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.

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.

Energy Transition

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.