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THE STATUS OF NATURAL GAS IN 2023: The energy crisis has greatly improved the prospects for natural gas as governments increasingly court suppliers and commit to building out new infrastructure.
Europe’s eroding trade with Russia has forced governments and utilities to go back to the energy policy drawing board, where many have concluded they’ll need additional gas for years to come. Producing countries, including the United States, have jumped at the opportunity to supply them.
What’s happening: The gas industry has long marketed its product as the best complement to renewable sources for power generation, arguing that it’s the cleaner alternative to coal, similarly dispatchable, and can be utilized to work well alongside variable wind and solar.
In Germany, gas is being treated that way. The government and grid regulator want to nearly double gas-fired generation capacity to help enable the phase-out of coal and ensure grid stability, Euractiv reported.
As the Russia-Ukraine war loomed, gas interest groups in the U.S. also began arguing more frequently that the Biden administration should support more production and exports to help allies — and it is.
“It’s very important to make sure that [allies] have the means,” Energy Secretary Jennifer Granholm said yesterday when asked about U.S. LNG exports. “We are fortunate in that we have an abundance, obviously, of natural gas in this country. Our prices are low. But during times of challenge, we want to help our allies as well.”
The administration’s been helping out by expanding U.S. LNG export authorizations. European utilities and traders are simultaneously inking new long-term supply deals, and governments there are blessing them, something they resisted before.
In 2020, the French government stepped in to block energy firm Engie from agreeing to a $7 billion LNG supply deal from NextDecade’s future export terminal in Texas on the grounds that U.S. LNG is too dirty. Last month, Engie and Sempra agreed to a 15-year sales and purchase agreement. (We note the Biden administration has pledged to clean up LNG with tighter methane regulations, a condition of President Joe Biden’s effort to increase exports.)
German, Portuguese, and British firms have also entered into long-term agreements in recent months, including with U.S. and Qatari suppliers.
“The Germans thought they had a long term deal with Russia, but Putin left them hanging,” Lauri Myllyvirta, lead analyst for the Center for Research on Energy and Clean Air, told Jeremy. “I don’t think they or other Europeans are exactly keen on long term deals but they have felt they don’t have other options.”
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OPEC+ UNLIKELY TO TWEAK OIL OUTPUT WHEN IT MEETS NEXT WEEK: OPEC+ oil producers are unlikely to make any changes to their current output policy next week when they convene for their Joint Ministerial Monitoring Committee, officials said, as producers seek to balance growing demand from China against broader fears of inflation and a global economic slowdown.
Five OPEC+ sources told Reuters that they are unlikely to leave their current policy unchanged during next week’s meeting, which will be held virtually. “We will certainly discuss China’s economy and inflation,” one source said. “There are no expectations for this meeting. This will not be an OPEC+ meeting, but only a JMMC with no decisions or recommendations.”
The forecast comes as energy ministers from two OPEC+ countries, the UAE and Russia, each said this month that global oil markets are “balanced.” (The International Energy Agency predicted that global oil demand will climb by a record-high of 1.9 million barrels per day this year, due in large part to China’s economic reopening and an uptick in demand that analysts expect will push prices slightly higher.)
OPEC+ angered the Biden administration in October after it announced it would cut oil output by 2 million barrels per day through 2023, reneging on a perceived commitment to the U.S. to pump more oil ahead of the midterm elections. Members left that policy unchanged at their meeting in December.
OPEC+ is slated to convene for their next in-person meeting in June.
…MEANWHILE, RUSSIAN CRUDE EXPORTS SLUMP, REVERSING EARLIER GAINS: Russian exports of seaborne crude slumped again last week after a temporary surge, reversing gains notched in the seven-day period and depleting the Kremlin’s profits, which soared in the aftermath of its invasion of Ukraine last year and resulting scramble for energy supplies.
In total, Russian output dropped by 22% last week, or 820,000 barrels per day—down to an average of 2.98 million per day.
The biggest single-week drop-offs were seen at ports in the Pacific, which dropped by nearly half during the past seven days, Bloomberg reports. Smaller declines were recorded in Russia’s exports to ports in the Arctic and Black Sea.
News of the slump comes as both the EU ban and G7 price cap on Russian petroleum products are slated to come into force on Feb. 5, threatening to further cut into Russian President Vladimir Putin’s war chest.
…Still, it will likely be years before Russia feels the pain from the West’s punishing sanctions packages. Russia currently holds a yuan reserve of $45 million, providing it enough of a buffer to cover its export shortfalls for the next several years barring any massive drop-offs in oil prices, according to analysts at Bloomberg Economics and Citigroup.
GRANHOLM: ‘NO CONCERNS’ ABOUT REFILLING SPR: Energy Secretary Jennifer Granholm said yesterday she has “no concerns that we will be able to refill and replenish the SPR, and do it at a savings to taxpayers.”
Remember, the DOE rejected bids for a pilot purchase of up to 3 million barrels to begin refilling the reserve after last year’s drawdowns, saying the bids did not meet their requirements for specification or price. Granholm told reporters yesterday to “stay tuned” for an announcement on the next steps to begin replenishing the stockpile.
Granholm also said Biden would veto H.R. 21, the bill introduced by House Republicans earlier this month that would limit a president’s authority to order SPR sales except in the event of a severe supply interruption.
She cited a report from the Treasury Department which estimated that the SPR releases reduced gas prices by up to 40 cents per gallon.
…Meanwhile, House Energy and Commerce Committee Chair Cathy McMorris Rodgers, who introduced the bill limiting Biden’s authority to order future SPR drawdowns, argued that the sales have depleted the reserves to dangerously low levels, thus preventing the U.S. from responding to other supply emergencies such as hurricanes or other natural disasters.
The Washington state Republican also took aim at Granholm’s remarks on gas prices, noting in a statement this morning that gas prices have increased over the past month by an average of 30 cents nationwide, offsetting much of the 40-cent price decrease touted by the administration.
BIDEN RE-TAPS DANIEL-DAVIS FOR INTERIOR POST: The White House is again elevating Laura Daniel-Davis for assistant secretary of the Interior, a post that’s been vacant for more than 3 years.
Daniel-Davis, who worked for two Interior secretaries during the Obama administration and returned to the department after a stint with the National Wildlife Federation, has been serving as principal deputy assistant secretary for Land and Minerals Management since the beginning of the Biden administration.
Biden nominated her previously for assistant secretary but the nomination deadlocked in the Senate Energy and Natural Resources Committee last July and never moved forward.
Goffman gets another go: Biden also put Joseph Goffman, a chief architect of the Obama-era Clean Power Plan, back up for assistant administrator for the Environmental Protection Agency.
An Environment and Public Works Committee vote on Goffman’s nomination to lead EPA’s Office of Air and Radiation tied in November.
The Rundown
Bloomberg Nuclear power plants are pushed to the limit as demand surges
E&E News How Texas’ electricity plan could change the grid
Politico Big winners from Biden’s climate law: Republicans who voted against it
Calendar
WEDNESDAY | JANUARY 25
2:00 p.m. Brookings Institution. The Brookings Institute will host an event exploring ways to accelerate federal, state, and local investments in the U.S. infrastructure workforce. Register to attend in-person or watch online here.
