Energy Transition

CERAWEEK: New methane regulations present disadvantages for small US oil, gas producers

Highlights

Larger companies likely already comply with new rules

Producers face fees for breaching limits

Small US oil and gas producers will struggle to comply with new US Environmental Protection Agency regulations to limit methane emissions while large companies are likely already compliant, according to various speakers at CERAWeek by S&P Global.

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“[Large companies] already have systems in place to go beyond what the EPA is requiring, so they’re going to sail over these requirements with no trouble,” Ben Cahill, Senior Fellow at the Center for Strategic and International Studies, said on the sidelines of CERAWeek March 21. “It’s more of a problem for the smaller producers, because many of them are just at the start of their own methane journey and they just don’t know what to do about these rules. They haven’t sorted through the technology yet.”

The Inflation Reduction Act provided $1.55 billion to give grants and training to smaller companies to help them comply with methane regulations. “I don’t think that money has gotten out the door as fast as people wanted,” Cahill said. “A lot of these companies might have some kind of cultural resistance to working with the EPA.”

“The new regulations also took away the grandfathering in of older producing wells,” Tom Jorden, CEO of Coterra Energy, said in a March 20 panel. Jorden said he was “deeply concerned” about the impact on smaller players “because many of those will not support the kind of retrofitting that companies like … Coterra can handle. Financially, those wells will just need to be plugged.”

The EPA announced the final rule on methane in December and published it March 8. The rule includes a zero-emissions standard for new controllers, and requirements that routine flaring from new wells be phased out.

A March 15 petition from 24 state attorneys general challenged the rule, which “imposes expensive and unjustified new technology and monitoring requirements; imposes new storage and transportation requirements; adds new source performance standards; and creates a ‘Super Emitter’ program that third-party environmental advocacy groups can use to harass producers,” Oklahoma Attorney General Gentner Drummond said in an accompanying statement.

“Generally, the way things work is EPA gets sued by everybody,” Cahill said. “The goal when the EPA puts these things together is to make them as resilient as possible to legal challenges.”

EPA could assess fees

Producers could face hefty charges if they are unable to bring down their methane emissions. The Inflation Reduction Act introduced a 0.2% methane emission limit for producers beginning in 2024. It tasked EPA with collecting a Waste Emission Charge for emissions beyond this limit, starting at $900/mt for 2024 emissions and rising to $1,200/mt in 2025 and $1,500/mt in 2026.

Companies producing MiQ-certified natural gas are already meeting the 0.2% threshold, but overall methane emissions from US production are around 1%, Georges Tijbosch the CEO of MiQ, a nonprofit that certifies gas for producers, said March 20. MiQ certifies around 22 Bcf/d of US production and participants include large producers like EQT and Chesapeake.

New reporting rules

The EPA is also finalizing rules that will change how companies report their methane emissions, moving away from the old system were they could report modeled emissions. “That data’s wrong. It’s too low,” Cahill said.

“In order to get an accurate estimate of emissions you actually have to go out and measure,” Matt Watson, EDF’s vice president of energy transition, said March 19 at CERAWeek. He praised the Oil and Gas Methane Partnership for helping companies “get to a really high level, scientifically rigorous measurement.”

When companies in OGMP start the process of measuring in the field, including “big, sophisticated, well-capitalized companies,” emissions are often far higher than anticipated, Watson said.

US House passes bills to undo Biden climate programs, ease pipe permitting

Highlights

Bills unlikely to move in Democrat-led Senate

Messaging efforts ahead of 2024 elections

House Republicans narrowly passed a slate of bills March 20-22 showcasing the party’s energy priorities and favoring US oil and gas production ahead of the 2024 elections but unlikely to be enacted in the 118th Congress.

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The votes were part of what Republicans dubbed “Energy Week” and advanced measures to roll back the US Environmental Protection Agency’s Greenhouse Gas Reduction Fund and scrap the EPA’s new fee on oil and gas methane emissions. Another measure would also streamline water crossing permits for oil and gas pipelines and other linear infrastructure.

Although the bills stand almost no chance of passage by the Democrat-controlled Senate, they could indicate what GOP lawmakers try to enact if Republicans win both chambers of Congress and the White House this November. And they present another chance for Republican lawmakers to air grievances with Biden administration energy policies.

“Biden’s policies have discouraged private investment in traditional energy projects and harmed American consumers by things such as killing the Keystone Pipeline,” said Representative Michael Burgess, Republican-Texas, vice chair of the House Rules Committee March 19. “House Republicans believe that there is a different path, one that lowers energy costs and secures energy independence, and in fact benefits all Americans.”

Democrats, for their part, emphasized that domestic energy production has hit all-time highs despite the GOP attacks on Biden’s approach. They accused Republicans of passing repeated messaging bills, seeking to gut pollution prevention programs, and offering more handouts to the oil and gas sector.

The House voted to repeal the EPA’s $27 billion Greenhouse Gas Reduction Fund and rescind any unobligated balances for the program. The fund, created through the Inflation Reduction Act of 2022, provides grants, including to low-income and disadvantaged communities, for projects to cut greenhouse gas emissions and air pollution.

Under GOP control, the House has voted several times in the past year to reverse the program, but that effort has never advanced in the Senate.

The House also passed H.R. 7023, the Creating Confidence in Clean Water Permitting Act, which among other things would require the US Army Corps of Engineers to maintain general water crossing permits on a nationwide basis for linear infrastructure projects.

To avoid getting bogged down in a more extensive Clean Water Act permitting process for large projects with multiple water crossings, oil and gas pipeline developers have preferred use of a general permit known as Nationwide Permit 12.

After halting the Keystone XL Pipeline approval in a January 2021 executive order, the Biden Administration has held the general permit under review, a status that oil pipeline developers argue creates uncertainty.

Democrats contend the bill would weaken the Clean Water Act and the Environmental Protection Agency’s ability to enforce laws against polluters.

Interstate gas pipeline have recently emphasized that they believe reform of the Clean Water Section 401 process, not included in the bill, would be necessary to make real progress on permitting reform. Gas pipelines developers have long complained that some states were abusing their veto power under Section 401.

Signals for production

The House also passed a bill to withdraw a July 2023 proposal from the US Bureau of Land Management to raise royalty rates and make other changes to the federal oil and gas leasing program for public lands.

House Republicans also approved non-binding “sense of Congress” resolutions stating that the president cannot declare a moratorium on hydraulic fracturing without approval from Congress and that a carbon tax would hurt the US economy.

The bills are part of House Republicans’ efforts to reverse major climate and energy policies from the Biden administration and Democratic lawmakers, including key IRA programs and tax incentives supporting zero-carbon technologies.

House Democrats blasted the GOP “Energy Week,” calling it a “shameless political stunt for [House Republicans’] fossil fuel supporters,” according to leaders of the House Sustainable Energy and Environment Coalition.

Republicans in the House “want nothing less than to roll back the historic clean energy investments that are already driving a boom in domestic manufacturing, slashing pollution, and creating thousands of jobs across America,” coalition members said in a March 19 statement.

CERAWEEK FACTBOX: Regulatory uncertainty; renewables in flux; power demand surge seen

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Highlights

Renewable power in ‘deep industry reset’

Alaska considering coal-fired generation

The penultimate day of CERAWeek by S&P Global in Houston focused on power, with talk of how to align legacy and new supply sources with a fast-moving demand outlook, an uncertain regulatory environment and unfolding energy transition.

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Power

Abu Dhabi’s Masdar plans to grow its operating renewable energy capacity in the US to 10 GW in the next five years through its planned acquisition of Terra-Gen Power Holdings, nearly 10 times its current base in the country, according to CEO Mohamed Jameel Al Ramahi. “You can’t be a global renewable energy company without having a strong presence in the United States,” he said. “We have full trust in the United States, as a direct foreign investor.” The company on March 19 said it would purchase a 50% stake in Terra-Gen from asset manager Energy Capital Partners.
Renewable power is “going through a deep industry reset” in which “nobody’s making any money,” a New York State Energy Research and Development Authority official said. Asked how inflation in material and operations and maintenance costs have affected renewable project returns, Georges Sassine, NYSERDA vice president for large scale renewables, said, “Terribly. What happened in New York in December, I had around 80 projects and 7.3 GW canceled contracts in the same day,” Sassine said. NYSERDA issued an expedited request for proposals, resulting in about 5 GW of capacity participating, “and we’re in the process of evaluating and deciding what we’re going to award, but we are definitely seeing higher prices to try to adjust the market,” he said.
Alaska may build the first large coal-fired power plant in the US in over a decade and is considering “probably two” equipped with carbon capture and storage technology, Governor Mike Dunleavy said. Alaska is constructing roads into remote mining areas, and they will need power, Dunleavy told S&P Global Commodity Insights. Situating coal plants near Alaska’s coalfields could significantly reduce costs while meeting other power needs, he added. “You place the plant right on the coalfield and right on the coalfield is where the main transmission line for the entire Railbelt [an electric grid providing the majority of Alaskans’ energy] is,” Dunleavy said. Most US utilities have shut coal plants in favor of cleaner power. The 932-MW Sandy Creek Energy Station in Texas went online in 2013 and is the most recent coal plant larger than 100 MW to power up in the US.

Hydrogen

Hydrogen hub investment opportunities can be identified by levels of CO2 emissions, Felipe Arbelaez, vice-president f hydrogen and carbon capture at BP, said. For example, he pointed out the US Gulf Coast’s industrial cluster has about 300 million-400 million mtCO2e/year. One of the Biden administration’s announced regional clean hydrogen hubs is the HyVelocity Hub based off the Gulf Coast. Co-locating hubs with market participants and potential offtakes, like industrial facilities seeking to decarbonize, fertilizer manufacturing assets and chemical facilities, not only shortens the supply chain but also makes large-scale development faster, speakers said. Hubs that are co-located with renewable energy sources and industrial emitters allows necessary technologies to be deployed easier and quicker, said Emmanouil Kakaras, vice-president of the NEXT Energy Business at Mitsubishi Heavy Industries in Europe, the Middle East and Africa.

Demand

National Grid CEO John Pettigrew told S&P Global Commodity Insights that while regulation and policy were set up to “build infrastructure at the last possible moment when you’re absolutely certain it was needed,” times are changing with the energy transition. “We know that we’re going to see electrification of transport. We know we’re going to see more heat pumps. We know we’re going to see more data centers, and load is going to increase,” Pettigrew told S&P Global Commodity Insights. “Unless you can do anticipatory investment and sort of build-out in anticipation of what’s coming, then you’re always going to end up with some bottlenecks, which will slow down people’s connections.”
The electrification and growth of demand on the electricity grid seem to be accelerating, which is a “daunting “challenge, Pattern Energy CEO Hunter Armistead told S&P Global Commodity Insights. “It’s one thing to think about transitioning how the resources stack up to meet the electrical needs,” Armistead said. “But to envision where the quantum of data centers and AI that are coming and even the prospect of a green fuels mix going into this, means that we’re facing a grid that is even more strained than we were expecting. You can be overwhelmed by that or get excited about figuring it out.”
Power companies plan to combine natural gas-fired generation with zero-emissions resources to meet expected surging power demand, executives said March 21. Robert Blue, Dominion Energy chairman, president and CEO, cited surging data center demand in Northern Virginia as particularly challenging. “If you looked back a decade, we had roughly 500 MW of data center demand, which was a lot for one industry at the time,” Blue said. “This year, we’re more than six times that, about 3 GW,” Blue said. “Looking forward, we expect to more than quadruple that over the course of the next 15 years, so it will be 13 gigawatts of data center demand. Just last year, the 15 data centers we connected had a capacity of nearly a gigawatt.”
Cheniere COO Corey Grindal said during a March 20 panel discussion that rising demand would cure pipeline developers of the “skittishness” created by the difficult planning system. “You’ll continue to see demand develop, whether it be electricity, whether it be LNG, whether it be industry coming back to the United States,” he said. “You’re going to start seeing the market send signals. And at some point the signals will get there where people are willing to take the chance, to take the risk, to develop additional infrastructure.”

Regulation

There is a lot of uncertainty with the US being in an election year, but Portland General Electric President and CEO Maria Pope said she is confident the Inflation Reduction Act’s benefits for green energy will remain intact. Pope’s company has not only benefitted from the IRA but also other legislation, such as the CHIPS and Science Act and the Infrastructure Investment and Jobs Act. “These are laws passed by our Congress, and they benefit red states and blue states: in many ways, red states more than blue states,” Pope said on the sidelines of the conference. “I don’t see them being rolled back, but rather maybe being nuanced as we move forward.”
Colin Parfitt, Chevron vice president of midstream, told S&P Global Commodity Insights “it would be nice” if the Biden administration’s pause on LNG export permitting was lifted by next year, as suggested earlier at the conference by Energy Secretary Jennifer Granholm. However, in the meantime, the pause has created uncertainty “that might take years to go away” over fears of the US limiting energy exports, Parfitt said. “That’s bad for the climate. It’s bad for the economy, and it’s bad for the USA,” Parfitt said, adding that LNG exports can replace coal generation at a lower emissions intensity.

CERAWEEK: US gas executives stress need for new storage capacity to accommodate growth

Highlights

LNG growth fueling storage need

Brownfield, greenfield projects in the mix

The US natural gas market has seen substantial growth in recent years but additions of new storage capacity have not kept pace, something expected to fuel volatility as the market continues to expand to meet rising gas demand, according to industry executives at the CERAWeek by S&P Global conference.

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“If you look back at 2010 until today, natural gas demand has grown 50%. Pipeline infrastructure has only grown 25%,” Toby Rice, CEO of Appalachian gas producer EQT, said in a March 18 interview on the sidelines of CERAWeek. “The volatility comes in with natural gas storage infrastructure only growing 10%.”

“What that means is, storage is not going to be the buffer on price,” Rice said. “Price is going to be the thing that influences — that balances supply and demand.”

Others representing all segments of the industry, from global commodities traders to midstream and LNG companies, stressed how the transformation of the domestic market could be expected to make new storage capacity a premium asset.

“We have so much more going on now with big industrial burn, with obviously, the LNG export facilities which from time to time come down for various reasons, and it’s going to cause continued volatility in the spot markets until we can handle that [with additional storage],” Rich Brockmeyer, head of North American natural gas and power for Gunvor, said March 20 during remarks at CERAWeek.

Market need

Over the last decade, total Lower 48 gas demand rose from about 74 Bcf/d in 2014 to just over 106 Bcf/d in 2023, according to data from S&P Global Commodity Insights. On the supply side, annual average Lower 48 gas production rose from 70 Bcf/d in 2014 to nearly 103 Bcf/d in 2023.

Working underground storage capacity has remained largely flat over the same period, data from the US Energy Information Administration showed.

Rising LNG exports has been a major component of demand growth and is expected to be the main driver of additional gas demand growth over the coming years. By 2028, LNG feed gas demand is expected to be nearly twice the 13 Bcf/d recorded in 2023, S&P Global data showed.

Gas market participants have discussed the need for new storage capacity proximate to the US Gulf Coast to manage variable demand at liquefaction facilities, such as when trains come offline.

LNG terminals are “living, breathing” facilities that require flexibility, Martin Hupka, president of LNG and net-zero solutions for Sempra Infrastructure, said.

“As more and more LNG comes on, the storage question is going to become more and more significant because those plants are going to require that [flexibility],” Hupka said March 20 on a CERAWeek panel alongside Gunvor’s Brockmeyer.

Storage economics, projects

Variability from wind and solar and increasing demand from LNG terminals are all increasing demand for storage, which is translating into higher rates, said Cynthia Hansen, president of gas transmission and midstream for pipeline operator Enbridge.

“As we look at re-contracting storage, our prices that we’re getting have increased from on average 50% to 200% depending on the location,” Hansen said March 20 in an interview at the conference.

Like many other firms, Enbridge is developing “low-cost” brownfield rather than greenfield storage opportunities.

“We still have conversations about… greenfield opportunities,” Hansen said. “But it has to be economic and we have to have those long-term contracts to support it.”

Enbridge expects to bring the 6.5-Bcf working-gas expansion to the Tres Palacios facility in Texas into service later this year. Its Aitken Creek asset in Canada has permits to expand by 40 Bcf.

Being integrated with existing pipeline assets improves the economics of these projects, Hansen said.

Near the Gulf Coast, storage operator Mississippi Hub recently proposed to expand its existing natural gas storage capacity and add three new 10-Bcf salt caverns, building upon its current 22 Bcf of working salt storage capacity.

Other operators are pursuing greenfield projects, such as Trinity Gas Storage’s 24-Bcf storage facility near Dallas, Texas. The project has an in-service target of Q2 2024.

S&P Global analysts are tracking over 100 Bcf of new storage projects in development.

Emissions under EU ETS fall 11% in 2023 on weak macroeconomics: S&P Global

Highlights

Demand destruction from power, industrial sectors

Emissions down 17% from 2020 levels

EU carbon prices have almost halved in a year

Total CO2 emissions under the EU Emissions Trading System likely slumped to their lowest in several years in 2023 as a weak macroeconomic environment led to constrained industrial activity and power demand destruction, according to estimates by analysts at S&P Global Commodity Insights.

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According to the estimates, regulated CO2 emissions from power plants and factories under the EU ETS totaled 1.123 billion mtCO2e last year, down 11% from 1.267 billion mtCO2e in 2022, and 17% lower than in 2020 during the coronavirus pandemic.

“Weak macroeconomics was identified as one of the main drivers besides energy prices for the decline in emissions in 2023,” S&P Global analysts said in a recent report. “2023 has been a stagnant year for [EU] gross domestic product growth and a contractionary year for Purchasing Managers’ Index and these have resulted in lower overall emissions projections.”

Emissions from the power generation sector are expected to see the largest drop-off, estimated to fall by 22% year on year amid high energy prices and lower power demand, while the chemical sector is seen falling by 7%. Aviation is the only sector projected to see an increase in emissions for the year, the report said.

The European Commission is expected to release its EU ETS verified emissions data for 2023 in April.

S&P Global analysts noted the positive correlation between macroeconomic indicators such as GDP growth and PMI with emissions changes.

“This is one of the lower GDP growth years since 2006. But has one of the most significant emissions falls,” the report said.

2024 price plunge

The fall comes amid an ongoing price slump for EU carbon prices, with EU Allowances under the ETS halving in the space of a year.

In February 2023, EUAs hit a record high of over Eur100/mtCO2e but by late-February this year they were at a 34-month low, just above the Eur50/mt mark.

Prices have recovered since amid some renewed demand with Platts, part of S&P Global Commodity Insights, assessing EUA contracts for December delivery at Eur60.62/mtCO2e ($66.14/mtCO2e) on March 20.

“Traders are expecting some resilience in prices as compliance entities start taking advantage of the lower prices and buying up allowances along with the notion that EUAs are becoming one of the best investment stories of 2024 when it comes to returns prompting investment funds to hold some long positions eventually,” S&P Global analysts said in a recent note.

The analysts expect prices this year to average Eur54.50/mtCO2e compared with Eur85.30/mtCO2e in 2023 and Eur81.50/mtCO2e in 2022. But EUAs are expected to rebound to an average of Eur82/mtCO2e in 2025, according to their latest forecast.

US Republican lawmakers attack IEA over energy security, peak oil forecast

Highlights

Republican lawmakers accuse IEA of becoming energy transition cheerleader

US lawmakers claim IEA discouraged investment in energy supply

IEA under pressure over oil demand forecasts and funding from US Republicans

Senior US Republican lawmakers have attacked the International Energy Agency in a strongly worded letter dated March 20 addressed to its executive director Fatih Birol.

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A copy of the letter signed by Republicans John Barrasso, ranking member of the US Senate Committee on Energy and Natural Resources, and Cathy McMorris Rodgers, chair of the US House Committee on Energy and Commerce, accused the IEA of becoming an “energy transition cheerleader”, according to a copy seen by S&P Global Commodity Insights.

“We would argue that in recent years the IEA has been undermining energy security by discouraging sufficient investment in energy supplies – specifically, oil, natural gas, and coal,” the letter said.

“It should disturb you that biased parties are exploiting the IEA’s forecasts and other products to advocate for policies that undermine energy security,” the letter went on to say.

The letter will pile pressure on the IEA over its long-term oil demand forecasts in a US election year. The body established after the oil shock of the 1970s by industrialized nations has come under attack from OPEC and specifically Saudi Arabia for its forecast that oil demand may peak as early as 2030.

In addition, the letter calls on Birol to detail funding the IEA received from the US over the last 10 years.

Sources told S&P Global March 20 that US Republicans have been lobbied over the prospect of cutting federal funding to the IEA following the outcome of the US elections later this year. The Senate and House energy committees did not immediately respond to requests to elaborate on their concerns about the US’ financial support of the IEA.

Another person familiar with discussions underway amongst Republican lawmakers said all aspects of US engagement with the IEA will be scrutinized, including its funding. Officials in Paris where the IEA is headquartered were unreachable for comment out of hours.

According to its website, the IEA’s budget and work are agreed every two years with member countries permitted to make voluntary contributions. In 2022 following the conclusion of the COP 26 summit, the agency, which comes under the umbrella of the Organization for Economic Co-operation and Development, had received a Eur20 million ($22 million) funding boost from member countries to “scale up its work supporting the transition to clean energy in emerging economies.”

Criticism of the IEA by Republican lawmakers comes after predictions of peak oil and the speed of transition away from fossil fuels were challenged by leaders of many of the world’s largest producing companies attending CERAWeek in Houston. Amin Nasser, CEO of Saudi Aramco, set the tone on the opening day March 18 when he described calls to phase out fossil fuels to help avert climate change as a “fantasy”. Fellow CEOs from companies including ExxonMobil, Chevron and Total also flagged concern over the speed of transition and the need for continued investment in oil.

The IEA’s analysis and stance on the pace of energy transition and the future of fossil fuels have for some time rankled producers especially in the Arab petrodollar economies of the Persian Gulf. In 2021, Saudi Arabia’s oil minister Prince Abdulaziz bin Salman described the IEA’s flagship roadmap to reach net zero by 2050 as “sequel of [the] La La Land movie.”

More recently, OPEC has challenged the IEA over its forecasting and energy transition advocacy. OPEC Secretary General Haitham al-Ghais last November accused the IEA of vilifying oil and gas producers through its analysis.

CERAWEEK FACTBOX: Energy leaders talk commodity, infrastructure growth

If recession fears persist among energy industry leaders, it wasn’t evident in Houston on March 20 as CERAWeek by S&P Global rolled through its third day with much talk of growing demand for energy commodities, infrastructure and raw materials to facilitate the energy transition.

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Upstream

The difference between CERAWeek 2023 and CERAWeek 2024 is striking, said Saad Rahim, chief economist at commodity logistics giant Trafigura, speaking on the sidelines of the conference. “The mood is completely different … it’s no longer the recession talk,” Rahim said. “Last year, really the concern was about recession, demand fears and growth fears, in particular, on oil. Now it’s the opposite. … Now, what we’re seeing is actually the demand forecasts are all being revised upwards.”

Offshore exploration and development in general, and the US Gulf of Mexico in particular, remain attractive to Woodside Energy, but there are headwinds, the company’s executive vice-president for exploration and development, Andy Drummond, said. “The challenges today are a bit different than in the past. We’re starting to see that in the drilling numbers and the lease sales,” he said. “There will be quite a change from what we’ve seen. We’re going from the Miocene back into the Paleogene, which [should slowly] move forward. You’re starting to see companies go back to areas of discovered fields in the Paleogene and a lot of it is focused at the western part of the Gulf.”

Argentina has the potential to quintuple its current oil output and raise its natural gas reserves and output in its Vaca Muerta shale play once the government revises its proposed regulatory scheme to streamline investment rules, the CEO of Argentinian energy engineering and construction provider Techint Group said. Vaca Muerta, located in the Patagonia region, only produces about 300,000 b/d of crude oil even though it has been producing for at least a decade, Paolo Rocca, CEO of Techint, said. By comparison, the US’ Permian Basin currently produces 6 million b/d.

Infrastructure

US LNG exporter Freeport LNG has launched a project to boost output, in tandem with major maintenance following an unplanned outage at one of its three liquefaction trains early this year — work that is expected to weigh on utilization until May before raising overall production by 10% soon after, CEO Michael Smith said in a March 19 interview. The debottlenecking stands to increase the capacity of the three-train 15 million mt/year facility in Texas by 1.5 million mt/year, Smith said. The additional production will bring Freeport’s total uncontracted supply to about 3 million mt/year, which Freeport plans to sell on a spot basis.

The Advanced Clean Energy Storage Delta Hub will in 2025 start storing as much as 5,500 mt of green hydrogen in salt domes in Delta, Utah, so it can be used to generate as much as 300 MWh of power. Andrea Willwerth, Mitsubishi Power Americas energy manager of market intelligence and strategy for energy transition, said the project will provide data useful in optimizing the interaction between renewable resources and power demand. To decarbonize the economy, “renewables cannot get us all the way there,” Willwerth said. For example, data centers “need firm baseload power, and you don’t have a lot of options,” she said.

Canadian-based Pathways Alliance, the world’s largest proposed carbon capture and storage facility, will complete its initial regulatory application by the end of this week, Kendall Dilling, company president said in an interview. The Pathways Alliance is an initiative of six leading oil sands producers that have partnered to build a mega CCS facility to reduce greenhouses gases by 22 million mt by 2030, or nearly 32% from current levels. A 260-mile pipeline will transport carbon dioxide from the oil sands producing areas of Fort McMurray, Christina Lake and Cold Lake to an underground storage hub in Cold Lake in northern Alberta, with the project estimated to cost $12.2 billion.

Energy executives are hoping for a breakthrough on a long-sought major infrastructure permitting overhaul after US Senate Energy and Natural Resources Chairman Joe Manchin (D-W.Va.) told the conference a bipartisan deal on legislation was back on track. “We simply will not be able to [reach emission reduction targets] … unless we have further siting and permitting reforms,” Edison International President and CEO Pedro Pizarro said in an interview two days after Manchin’s comments. “If there’s one magic thing, if you give me one shot, one thing to fix, it would be that.”

Trading

ExxonMobil’s head of upstream said the super major is scaling up its energy trading business, partly in recognition of the “earnings power” of pure-play traders. Liam Mallon, president of ExxonMobil Upstream, said the company is hiring “significant” numbers of traders to leverage its knowledge of markets. Mallon’s remarks come after trading houses such as Vitol, Trafigura and Glencore have seen profits boosted by volatility in commodity markets from resurgent demand and changing trade flows. Russell Hardy, chief executive of Vitol, speaking on the same panel as Mallon said geopolitical turmoil in the Red Sea had added about 100,000 b/d of demand to bunker markets as commercial vessels are forced to divert on longer voyages around the Cape of Good Hope.

ExxonMobil sees the energy transition as an opportunity and is addressing it by leaning into its core competencies, Liam Mallon, president of ExxonMobil Upstream said. The company is exploiting its upstream experience to focus on carbon capture and storage, biofuels, hydrogen and more recently, lithium, he said. “It’s an opportunity for us to lead in this energy transition…” he said. The company’s oil and gas business will continue to grow, but with increasingly lower emissions, he said.

Copper demand will only rise for the foreseeable future, Saad Rahim, chief economist at Trafigura Group Pte. Ltd., told S&P Global Commodity Insights. The world will need copper in “ever-growing quantities,” to meet the needs of the energy transition, Rahim said. The commodity trading and logistics giant does not own or operate mines, but it does invest in mining projects worldwide. “You look at copper, and it’s amazing,” Rahim said. “No one is ever going to say the phrase ‘peak copper demand,’ at least in my career. I mean, every forecast is some version of up and to the right.”

Hydrogen presents a complicated challenge when used as a power source, but these challenges could be addressed with incremental gas blending and artificial intelligence tools, industry participants said March 20. The use of hydrogen in power is generally controversial, speakers at a CERAWeek panel said, saying it’s “not the first application that comes to mind.” S&P Global Consulting Director Natallia Pinchuk referenced an analogy that says using hydrogen in power “is like using champagne to flush a toilet. If you can do it, it will do the job, but why would you?” she said.

Pipelines

US midstream operator Williams plans to further expand its Transcontinental Gas Pipe Line in the Southeast due to growing demand for gas-fired power, driven by data centers, CEO Alan Armstrong said. Williams is already pursuing an expansion of Transco with its fully subscribed Southeast Supply Enhancement Project, which has a November 2027 in-service target. “I think as the data center load in those, in the Mid-Atlantic and the Southeast, as that starts to firm itself up in terms of gas load in those markets, we’ll probably see another expansion,” Armstrong said during a press conference.

Partners in the Nigeria-Morocco natural gas pipeline project are on course to take a final investment decision in late 2024, according to the head of state-owned Nigerian National Petroleum Company. The 7,000-km Nigeria-Morocco pipeline, which was conceived in 2016, would supply 3 Bcf/d (30 Bcm/year) of gas from Nigeria’s Niger Delta region to the North African country. “There is ongoing engagement on the Nigeria Morocco Gas Pipeline Project (NMGP), which is at an advanced stage, to create a pipeline that will pass through 13 African countries and all the way to Europe,” NNPC group CEO Mele Kyari said at the conference, according to an NNPC statement.

Power

Texas power market participants face daunting — but surmountable — challenges to accelerate permitting and infrastructure completion to meet load growth driven by economic and demographic factors, experts said. The Electric Reliability Council of Texas in December projected that under normal weather conditions load will peak in summer 2024 around 80 GW, but the system set a record of 85.4 GW in the record summer heat of 2024, when it had previously projected a summer peak of just 82.7 GW under normal weather conditions.

CERAWEEK: MiQ targets LNG buyers amid oversupplied US certified gas market

Highlights

Almost no premium for certified gas

MiQ says LNG buyers are keen on certified cargoes

US certified natural gas is selling for little to no premium because of a “gigantic” oversupply of certificates, but the demand side could pick up as LNG buyers in Europe or Asia are increasingly interested in buying certified cargoes, Georges Tijbosch, CEO of the non-profit certificate issuer MiQ, said March 20.

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From a standing start in 2022, MiQ now certifies 22 Bcf/d in the US, or around 20% of total natural gas production, Tijbosch said on the sidelines of CERAWeek by S&P Global in Houston. “The buyers, from what we can see, are in the single-digit percentages versus that 20%.”

Buyers do pay a premium for certified natural gas, Tijbosch said. “The premium is just vey low. From what we hear the premiums are between one cents and five cents.”

“Right now we’re in the earlier stages,” William Jordan, general counsel at EQT said March 19 at a CERAWeek panel discussion. “Not everything commands a premium but that’s where it’s going to go and that’s where it needs to go.” EQT has over 4 Bcf/d of production that is being certified by third parties like MiQ. For now, “we’re not even asking for a premium.” Jordan said.

EQT also sees certification as a way to push back against environmental groups who have made building egress capacity in the Northeast particularly difficult. “We have an inventory that we could effectively double for 30 years. Right now we cannot do that… because we don’t have any pipelines, and it’s because of concerns around the environment and natural gas. We think those concerns are misguided.”

At the same panel, Tijbosch compared the certified natural gas market to the early stages of the EU’s emissions trading system. “For about five or ten years it traded near zero. Everybody gave up. And then the EU tinkered around with it.” December 2024 EU allowances settled at around Eur61/mtCO2e March 19, and were over Eur100/mtCO2e in April 2023, data from Intercontinental Exchange shows.

“That’s the kind of world we will end up in,” Tijbosch said. “Whether its embedded or explicit, there are going to be carbon and or methane prices in the world”

LNG buyers

The demand for US certified gas is likely to be driven LNG buyers in Europe and Asia, Tijbosch said. “Here at CERA, we’re speaking to several companies that are very very keen to get this going, to deliver certified cargoes into Europe or into Japan. That’s what we’re going to do this year.”

MiQ announced March 19 a supply chain protocol to estimate emissions across the entire supply chain.

The open-source protocol is based on based on recognized life cycle assessment principles, the company said in a statement. It “accommodates multiple data sources–certified and uncertified data–and provides a ranking of the quality of each methodology, MiQ said.

The framework fills in gaps for parts of the supply chain which are not currently being certified, Tijbosch said. Gaps exist because there are seven segments of the supply chain from US producer to landed Europe.

“That is different people for every supply chain,” he said. “That’s just going to take time for that system to develop.”

For now, the average US gas molecule “doesn’t look good” for LNG buyers. US production has average methane emissions of 1%, which could rise to almost 3% when including midstream and LNG terminals, Tijbosch said.

Production with a grade C certification from MiQ already meets the EPA’s proposed methane intensity standards of 0.2%. MiQ’s standards are more robust because they are externally audited, whereas the EPA rules will be self-reported, Tijbosch said.

“I think that’s going to create some tension in the market,” he said.

US EPA softens final tailpipe emissions rule with slower pace, more room for hybrid vehicles

Highlights

Collaborators must be complementary

Opportunities in ammonia, pumped hydro

Profitably deploying clean technology entails using existing underused technologies, innovating new technologies and forming partnerships among new and existing businesses with complementary – rather than duplicative – capabilities, panelists said March 19 during the CERAWeek by S&P Global conference.

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In response to a request from Eduard Sala de Vedruna, S&P Global clean energy technology lead, for a one-word factor needed for clean energy business strategies, panelists listed collaboration, innovation and ambition as key.

Asked for advice for individuals hoping to start up such businesses, Karen Bomber, ABB Energy Industries chief commercial officer, said “no single answer” exists. ABB provides information technologies for industries.

“We use partnerships as truly a partnership,” Bomber said. “It couldn’t be subordinate or a vendor … from a technology standpoint. Each party is bringing something to the table. Now, as far as our process of how to do that, I will be honest. We’re still evolving. It’s a combination of ad hoc or word of mouth. … You start to understand where your gaps are, your blind spots are. And then we start funneling and making sure that when the Energy Department comes to the table, that you’re working together.”

Increasing innovation

An example of such partnerships of equals could include efforts by Tokyo-based INPEX, represented on the panel by Toshiaki Takimoto, senior managing executive officer and head of Net Zero Business.

Takimoto cited INPEX’s development of large-scale, low-carbon ammonia technology as an example of the “innovation” factor in successful clean technology business models.

But INPEX is also forming partnerships with Paris-based Air Liquide Group, Oklahoma City-based LSB Industries and Houston-based Vopak Moda Houston on Houston Ship Channel project with the goal of producing more than 1.1 million mt of ammonia by the end of 2027, with options for future expansion.

INPEX, Japan’s largest oil and gas exploration and production company, is also working with Green Hydrogen International near Corpus Christi, Texas, on the Gulf Coast.

“We are not sure yet we can commercialize those projects,” Takimoto said. “We are trying to export to Japan and Korea.”

Rob Wingo, EQT executive vice president for corporate ventures, said the essentials of forming profitable clean technology partnerships is “pretty basic,” as prospective business leaders must “understand what we’re trying to accomplish, understand what our purpose and understand the thing that we’re focusing.”

“Their time is very limited, right?” Wingo said. “They’re probably operating while looking for staff. And I would say make sure you have a target to be reaching out to and take the time … to understand the customer. … Make sure that the partner is going to be complementary. Make sure that you’re bringing something to the table — that there’s not too much overlap of what you’re trying to accomplish.”

Using existing technology

Sushil Purohit, CEO of Gentari, a clean energy solutions company owned by Petronas, advocated using existing, underutilized technologies to reduce emissions in a way that has proven to be profitable.

“The kind of challenge that we have today is quite enormous,” Purohit said. “Some of the technologies that already exist and products for a long time have been producing power and providing stability. Right now, for example you can actually make engines run on hydrogen. There’s another activity that is making something of a comeback, which is pumped hydro.”

Power grids are adding “enormous amount of renewable power systems, resulting in a need for long-term storage for the power system,” Purohit said, which can be effectively supplied by pumped-hydro projects.

Wingo said EQT, a large natural gas producer, seeks to decarbonize its processes using existing technologies.

“We have been very aggressively cutting our emissions, with a lot of time and money and resources,” Wingo said. “What we’re trying to do is we’re trying to get our carbon intensity way down, because we think that needs to be a feedstock for other types of derivative products. … We think clean gas is going to be vital for the energy transition.”

EQT is working on carbon capture utilization and sequestration, Wingo said, and working to generate revenue through the generation of carbon offsets, partly by analyzing the amount of carbon dioxide that is captured in soil as part of its processes, Wingo said.

CERAWEEK: Some industry members are not deterred by hydrogen’s ‘green premium’

Highlights

Cost gap is “less than people think”

High green hydrogen costs not seen by consumers: Air Products

Federal government and private sector stakeholders must move quickly to design a process to ramp up demand for hydrogen before the fiscal year ends Sept. 30, experts said March 19at the CERAWeek energy conference by S&P Global in Houston.

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During a panel discussion entitled “From Hubs to Demand Support: Catalyzing the American hydrogen market,” David Crane, US Department of Energy undersecretary for infrastructure, described the bipartisan Infrastructure Investment and Jobs Act of 2021, which allocated $9.5 billion to fund regional hydrogen hubs, as “the most inspired pieces of legislation ever passed and signed into law to get us on the path to energy transition.”

“Fortunately for us … it actually charged the Department of Energy with standing up the hydrogen economy, and as anyone who’s been around the energy industry for a very long time knows, energy at the end of the day comes down to a very basic supply-and-demand business,” Crane said.

Aside from helping kick-start seven regional hydrogen hubs for production across the US, the legislation allocated about $800 million to building demand for hydrogen, and “demand for clean hydrogen just doesn’t occur overnight.”

“So, the purpose of the Hydrogen Demand Initiative was to smooth that transition, because we hear there’s a lot of people interested in consuming clean hydrogen, but there’s probably more people interested in going second, rather than going first,” Crane said. “So, this is a way of helping make sure that the hydrogen in production has a home in the early going.”

Replacing diesel ‘a big win’

Hydrogen offers an opportunity to decarbonize heavy transportation and industry requiring high temperatures, Crane said.

“If we use green hydrogen to replace diesel in big trucks, I mean, that’s just such a big win, that I think the whole hydrogen complex is a big step forward towards decarbonizing the whole economy,” Crane said.

But Ernest Moniz, president and CEO of the Energy Futures Initiative and former US secretary of energy, described the IIJA’s $800 million to build a hydrogen demand economy as “a little amount of money” in comparison with scale of the challenge.

Established in 2017, the Energy Futures Initiative is a nonprofit designed to address “the challenges and opportunities associated with the move to a clean energy economy,” EFI says on its website. Among its publications is a recent report entitled “The US Hydrogen Demand Action Plan.”

“Capital is available for things that people want to buy, but I would say I think there’s a bit more, that when people need to buy things, there needs to be a prospect that they can buy them over 20 years to make projects available to get past investment communities,” Moniz said. “We don’t see unavailability of capital as being the principal problem. The problem is making the investments better and bankable.”

Bankability implies that “there’s a certain stability, a certain management of market risk, because other energy prices certainly can be very volatile and could change the relative attractiveness of something like hydrogen,” Moniz said.

A looming deadline

Establishing confidence in the bankability of such projects entails developing “processes by the end of the fiscal year, which means Sept. 30,” Moniz said.

“That’s not very far — six months, and so we’re going to have a lot of dialogue,” Moniz said. “We’re going to have to listen hard and fast to be able to convert that into proposed methodologies, really by the summer so that we can converge by the end of the fiscal year.”

The DOE’s Crane said, “I think it’s important to emphasize how little has been decided about how hydrogen demand will work at this point.”

Nevertheless, the DOE’s commitment to build hydrogen demand “shows that the United States government is going to do what it takes to make hydrogen happen … but we know it’s not a smooth path.”

“We are going to try and tackle every issue that stands between hydrogen and the commercial realization of hydrogen,” Crane said.

Citing the various types of hydrogen production, ranging from gray hydrogen produced by cracking fossil fuels to green hydrogen produced renewable electrolysis of water into hydrogen and oxygen, Crane said, “We want to see the entire colors of the rainbow blossom and be successful.”

CERAWEEK: Stakeholders face intense talks to design US hydrogen market by Sept 30

Highlights

Heavy industry, transport are early targets

US to ‘do what it takes’ to grow bankability

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Replacing diesel ‘a big win’

Hydrogen offers an opportunity to decarbonize heavy transportation and industry requiring high temperatures, Crane said.

A looming deadline

Establishing confidence in the bankability of such projects entails developing “processes by the end of the fiscal year, which means Sept. 30,” Moniz said.

The DOE’s Crane said, “I think it’s important to emphasize how little has been decided about how hydrogen demand will work at this point.”

“We are going to try and tackle every issue that stands between hydrogen and the commercial realization of hydrogen,” Crane said.

CERAWEEK: Kuwait Petroleum plans offshore oil exploration for first time

Highlights

KPC lifting oil at $10/b, but constrained by OPEC+ cuts

Aims to boost capacity to 4 million b/d, with IOC help

CEO says country needs to diversify from hydrocarbons

Kuwait Petroleum Corp. is planning to move offshore in the Persian Gulf for the first time and will seek help from international oil majors, the company’s CEO said March 19, as the country aims to boost its flagging production capacity.

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“We’re looking at a new model to bring expertise from around the world,” said Sheikh Nawaf al-Sabah, speaking at the CERAWeek by S&P Global conference.

Kuwait, which holds the world’s seventh largest crude reserves, is currently producing below 3 million b/d capacity because of OPEC+ cuts but is seeking to expand to more than 4 million b/d, Sabah said, adding the emirate had lifting costs onshore of $10/b. The country pumped 2.44 million b/d in February, slightly above its quota, according to the latest Platts survey by S&P Global Commodity Insights.

In October, state-owned KPC unveiled its latest strategy with plans to hit 4 million b/d of capacity by 2035 and 2 Bcf/d of non-associated gas by 2040. The capacity additions are to come from its domestic fields, as well as the Neutral Zone it shares with Saudi Arabia.

Reaching those goals will require significant investments, with the country’s main producing field, the Greater Burgan, facing natural decline, while other fields are proving technologically challenging to develop.

In the Neutral Zone, operational challenges have hampered plans to expand operations, which were restarted in 2020 after a hiatus of more than four years due to a political dispute with Saudi Arabia.

That dispute has now largely been settled, but competing claims on the offshore Durra gas field by Iran, which calls the reservoir Arash, have now reemerged, with Tehran saying in September that it would begin drilling there.

S&P Global previously reported that Kuwait and Saudi Arabia are expected to complete a pre front-end engineering and design study for the Durra field by the fourth quarter. The field is estimated to hold 20 trillion cubic feet (567 Bcm) of gas.

Durra “will be developed jointly between us and Saudi Arabia,” Sabah said. “We are in the … front end engineering and design stage of that process. We should be finishing that in the next few months and will take a final investment decision to start building … moving on to development of that field.”

Red Sea tensions

Sabah added that KPC had been forced to divert cargoes around the Cape of Good Hope because of attacks in the Red Sea and had started to swap some cargoes with counterparties between regions as a consequence of the disruption. He added that Kuwait Petroleum had also given its tanker captains “autonomy” on whether to sail into the Red Sea.

Iranian-backed Houthi militia have since October been targeting vessels transiting the southern Red Sea and the Gulf of Aden, in stated solidarity with Palestine in the Israel-Hamas war.

Further highlighting the geopolitical risks to Kuwait, on March 6, an Iranian court ordered the country’s authorities to seize an estimated $50 million Kuwaiti oil cargo from a previously captured tanker, the Marshall Islands-flagged Advantage Sweet. The tanker, which had been chartered by Chevron and loaded Kuwaiti crude from Kuwait’s Mina Saud port, was impounded by Iran’s navy in April 2023, bound for Houston.

As for the energy transition, Sabah, who is a member of Kuwait’s ruling family, said the emirate was acutely aware of the need to diversify its economy away from economic dependence on hydrocarbons. Kuwait relies on hydrocarbon revenues for some 90% of its government budget and has seen its Gulf neighbors Saudi Arabia and the UAE launch aggressive pushes into LNG, hydrogen and renewables, while using their oil revenues to expand their non-oil economic sectors.

Kuwait has yet to unveil similar strategies, with KPC’s October strategy overhaul including consideration of green hydrogen, second-generation biofuels, renewables and carbon offsetting, among other greening measures, but without specific plans or timelines.

“Do not rely on the oil industry to continue to fund state budgets,” Sabah said.