Yesterday was Robert Dillon's (NGP Photo) last day of service to Senator Lisa Murkowski's Senate Energy Committee. He was thoughtful enough to share his news with regular correspondents and we pass it on, here, for some of you who know Robert well and wish to remain in touch with him. (Other Murkowski staff changes noted here at APM.) -dh
WASHINGTON, D.C.–In the Weekly Republican Address, Sen. Lisa Murkowski (NGP Photo), Chairman of the Senate Committee on Energy and Natural Resources, discusses the Energy Policy Modernization Act, the first broad bipartisan energy legislation to be considered by the Senate since 2007.
This bill ‘will help America produce more energy,’ Senator Murkowski says, ‘It will help Americans pay less for energy. And it will firmly establish America as a global energy superpower.’The Weekly Republican Address is available in both audio and video format and is embargoed until 6:00 a.m. ET, Saturday, January 23. The audio of the address is available here, the video will beavailable here and you may download the addresshere. A full transcript of the address follows:
“Hi, I’m Lisa Murkowski.
“I’m proud to represent the great state of Alaska in the U.S. Senate, where I serve as Chairman of the Energy and Natural Resources Committee.
“And I’m pleased that just days from now, the Senate will consider broad energy legislation.
“Following the passage of a highway bill, education reform, and many others, the energy bill promises to be our next bipartisan accomplishment on behalf of the American people.
“It will also be the first major energy legislation considered on the Senate floor since 2007.
“It’s been over eight years, folks.
“Back then, we were living in an era of energy scarcity, with many afraid that America was running out of resources.
“But since then, an energy revolution has occurred in our country.
“Newer technologies have allowed oil and natural gas production to soar on state and private lands, creating hundreds of thousands of jobs.
“On top of that, the cost of many other technologies – from solar panels to batteries for electric vehicles – has declined dramatically.
“Unfortunately, the passage of time has also brought new challenges.
“Our infrastructure continues to age.
“Access restrictions, permitting delays, and other bureaucratic hurdles are sapping the competitiveness of our energy sector.
“And President Obama has ignored the good work going on in Congress as he attempts to unilaterally recast our nation’s energy policy.
“His gauntlet of burdensome regulations, many just beginning to take effect, threatens the affordability and reliability of our energy.
“His policies are shutting down energy-rich states like Alaska.
“He rejected the Keystone XL pipeline on political grounds.
“And then his administration imposed a moratorium on federal coal leasing.
“Decisions like those cost us jobs. They weaken our growth. And they strengthen some of the world’s worst actors, at the expense of hard-working Americans.
“There is a better path for our energy policy. And under Republican leadership, Congress is taking it.
“While the President lifted sanctions on Iran, letting the regime sell its oil into global markets, we ensured American producers can do the same by repealing an outdated export ban that applied to the United States.
“Instead of standing in the way of new infrastructure, members of both parties have supported it.
“And instead of relying on burdensome mandates and regulations, many of us have chosen to promote innovation.
“But our work is hardly finished. In order to truly protect our nation, we must do more to update our energy policies.
“That’s why I worked with my colleagues on the Energy Committee to develop a broad, bipartisan bill.
“It will help America produce more energy. It will help Americans pay less for energy. And it will firmly establish America as a global energy superpower.
“We agreed to expedite liquefied natural gas exports to boost our economy and the security of our allies.
“We agreed to bolster our mineral security so that we don’t have to rely on foreign countries for the raw materials needed for everything from smart phones to military assets.
“We agreed to promote hydropower – not to mention geothermal and other clean, renewable resources.
“We focused on innovation and efficiency – both of which lead us to a brighter energy future.
“We started to tackle permitting reform.
“And we agreed to increase government accountability, and took steps to prevent another Solyndra.
“We did this by working together. And our bill – the Energy Policy Modernization Act – passed our committee with strong bipartisan support.
“It is our latest contribution to a better energy policy for the United States. It is our latest effort to restore regular order. And it will be on the floor, on the Senate floor, starting this week.
“Thank you for listening.”
Yesterday, we commented on the passing of our dear, respected economist friend (and sometimes friendly antagonist) of almost 50 years, Arlon Tussing (NGP Photo). Apropos of today's title, he once testified in a way that more liberal readers might have found offensive:
|Comment: Arlon's wise counsel outlives him as those close to him knew it would. Often politicians try to solve, with other peoples' wealth, economic problems better left to free enterprise solutions guided by Adam Smith's invisible hand. -dh|
Before the Congress succumbs to any renewed yearning for a "National Energy Strategy" to serve as a moral substitute for war, it ought to take a hard, cold look at the energy policies of the 'Seventies.
He continued: As a whole the massive intervention of the federal government during the Energy Crisis years did more harm than good, and the good that did emerge was often at an exorbitant cost to consumers and taxpayers. The failures stemmed from the false premise that real energy costs tend to rise instead of fall over the long term, an overemphasis on oil and oil imports, and the assumption that public officials and panels of experts are more competent to pick future technical winners than risk-taking investors.
Governor Bill Walker (NGP Photo) proposes to cut 185 jobs.... More here....
We believe that Alaska Headlamp is providing the single most useful daily report on legislative happenings in Juneau that affect the oil and gas industry. We will link our readers, daily, to that excellent site (See right column), produced by the Alaska Support Industry Alliance. -dh
Analysis, CBC, by Kyle Bakx. The fate of new oil pipelines in Canada is in a sorry state.
"Our Own Worst Enemy"
And we remind readers to not forget that Governor Frank Murkowski (NGP Photo) in the last decade had created a deal with producers to move forward with a gas export project years ago.
...and in a previous generation, your publisher served as Director of Public Affairs for the Arctic Gas Project, participating in passage of the Alaska Natural Gas Transportation Act of 1976. We will not forget that magnificent project that would have provided a market for both Alaska and Mackenzie Delta gas. It was supported by virtually all of the major North American gas pipeline companies, producers and large city distribution companies--but opposed by Alaska's Governor, Bill Walker, among others.
We will not forget that the Arctic Gas Project, due partly to Canadian politics arising from the Justice Berger report and a compliant NEB decision gave the project instead to an ill equipped applicant who then faced a depressed natural gas market upon being certificated in Canada and the United States.
Yes, over the years, it can be said that Alaska and Canada have been their own worst enemies, economically at least.
With disapproval of Keystone XL and so many other natural resource projects, the U.S. federal government might also join the consortium of those whose motto is: "We are our own worst economic enemy".
Reader response: Randy Kerr, Canada, to 1-21-16 "Our Own Worst Economic Enemy":
No question, you are right about that Dave. Crazy what’s happening in Canada these last couple of years. It just keeps getting worse and AK doesn’t seem any different.
The imperiled Northern Gateway project. The Obama-rejected Keystone XL venture. The protest-filled Trans Mountain expansion. And the suspect political support around the Energy East proposal.
With the oil market in a severe downturn and stiff opposition greeting every pipeline proposal, there is debate over whether this country will ever break ground on new export pipelines.
"We run the risk that we missed the window of opportunity."
Even veterans of the oil patch aren't certain of the answer.
"It's a legitimate question," said David Collyer, the former president of the Canadian Association of Petroleum Producers (CAPP). "It's not out of the realm of possibility." Dave Collyer - former CAPP president
Today's Alaska Headlamp, continued:
Those cuts would leave the state with just over 24,000 workers across all agencies, the smallest figure since 2007.
Senator Anna MacKinnon (NGP Photo), co-chair of Senate Finance, said the governor’s proposal “hasn’t really reduced spending overall in the state’s budget” ... “I’m not sure we’re really reducing state government,” she said. “We’re just moving the shell.”
Alaska Headlamp comments on the Juneau Empire survey (column left), then goes on to tackle related subjects, like how to control government spending.
For further reference, we draw reader attention to our earlier commentary dealing with how the parents of this generation should be treating their children, of the next generation. (We think this will be welcome reading for young people determined to have a voice in decisions that will affect them--represented by groups such as, Our Alaska.)
ALASKA'S FISCAL CRISIS
The Juneau Empire asked legislators for their views on this year's legislative session.
Here's what they said:
Everyone wants to know what the second session of the 29th Alaska Legislature will bring, but no one knows the answer. Well, no one outside the 60 members of the Legislature, that is. To get the best insight into what this session will bring, the Empire e-mailed a simple three-question survey to all 60 legislators on a Monday during the interim. Fifteen lawmakers — 25 percent of the Legislature — responded by our deadline. Their full answers are reprinted below.
Sen. Cathy Giessel...
Q: How should the state fix its budget problems?
A: First step — stop looking for magic bullets. We can’t tax people and business or cut services enough to bridge the gap. We have to remind ourselves .... (Read the balance of the Empire article here.)
ADN by Erica Martinson. Admiral Paul Zukunft, the commandant of the Coast Guard, announced Wednesday that the military was beginning discussions with ship architects and builders to advance early stages of acquiring a new icebreaker to supplement the nation’s dwindling fleet. The Coast Guard also released a draft wish list of sorts, detailing its hopes for.... (More)
Please enjoy Larry Persily's (NGP Photo) Alaska gas/LNG related links TODAY!
From our anonymous Aussie energy analyst today, several points of interest re: oil and gas prices and the state of LNG..., and, ISIS NEEDS (FEARLESS) OIL AND GAS EMPLOYEES....
ADN by Yereth Rosen. A coalition of environmental groups filed a motion Wednesday to intervene in support of the Interior Department’s decision to reject Royal Dutch Shell's request to extend its offshore Arctic leases.
The groups filed their motion with the Interior Department’s Board of Land Appeals, an agency tasked with reviewing disputed department rulings.
Our comment: The agency appeal process generally tends to side with the agency's position. But going through it is a step toward a court appeal, which is more objective and whose decision is more honestly based on the record, hopefully. We wish Shell well in this process and to the enviro-activist groups seeking to impose more delay or roadblocks, we say, "Enough is enough; go away." -dh
From our anonymous Mid Atlantic energy analyst comes word today that low energy prices are creating deficits among middle eastern producers as the cost of production exceeds the value of oil produced. -dh
OP-Ed by Rich Coleman, BC Minister of Natural Gas Development. British Columbia’s liquefied natural gas industry made unprecedented progress this year.
The first final investment decision was made by Pacific NorthWest LNG, marking their commitment to move forward with construction and operation. That pledge had two conditions; with the first requiring government to finalize a project development agreement with them, which we did.
The other outstanding condition – environmental approval by the Government of Canada – is scheduled for a decision in 2016. ... That could all happen while the expansion of FortisBC’s Tilbury LNG facility continues in Delta which has already provided $50 million in contract work to over 100 companies in neighbouring communities like Vancouver, Langley, Abbotsford, Coquitlam, and more.
These are positive developments for just three of the 20 facilities now proposed in our province. Other exciting news included LNG Canada finalizing the very first substituted environmental assessment in our province, keeping their proposal on track to be one of B.C.’s most promising export operations. Full story here....
Mining.com by Cecilia Jamasmie. New climate change regulations, fraud in e-payment systems, “poison pills”, privacy class actions and cybersex in the workplace are among the top 10 legal risks companies operating in Canada will face this year, according to Canadian law firm Borden Ladner Gervais LLP (BLG). -- and -- Canadian Oil Sands is claiming victory over Suncor Energy’s $4.3 billion hostile takeover attempts
From our anonymous Mid Atlantic energy analyst comes word today that low energy prices are creating deficits as the cost of production exceeds the value of oil produced. -dh
Comments, from Bernstein Research today, summarize well the current financial state of Saudi Arabia (SA), relative to its cash reserves. They also show why SA is considering an IPO in the depths of the current oil price decline: THEY NEED THE MONEY.
We are strongly in the camp that Saudi Aramco will only include downstream assets (or at best throw in a small amount of dedicated production from some minor upstream capacity). There are a host of reasons:
· Large-scale upstream assets within a public entity would involve disclosures and fiduciary compliance to which they would never agree
· Such an offering would be wildly unpopular within the country, and the House of Saud has always to consider its actions in the eyes of the Wahabis
· The company is adding significant gas production and processing capacity over the next couple of years, which will require capital infusions that cannot be taken out of normal cash flow in these troubled times.
· The Saudis find themselves in the classic “Run Away From the Bear” race. They do not have to outrun the bear; they just have to outrun the others who are also trying to outrun the bear. As dire as their draw on their cash reserves might seem, they are in much better shape than a lot of others in the race.
The similarities between the current oil price crash and that experienced in the mid 1980s has been remarked upon by many. This is illustrated by the following quote from Daniel Yergin’s The Prize, commenting on the sector in 1986: “Many oil companies were unprepared for this latest crisis, their executives having been convinced that “they” – OPEC – would not do something so silly as to eradicate a large part of their own revenues”.
The Wall Street Journal reported yesterday that Asian LNG demand in 2015 declined (including a first ever decline from China). This was notwithstanding the very substantial spot and contract price falls and increased regional supplies.
The EIA weekly report issued yesterday was largely negative. Crude stocks increased by 0.2 mmbbls – and worse news came from a substantial build in product stocks (gasoline by 8.4 mmbbls and distillate by 6.1 mmbbls).
Reuters recently noted that the US oil and gas industry itself was a cause of declining demand for distillate (in the form of diesel). Less drilling activity, by more efficient rigs, had reduced total diesel demand in the US
As we noted yesterday (Note new KTVA story), BP is shortly to add another 4,000 souls to the swollen ranks of redundant oil and gas workers that have fallen out of the industry since the November 2014 OPEC meeting.
However, we have come across one organisation in the sector that is currently actively seeking engineers of all stripes: ISIS.
Last week the International Business Times said it had seen documents from ISIS seeking staff to assist it in bringing back to production various assets it had "acquired" in Libya.
It did not disclose the fringe benefits it was offering - perhaps low taxes; multiple wives; a free knife; company uniform (black); etc. (Note of caution to our job hunting friends in Canada, Alaska and the Lower 48: failure to meet daily ISIS production quotas could result in decapitation. -dh)
Global LNG production rose in 2015, but sales to Asia dropped
(Wall Street Journal; Jan. 13) - Liquefied natural gas shipments to Asian economies that are the world’s biggest gas importers dropped in 2015, according to a report published Jan. 13, including a first-ever decline in China. The decline in Asia came as global LNG global production rose 1.6 percent to 250 million metric tons, or 32 billion cubic feet a day, energy consultant Wood Mackenzie said in an annual report on the industry.
The increase in LNG supply comes amid a steep drop in spot-market prices in Asia over the past year to below $7 per million Btu. Prices may remain depressed with the start of shipments this year from the U.S. Gulf Coast and a ramp-up in exports from Australia. The new supplies will help boost global LNG production by an estimated 50 percent over the next five years, which is beyond the capacity of Asia to absorb, Giles Farrer, Wood Mackenzie’s research director for global gas and LNG, said in an interview.
Asia represents more than 70 percent of worldwide demand for LNG, but Wood Mackenzie said demand from the region’s largest buyers dropped in 2015, including a first-ever decline in shipments to China, which fell about 1 percent after years of double-digit growth. South Korean imports of LNG fell 11 percent on the year and shipments to Japan declined 4 percent, the report said. That was offset by growing demand from newer importers such as Egypt, Jordan and Pakistan, the report said. And lower prices for LNG will likely spur increased demand from other markets, Farrer said.
Korea Gas wants to reduce its stake in proposed LNG Canada project
(Platts; Jan.12) - South Korea's state-owned Korea Gas Corp. will press ahead with a long-delayed attempt this year to sell part of its 15 percent stake in the proposed LNG Canada project, a company official said Jan. 12. KOGAS aimed to sell the stake by the end of 2015, but the plan was delayed due to the falling price of natural gas and some delays to the LNG project, a company official said. However, KOGAS will continue the plan to sell the stake this year as part of its efforts to improve its finances, he said.
The official declined to disclose how much the company would sell, but it most likely will be one-third of its stake. KOGAS currently holds a 15 percent interest in Shell-led LNG Canada after selling a 5 percent slice to Shell in May 2014. KOGAS and its partners in May 2013 launched LNG Canada, a project to produce 12 million metric tons per year of LNG from two trains at Kitimat, B.C. Shell holds a 50 percent stake, China National Petroleum Corp. 20 percent, and Japan’s Mitsubishi 15 percent.
The LNG Canada consortium plans to make a final investment decision on the project this year. KOGAS is under pressure from the government to reduce its debt, which has grown after massive overseas projects in the past few years. KOGAS is owned 54.55 percent by the state — 26.15 percent by the central government, 20.47 percent by state power monopoly Korea Electric Power Corp. and 7.93 percent by local governments.
China’s push to cut air pollution could help boost natural gas demand
(Nikkei Asian Review; Jan. 11) - The serious and endemic air pollution that has engulfed major Chinese cities in recent years is not only a growing health threat, but may well have a significant impact on the global market for cleaner-burning natural gas. The formidable environmental challenge forced the government to issue its first-ever air pollution red alert in December. Under the five-year economic development plan that begins this year, Beijing is set to make a concerted effort to reduce air pollution.
The government intends to curb growth in oil and coal use, while promoting renewable energy. Efforts to slash coal consumption, the main contributor to pollution, have barely begun, but there have been some encouraging signs. The International Energy Agency says China’s coal use in 2014 was down 3 percent from 2013, marking the first decline since 1999. And China's maritime imports of coal for power generation fell about 30 percent in 2015 from the previous year, according to Bank of America Merrill Lynch.
Driven by the government's efforts to promote its use, China's natural gas imports will triple from 2014 to 2020, according to British financial services company Barclays. In November, the Chinese government lowered wholesale prices of natural gas for nonresidential users by about 30 percent in Beijing and other major markets, in a move to boost flagging growth in demand for natural gas. The measures taken to push up natural gas consumption also include allowing third parties to use liquefied natural gas import terminals and private-sector companies to build such terminals.
This could be the year for investment decisions on B.C. LNG projects
(Canadian Press; Jan. 10) - After much anticipation, Canada could see final approval of the first liquefied natural gas export projects on the West Coast this year. Proponents behind some of the 20 proposed LNG projects in B.C. say they should be in a position to make final investment decisions this year as environmental approvals, permits and First Nations support fall into place. And while a supply glut has pushed down natural gas prices and reduced short-term prospects, some experts say projects remain viable.
“These are long-term, multi-decade projects,” said AltaCorp Capital analyst Mark Westby. “Current gas prices are only one factor.” However, spot prices for LNG have dropped by more than half in Asia over the past two years. Westby sees the Shell-led LNG Canada facility in Kitimat, and the much smaller barge-mounted Altagas-led Douglas Channel project also planned for Kitimat, as most likely to proceed this year.
LNG Canada’s final barriers are securing assurances from First Nations and a permit from Fisheries and Oceans Canada, while Douglas Channel still needs to settle a 25 percent excise duty being levied on its LNG facility, Westby said. Another possibility is the Pacific NorthWest LNG project led by Malaysia’s Petronas. But Westby said while it remains promising, it faces uncertainty. An environmental assessment should be done by March, but Petronas still has to resolve significant fisheries issues with First Nations.
Mary Hemmingsen, global head of LNG at KPMG, said the drop in oil and gas prices has diminished the likelihood of multibillion-dollar projects going ahead. She said low oil prices have reduced cash flow at project developers, while also making alternatives to LNG cheaper. The “gold rush mentality” that was in place the past couple of years has been replaced by a somber, realistic outlook, she said. “What everyone was chasing two years ago was volume, volume, volume. … Now it’s about value, value, value.”
Australia LNG project ships first cargo; Conoco one of three partners
(Houston Chronicle; Jan. 11) - The first cargo of liquefied natural gas has sailed from the Australia Pacific LNG facility in Queensland, Australia, ConocoPhillips and its partners in the project announced Jan. 11. For the companies behind the project, the cargo is an important first step toward transitioning from a cash-sink to cash-generator after years of construction and more than $17 billion (U.S.) in investment to develop the facility capable of making 9 million metric tons of LNG per year.
ConocoPhillips and Australia’s Origin Energy each own 37.5 percent of the venture; China’s Sinopec owns 25 percent and is its largest customer. Japan’s Kansai Electric Power also has signed contracts for some shipments. The Australia Pacific LNG plant takes coal-seam gas through a 330-mile pipeline from Eastern Australia, liquefies it and then ships the fuel to customers in Asia. The initial shipment came from the plant’s first liquefaction train; a second production train is due online in the second half of 2016.
The project’s backers have continued to pour billions into APLNG despite a collapse in oil prices that has crimped cash flow and dragged down LNG prices across the globe. That collapse has left immediate profitability of the project uncertain — Origin has said it needs oil prices at between $38 and $42 per barrel before it will see positive cash flow from its investment, according to the Sydney Morning Herald. ConocoPhillips said it expects the project to be self-funding after the second train comes online later in 2016.
Oregon LNG developer withdraws lawsuit over proposed plant site
(Daily Astorian; Astoria, OR; Jan. 11) - Oregon LNG has voluntarily withdrawn from litigation with the U.S. Army Corps of Engineers before a federal district court judge could officially dismiss the developer’s claims. The company wants to build a liquefied natural gas plant and export terminal in Warrenton, Ore., near the mouth of the Columbia River, but the Army Corps has asserted its exclusive rights to the proposed plant site under a nearly 60-year-old easement to deposit dredging spoils.
In late December, Magistrate Judge John V. Acosta ruled against Oregon LNG in a lawsuit the company filed against the Army Corps. Oregon LNG failed to prove, Acosta said, that the Corps has abandoned property. Acosta’s ruling still needs to be signed by Anna J. Brown, a federal district court judge, to become official. By choosing to drop its lawsuit ahead of Brown’s signature, the company preserves its ability to refile its complaint against the Army Corps at a later date.
Opponents of the $6 billion terminal and pipeline project welcomed the move as another setback for the company. “The direct implication is that there won’t be an official court judgment saying that Oregon LNG ‘loses,’” said Miles Johnson, a lawyer for Columbia Riverkeeper, an environmental group opposing the project. “It’s just one more legal defeat for Oregon LNG in kind of a long string of them,” he said. “It makes it harder for them to see how they’re going to get this project off the ground.”
Chevron-PetroChina venture starts production at gas field in China
(Bloomberg; Jan. 10) - Chevron and PetroChina started gas production in China’s southwestern regions of Sichuan and Chongqing, eight years after signing a production-sharing agreement. The well in Chongqing’s Luojiazhai gas field began commercial gas production Dec. 30, China National Petroleum Corp., PetroChina’s parent, said Jan. 11. PetroChina in 2008 signed the 30-year agreement with Chevron, under which the U.S. producer took a 49 percent stake in the parcel and became the operator.
The Luojiazhai project, the first phase of development, will produce at its peak an estimated 300 million cubic feet of gas per day, according to the PetroChina statement. China currently consumes almost 18 billion cubic feet of gas per day. Both parties will work on two more phases in the same area. Chevron beat Shell, Statoil and Total to win the right to develop the so-called sour-gas reserves at Chuandongbei. Sour gas refers to natural gas that contains a high level of hydrogen sulfide.
Gulf of Mexico tugboats to benefit from start of LNG exports
(Bloomberg; Jan. 11) - Somewhere in the Gulf of Mexico right now, the Energy Atlantic is headed for Louisiana to collect the first exports from America’s shale gas revolution. Waiting to steer the tanker into Cheniere Energy’s Sabine Pass terminal is a fleet of tugboats that’s spent the past seven years killing time — some days holding emergency exercises, some days racing each other. They were ready to escort ships for natural gas imports, but that never arrived. Now, they will work escorting ships for LNG exports.
“The boats are beautiful — you could eat off the floor in the engine room,” said Richard Ennis, head of natural resources at ING Capital. With the switch to exports, the tugs will at last have a job to do — even if it’s not the one they expected. The surge in oil and gas output from U.S. shale drillers has the potential to transform world markets. At home, it left a chain of idle LNG import facilities from the Northeast to the Gulf Coast. Now, some of those facilities will go to work exporting liquefied natural gas.
It’s about putting to use for export what was not being used to import gas. At Sabine Pass, empty LNG storage tanks designed for the import terminal will be repurposed for exports. And, at last, there’ll be work for the ochre-colored tugboats with their fire-engine-red hulls. They’ll no longer be waiting for phantom ships.
B.C. government will oppose oil pipeline expansion project
(Vancouver Sun; Jan. 10) - The B.C. government will formally oppose the Trans Mountain oil pipeline expansion in a written submission to the National Energy Board. Environment Minister Mary Polak told The Vancouver Sun that the provincial government believes that pipeline proponent Kinder Morgan has failed to provide the NEB with an adequate plan to prevent or respond to an oil spill. “We are asking them not to recommend approval,” Polak said of the Alberta-to-B.C. coast pipeline project.
The B.C. government laid out in five conditions in 2012 that it said all oil line projects would have to meet before they would be allowed in the province. The second and third conditions require “world-leading” prevention and response plans if a pipeline fails on land or if oil is spilled into any rivers, lakes or the ocean. “As far as we’re concerned, we have not seen the evidence in the hearings to support a conclusion that they’ve met our conditions,” Polak said. “So we won’t be supporting their approval at this time.”
The $6.8 billion Trans Mountain project would involve twinning Kinder Morgan’s existing 715-mile pipeline from the Alberta oil sands to its costal terminal in Burnaby, B.C. It would increase capacity between Edmonton and Burnaby from 300,000 barrels a day to 890,000 barrels, and lead to as much as a seven-fold increase in tanker traffic. Kinder Morgan has said it will mitigate increased risks of oil spills by increasing tug escorts in inland ocean waters and beefing up spill-response capacity. “They did not submit evidence of their ability to respond in a world leading way on the land,” Polak said.
Hard to see ‘any company making money’ at $30 oil
(Calgary Herald; Jan. 12) - Crude proved it can indeed go “lower for longer,” falling briefly Jan. 12 to below $30 per barrel before closing at $30.44. “At these prices, I can’t think of any company making money,” said Gary Leach, president of the Explorer and Producers Association of Canada. At a conference in Calgary, meanwhile, a panel of commodities experts agreed that prices will come back — eventually — but no one sees West Texas Intermediate ever getting back to above $105, where it was in June 2014.
Martin King, an analyst with FirstEnergy Capital in Calgary, pointed out that Canadian crudes are being hit particularly hard, with Western Canadian Select, a heavy oil and oil sands blend, recently falling below $20 per barrel. “Prices remain under pressure,” said panelist Michael Wittner, global head of oil research for Societe Generale, listing China’s market turmoil and currency uncertainty around the world as recent influences on the price. But he did predict that oil could return to the $70s by 2020 as cheap oil cannot keep up with demand growth, forcing the market to call on costlier supplies.
Meanwhile, Ed Morse, global head of commodities for Citi Research, said new production from Iran as sanctions are removed in the next month or so will cause ripple effects on global oil markets. “It’s hard to be optimistic over the short term when you have as much inventory being put into storage as we’ve seen happening right now and when Iran is going to put out a significant amount of oil into the market,” he told reporters.
Petroleum News by Alan Bailey (NGP Photo).
As oil prices tumble and with them the potential solvency of the state of Alaska's finances, a heated debate is emerging over both the extent of the problem and the means of putting the state's fiscal position back onto an even keel.
On Dec. 7, during Law Seminars International's Energy in Alaska c....
APRN by Rachael Waldholz. This month, the state committed to another year of work on the Alaska LNG project. That’s the effort to bring natural gas from the North Slope to the Kenai Peninsula for export.
But natural gas prices have been plunging along with oil. In the Asian spot market, gas is selling for a third of what it did two years ago.
Should Alaska be worried Larry Persily (NGP Photo) says it’s true: the global market for natural gas is not so good right now.
“It’s wretched, it’s miserable, it’s lousy, it stinks,” he said. “There’s way more gas than there is demand…it’s like oil!” Read more and play audio of interview....
But, will it be sustained through the winter and the coming year?
Part of the answer lies in how government policy faces the challenge of shortage: will government recognize its self-imposed reliance on oil to fund 90% of the operating budget and make appropriate operating budget cuts in wake of low oil prices.
Or, will government avoid cutting its own operations and instead punish a struggling oil industry and private enterprises with new and/or increased taxes and fees that inhibit future investment?
Despite challenging times, Alaska’s oil and gas industry is making significant investments in the state.
According to the Alaska Division of Oil and Gas, the industry spent $7 billion on North Slope assets in 2014. And in a climate of sub-$40 per-barrel oil, the state has seen far fewer capital and operating spending reductions than almost anywhere else in the world.
ConocoPhillips announced that it would be cutting its Alaska capital spending by just 5 percent in 2016, compared to 15-30 percent cuts the company is making in other operations around the world. ConocoPhillips completed its CD-5 project and began producing the first oil from the National Petroleum Reserve-Alaska in the fall (see video below). The company also has plans to begin producing up to 30,000 barrels per day from another NPR-A field, the greater Moose’s Tooth unit, by 2018.
ExxonMobil continues to bring online the Point Thomson gas field west of Prudhoe Bay (see story below), and new, smaller players in Alaska’s oil patch, like Hilcorp, are investing in new projects (Liberty) and older fields on the North Slope.
Cook Inlet is also seeing renewed interest. Both Hilcorp and Furie Operations Alaska are investing heavily in reinvigorating legacy fields and exploring for new deposits. Furie announced it is bringing a jack-up rig to Alaska to begin drilling in its offshore Kitchen Lights unit. Since November, Furie has increased natural gas production from the unit from 2 million to 9 million cubic feet-per-day.
Caleus Energy’s plans for its $1.2 billion Nuna project depend largely on current state oil and gas tax credits. Nuna is located in the Oooguruk field, several miles offshore in the Beaufort Sea. Casey Sullivan, Caleus’s external affairs manager, told the Resource Development Council that the project could ultimately bring the state more than $1.2 billion in royalties and taxes over the lifespan of the project. He urged lawmakers in Juneau and the governor’s office to be careful making changes to the tax credit system as they look to find ways to fill a growing $3.5 billion state budget hole.
“This isn’t free money. We spend money in the economy, and no industry has a greater job-multiplier effect than oil and gas — about 9 to 1, meaning for every one job in the industry, nine other jobs are created indirectly by the spending,” Sullivan said.
Fairbanks News Miner. Tucked away in this year’s Coast Guard Reauthorization Act, a $175 million bill that just passed the Senate by a unanimous vote, is a land transfer that could be consequential for Alaska’s future role in the Arctic. Conveying 2,500 acres of federal land to state control at Point Clarence on the Seward Peninsula, the provision could set the location for a long-sought deepwater port for the northern half of the state. It’s the latest in a slow-moving chain of events coming together into a framework for Alaska’s future role as a leader in arctic affairs — if those here and in Washington, D.C. maintain their focus.
Point Clarence is northwest of Nome, near the tip of the Seward Peninsula that constitutes the westernmost reach of the North American continent. It’s 786 miles almost due north of the state’s closest existing deepwater port in Unalaska. In shipping terms, that’s a world away. The port in Unalaska is well more than 1,000 miles from offshore oil exploration sites in the Beaufort and Chukchi seas, a fact that complicated producer Shell’s efforts to coordinate the movements of its oil platform and associated ships when drilling test wells.