there.
Biden has treated gas differently. In the other account of things, one largely shared between the Biden administration and the LNG sector, Europe needs more gas from its friends across the Atlantic, and it needs the additional export authorizations to support more exports.
More on the numbers: The FOE-Public Citizen joint report itemizes 45 long-term contracts and contract expansions to supply LNG entered into since the war began last February, although a few of the contracts involving Tellurian have been canceled. The count is up from 14 in 2021.
All of these contracts involve future supply, and most of the projects involved in these supply and purchase agreements have not yet even reached final investment decisions. European buyers have been a party to a lot of these contracts, although they’ve been outpaced by Asian buyers.
The Biden administration jumped at the opportunity to facilitate more LNG shipments from existing export terminals after the war began and authorized new exports, having previewed more LNG supplies as a ready solution in the weeks just before the war began.
We observed that Biden’s pledge to get Europe more LNG put him on a collision course with his environmental constituencies, and it certainly has.
“LNG exports are a ploy to prolong the era of fossil fuels. If Big Oil’s export agenda remains a blindspot for the Biden administration, then the President’s climate legacy is at risk,” said Lukas Ross of Friends of the Earth, a co-author of the report, which dismisses the expansion of gas infrastructure tied to these long-term contracts as a permanent solution to short-term volatility.
Fred Hutchison, president and CEO of LNG Allies, noted that the Europeans are now looking to Algeria and other countries for additional volumes of gas to displace product from Russia and said the U.S. is best positioned to provide the cleanest fuel to Europe for its tighter emissions regulations — with more coming down the pike.
He also pushed back on the notion that supplier interest in these contracts popped up suddenly after the war began.
“Since the very minute any of those companies began to push their projects forward, before they even got FERC or DOE approval, all of them were out all over the world trying to get long-term contracts,” Hutchison told Jeremy.
Welcome to Daily on Energy, written by Washington Examiner Energy and Environment Writers Jeremy Beaman (@jeremywbeaman) and Breanne Deppisch (@breanne_dep). Email [email protected] or [email protected] for tips, suggestions, calendar items, and anything else. If a friend sent this to you and you’d like to sign up, click here. If signing up doesn’t work, shoot us an email, and we’ll add you to our list.
MORGAN STANLEY RAISES 2023 OIL GROWTH ESTIMATE BY 36%: Morgan Stanley raised its estimate for global oil demand growth by around 36% in a new market note, citing growing momentum as China continues to reopen its economy, as well as a recovery in jet fuel demand, while higher supply from Russia was listed as one offsetting factor.
“Mobility indicators for China, such as congestion, have been rising steadily,” the bank said, while “flight schedules have firmed-up the outlook for jet fuel demand.”
Still, the bank trimmed its Brent oil price forecast to $90-100 per barrel, down from the $100-110 per barrel it had previously, due to what it estimates will be higher-than-predicted output from Russia.
Global oil consumption is now expected to rise by around 1.9 million bpd in 2023 compared to the previous forecast of 1.4 million bpd.
“We previously estimated a ~1 mb/d year-on-year decline in 2023, which we moderate to 0.4 mb/d,” analysts said.
‘NO EXCUSE’ FOR FAILING TO TACKLE METHANE EMISSIONS, IEA TELLS ENERGY FIRMS: Methane emissions from the energy sector increased in 2022 for a third consecutive year, according to a new report from the International Energy Agency, which accused fossil fuel industries of failing to take sufficient action to curb their methane emissions.
According to the report, energy companies were responsible for some 135 million tons of methane released into the atmosphere in 2022, or 40% of total human-created methane emissions. The increase brings methane emissions closer to their highest-ever level seen in 2019.
Moreover, it said that 75% of emissions from the oil and gas sector could be reduced with cheap, existing technologies that would account for less than 3% of income accrued by oil and gas companies in 2022.
“Some progress is being made but… emissions are still far too high and not falling fast enough,” said IEA chief Fatih Birol.
Democrats weigh in: Meanwhile, a group of 76 congressional Democrats urged the EPA to strengthen its proposal to regulate methane emissions from U.S. oil and gas operations. In a letter to EPA Administrator Michael Regan reported by the Washington Post, the lawmakers called on the administration to tighten restrictions on routine flaring and define when flaring can occur during emergencies and maintenance.
“While the supplemental proposal takes some important steps to reduce pollution from routine flaring of gas at oil wells, stricter safeguards against this harmful practice are critical to reduce pollution and protect health,” they wrote.
SOUTH AFRICA OFFERS SUBSIDIES TO ADDRESS ENERGY CRISIS: South Africa is offering $710 million in tax incentives to businesses and individuals in an effort to boost investments in renewable energy projects as the country experiences its worst electricity crisis to date.
According to the country’s newly published Budget Review, individuals who install new solar photovoltaic panels at private residences between now and February 2024 will be eligible for a tax rebate of 25% of the cost.
It also expands an existing tax incentive for businesses that turn to renewable energy, allowing them to claim the equivalent of 125% of their investment, Bloomberg reports.
It also calls for the procurement of up to 500 MW of power from private companies by 2026 in the country’s capital city of Cape Town.
The effort comes as South African President Cyril Ramaphosa has declared a state of disaster over the power crisis, which has triggered rolling blackouts across the country and left some without power for as long as 10 hours at a time.
FREEPORT LNG RETURNS TO AN ANEMIC GAS MARKET: Freeport LNG announced that it received approval from federal regulators to restart liquefaction operations at its Gulf export terminal, some eight months after it went offline at what was seen at the worst possible time for an LNG supplier drop off.
Freeport said yesterday it will now commence full operations of one of its three liquefaction trains and will engage in a “incremental restart” of operations with its second train. Its third train requires additional approval to restart.
The company said it expects to bring its 2 bcf per day of liquefaction capacity back online over the next several weeks.
How it started: When the export terminal closed following an explosion last summer, U.S. natural gas futures were trading at close to $9 per MMBtu. In Europe, where an increasing share of U.S. LNG volumes were heading, including Freeport’s, benchmark futures were above $90 per megawatt-hour, and buyers couldn’t wait for Freeport’s gas to come back.
How it’s going: U.S. gas futures fell above $2 per MMBtu overnight, and European futures are trading for nearly half the price they were going for when the Freeport explosion happened.
INTERIOR PROPOSES INAUGURAL WIND LEASE SALE IN GULF: The Interior Department proposed the first-ever wind lease sale in the Gulf of Mexico, a region that has so far been passed over for windier waters in the Atlantic.
The White House first announced the proposed sale, which would make acreage available offshore Texas and Louisiana, this morning. Its announcement said the total acreage could power as many as 1.3 million homes.
A Gulf lease sale would be Interior’s fourth since Biden took office. Two others were held off the coasts of New York and the Carolinas, and Interior held its first Pacific wind lease sale offshore California last year.
Atlantic is well ahead: Biden wants to install at least 30 gigawatts of offshore wind capacity by 2030. Most of that is going to come from projects in the Atlantic Ocean as things stand.
South Fork Wind and Vineyard Wind, the two commercial-scale offshore wind projects expected to begin producing electricity beginning this year, are located in the Northeast, and all of the projects in the offshore wind pipeline with estimated operation dates before decade’s end are located in the Atlantic.
CALIFORNIA SENATE TO DEBATE NEWSOM PRICE GOUGING PROPOSAL: A California Senate committee will begin hearings this week on a legislative proposal backed by Gov. Gavin Newsom designed to punish oil refiners for high profits margins.
The chamber’s Energy, Utilities and Communications Committee will hold an initial informational hearing this afternoon on the proposed windfall profits penalty. Democratic Sen. Nancy Skinner and Newsom announced the proposal in December, which would work by making it illegal for petroleum refiners to earn above an established “maximum gross gasoline refining margin,” calculated on a per-gallon basis.
RUSSIA CALLS FOR U.N. PROBE OF NORD STREAM BLASTS: Russia called yesterday for a special U.N. commission to investigate the four explosions along the Nord Stream 1 and 2 gas pipelines linking it to Germany, citing, in large part, a controversial report from American journalist Seymour Hersh that alleged the U.S. was responsible for carrying out the attack.
(The report has been dismissed as “utterly false” and “complete fiction” by the Biden administration.)
Russia issued its request for the independent investigation yesterday at a U.N. Security Council meeting. It was backed only by China, which described Russia’s demands as “entirely legitimate and reasonable.” (Columbia University professor Jeffrey Sachs and retired CIA officer Raymond McGovern also gave presentations in support of Russia’s request.)
Meanwhile, U.S. Minister-Counselor John Kelley told the council that the request was a last-ditch attempt from Moscow to divert attention from the first anniversary of its invasion of Ukraine.
Rather than entertain “completely false” allegations, he said, “we wish [Russia] would apply urgency … to myriad reports of violations of international human rights law caused by its invading forces.”
ESG CRITIC VIVEK RAMASWAMY ANNOUNCES PRESIDENTIAL BID: Ohio biotech entrepreneur and ESG critic Vivek Ramaswamy announced yesterday that he is running for president.
The 37-year-old billionaire and founder of Roivant Science, and who has been dubbed the “CEO of Anti-Woke Inc.,” made his announcement on Tucker Carlson’s Fox News show yesterday. He also shared a video of his announcement on Twitter.
Ramaswamy, the author of Woke Inc: Inside Corporate America’s Social Justice Scam, has criticized ESG as a way of forcing cultural and societal changes through the influence of capital, and started the firm Strive Asset Management to pressure major corporations, such as Chevron, BlackRock, Walt Disney, and Apple to abandon their ESG goal and focus solely on their earnings.
Ramaswamy will step down as executive chairman of Strive to pursue his presidential bid.
The Rundown
Wall Street Journal Venezuela’s oil industry, reopening to investors, is major polluter
E&E News 3 questions answered on the Ukraine war’s impact on energy
New York Times A sudden rush to make sustainable aviation fuel mainstream
Calendar
MONDAY | MARCH 6
The annual CERAWeek conference kicks off in Houston, Texas. Learn more and register here.
TIME AND DATE TBA
The Senate Environment and Public Works Committee will hold a hearing in early March on the emergency response and cleanup effort related to the train derailment in East Palestine, Ohio.
