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ALASKA FOSSIL FUELS EXPANDING: The Biden administration is broadening Alaska’s license to produce and export fossil fuels, supplementing its recent approval of ConocoPhillips’s Willow project with a liquefied natural gas export authorization inked just a few days before a U.S. delegation meets with other G-7 leaders in Japan — likely to one day be a key export market for LNG from the facility in question.
The Department of Energy’s order, which it handed down yesterday, is another victory for interests in Alaska who want to grow its fossil fuel footprint and take advantage of the state’s top five proved oil and gas reserves.
The latest move: The Department of Energy issued an order yesterday reaffirming a Trump-era authorization to allow the export of 2.55 billion cubic feet per day from Alaska Gasline Development Corporation’s proposed liquefaction terminal, Alaska LNG, in south central Alaska.
It’s one of several LNG export authorizations to be approved over the last year — authorizations the administration has touted as giving U.S. allies assurance that they’ll have security of supply in a future with less Russian gas.
Alaska LNG, which has FERC approval, is one of the largest export terminals in the LNG pipeline and the only currently planned for Alaska.
The Biden touch: DOE opened the authorization back up a few months into President Joe Biden’s tenure, granting environmental groups a rehearing to reconsider the project’s impacts, and performed a supplemental environmental impact statement on the project.
DOE’s second look at the authorization maintained the Trump-era approval’s justification that exports from the planned terminal are not contrary to the public interest, the Natural Gas Act’s standard.
DOE did enlist a recommendation from environmental groups that the department said would reduce its GHG emissions. Under the order, Alaska LNG must certify each month that its feedgas, when produced, did not result in the venting of byproduct carbon dioxide.
The administration did a similar thing with the Willow project, taking the Trump-approved project (notably, one whose record of decision was deemed legally faulty) and shrinking it to reduce the impact while ultimately still granting the go-ahead against objections that it takes the country off course on climate change mitigation.
Alaskan advantage: Backers see the project, as many endorsers of Willow did, as another economic boon for rural Alaska. Alaska LNG’s project includes an 800-mile, royalty-generating pipeline to carry gas from the North Slope to liquefaction trains on the southern coast.
“This project means greater jobs for Alaskans, additional state and federal tax revenue, and reliable energy for our allies,” said Daniel Turner, executive director of Power The Future, which advocates on behalf of traditional energy interests. “It may be the ultimate irony that if President Biden continues permitting fossil fuel production, this great American industry will dig him out of the hole he put himself in with his failed green agenda.”
Long way to go: Alaska LNG’s timeline is still years off. The project was estimated last year to start production in 2027, contingent upon reaching a final investment decision in early 2024.
Alex Munton, director of global gas at consultancy Rapidan Energy, stressed that the authorization is news but far from sufficient.
“There are still many hurdles to cross before construction can begin,” Munton told Jeremy. Project financing, who’s going to buy the gas, contract work all still need to be finalized.
And the legal threat: DOE’s final environmental review concluded that the project had “potential for disproportionately high and adverse impacts” for at least two Alaska native groups, although it said those could be mitigated.
Environmental law outfit Earthjustice said DOE’s order, which grants the Center for Biological Diversity and Cook Inletkeeper leave to intervene in the process, opens the door for green NGOs “to potentially file additional legal challenges to DOE’s approval.”
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BP KICKSTARTS PRODUCTION ON NEW GULF OIL RIG: BP has begun oil production activities at its Argos platform in the Gulf of Mexico, a 27-story tall structure with an estimated peak capacity to produce 140,000 barrels of oil per day.
The platform is BP’s fifth in the Gulf and the first new BP-operated production facility in the region since 2008. The semi-submersible platform ultimately will increase BP’s gross operated production capacity in the Gulf of Mexico by an estimated 20%.
BP in the Gulf: Overall production in the Gulf of Mexico has fallen since its peak in late 2019-early 2020, when daily output reached just shy of 2 million barrels. Production has recovered from pandemic lows, and BP and other operators have big plans to grow in the region where some estimates identify the average barrel to have half the emissions intensity as a barrel produced onshore.
BP intends to increase its Gulf of Mexico production to around 400,000 barrels of oil equivalent per day by 2025 and put forward $46,609,285 in high bids in Lease Sale 259, the offshore oil and gas lease sale held last month, being outdone only by competitor Chevron.
GHG INVENTORY UPDATE SHOWS 6% INCREASE EMISSIONS HIKE: EPA’s updated greenhouse gas inventory estimates that 2021 saw a 6% net increase in emissions compared to the year before, when the world was shut down due to COVID-19.
The increase was largely driven by increased fossil fuel combustion, EPA said in its inventory released yesterday, which it attributed to the economic rebound.
Despite the increase, emissions in 2021 were still 17% below 2005 levels.
IEA WARNS OPEC+ CUTS WILL HURT: The International Energy Agency (IEA) said today that the OPEC+ oil production cuts announced earlier this month could worsen an already expected supply deficit in the second half of 2023, and could further stunt economic recovery as the world attempts to recover from the COVID-19 pandemic.
“Oil market balances were already set to tighten in the second half of 2023, with the potential for a substantial supply deficit to emerge,” the IEA said in its April 2023 Oil Market Report published this morning. “The latest cuts risk exacerbating those strains, pushing both crude and product prices higher. Consumers currently under siege from inflation will suffer even more from higher prices.”
The IEA is predicting global supply to fall by 400,000 bpd by the end of 2023 due to production gains from non-OPEC+ supplier countries, led by the U.S.and Brazil, versus the 1.4 million bpd expected drop in production from OPEC+.
Oil prices climbed slightly in the aftermath of the IEA report, with Brent futures rising this morning to $86.18 per barrel, and West Texas Intermediate prices climbing by 12 cents to $82.28.
OPEC+ has described the cuts as a so-called “precautionary measure,” even as the IEA and other forecasters have predicted a supply demand imbalance beginning this summer, when demand from China rebounds more fully as it reopens its economy and relaxes its COVID-19 restrictions.
The Rundown
Politico Natural gas exporters skirt Washington’s scrutiny of China
Wall Street Journal Green tax credits are likely to be more popular—and expensive—than expected
Bloomberg G-7 energy ministers face climate fight with Japan as host
