Forbes by Brigham A. McCown. The recent free-fall of crude oil prices has affected markets across the globe. Energy companies have responded by scaling back investments as their available capital shrinks. In British Columbia, delays are hampering the Pacific Northwest LNG project. Likewise, in Texas, a liquefaction project has been suspended off its coast by Excelerate Energy. Yet, meanwhile, Alaska is moving forward on an ambitious infrastructure project to develop and export its North Slope gas reserves.
The right hand column is undergoing construction and will be visible soon. -dh
|Alaska budget and gasline Comments, ADN by Tim Bradner (NGP Photo).
I have sympathy for new Gov. Bill Walker walking into this. So far — with one exception — Walker’s actions have been quite reasoned. He prudently ordered a stop to unobligated spending on several high-profile state development projects and put off submitting a revised state budget until January to allow his team to develop a plan.
Note to readers and public service advertisers: the right hand column normally appearing here is being reconstructed. Thank you for your patience. -dh
Comment: 'Climate Change/Global Warming' Is Important To Energy Producers...and, transporters, refiners, distributors and consumers because when the government and its political allies use it as a foundational assumption for policy, the economy suffers upstream at the wealth producing level, all the way to consumers and defenders of national security. -dh
Washington Post by George Will. We know, because they often say so, that those who think catastrophic global warming is probable and perhaps imminent are exemplary empiricists. They say those who disagree with them are “climate change deniers” disrespectful of science.
Actually, however, something about which everyone can agree is that of course the climate is changing — it always is. And if climate Cassandras are as conscientious as they claim to be about weighing evidence, how do they accommodate historical evidence of enormously consequential episodes of climate change not produced by human activity? Read more....
Energy Guardian by Edward Felker. Sen. Lisa Murkowski (NGP Photo) of Alaska on Thursday laid out an ambitious vision for energy legislation she plans to pursue as the first Republican chair of the Energy and Natural Resources Committee since 2006, beyond the Keystone XL bill the panel approved mostly along party lines.
Her priorities include a measure by Sen. John Barrasso, R-Wyo., to speed up approvals of liquefied natural gas, which Murkowski said will get a hearing this month.
While consumers rejoice, low oil prices cause "crises" to those governments and economies that are highly dependent on a high price for the volatile oil & gas commodities they produce.
It may be instructive for decision makers in Alaska and Alberta, for example, to observe -- as they develop their own creative solutions -- ideas from abroad.
Here is what the Ecuador’s Vice President Jorge Glas said yesterday in a Radio announcement about that country's dependence on falling oil prices (See our earlier story re: Ecuador - Pebble Project, Alaska). “We have already faced similar situations, as have many countries throughout Latin America. We have a technical government that is prepared to face this crisis." According to a recent posting of a Tiempo Story, "The Ecuadorian government is taking a number of steps to address the economic repercussions of the dramatic decline in oil prices. One such measure has been the revocation of the 5% increase in public sector wages which was scheduled for 2015. There have also been a number of proposals to cut the state budget by as much as $1.4 million. Ecuador’s Minister of Finance Fausto Herrera recently reported that the government will cut its capital expenditures by over $800 million, in addition to a $580 million cut from the budgets of current projects. With regards to the latter, there will be a direct cut of $200 million, while the remaining $380 million will be saved by optimizing spending."
On Friday, the Nebraska Supreme Court upheld the pipeline’s route through Nebraska while the U.S. House of Representatives voted to approve the project following Senate Energy Committee action. Prior to the release of the Nebraska Supreme Court decision, Michael Whatley (NGP Photo) of the Consumer Energy Alliance (CEA) appeared on Omaha’s KMTV to preview what to expect from the courts and what implications a decision would have. Following the decision, CEA issued a statement and spoke to several networks, including Nebraska Public Radio. Later on Friday, CEA issued a statement of support following the House’s vote to approve the project by a strong bipartisan majority, which was picked up on Omaha’s WOWT. (Note: We have long associated ourselves with CEA and other NGOs advocating reasonable, 'all-of-the-above' energy development policies and projects for North America. In fact, we believe that together such groups represent the common-sense, public interest 'sweet spot' creating the best blend of economic development, environmental conservation, job creation, and consumer benefits. -dh)
KTUU Television. (See story left column) The agencies in charge of six "mega projects'" that were put on hold in December by Gov. Bill Walker submitted reports this week outlining the operating costs and potential consequences if work is delayed or stopped permanently. The projects include the Ambler Mining District, the Juneau Access Road, the Susitna-Watana Hydro Project, the Knik Arm Bridge;, the Alaska Stand Alone Pipeline; and the Kodiak Launch Complex.
SIGNS OF THE TIMES, fron Schwab: Tpday, Tranocean, Ltd. (RIG) fell 2.30% to a new 52 week low of $15.72. During the last 52 weeks, RIG's price has ranged from $48.53 on January 10, 2014 to today's low of $15.72. Additionally, over the last 12 months, RIG has decreased 67.59% while its peers in the Oil & Gas Drilling industry decreased 47.73%.
TODAY'S ENERGY IN DEPTH ENERGY LINKS:
HF: New York, California and the perils of ignoring science. San Jose Mercury News,EID’s Dave Quast. Recent developments in the debate over hydraulic fracturing (fracking), however, show that these two states have fundamentally opposite approaches to leadership from Democratic governors. Gov. Andrew Cuomo of New York didn't lead, but rather followed when his Health Commissioner announced that the state would continue its ban on fracking. This despite the fact that the state's Department of Health couldn't find evidence that fracking is harmful.
The debate about fracturing must be based on sound science. Times Record News, column. Hydraulic fracturing has been accused by environmental groups of everything from polluting water supplies to contaminating the air to causing cancer to inducing earthquakes. Dr. Dan Hill, head and professor and Noble Chair of the Harold Vance Department of Petroleum Engineering at Texas A&M University, wrote a column that appeared in the Bryan/College Station Eagle on Dec. 30 that warned consumers “to keep an eye out for claims masquerading as ‘science.’”
The Myth of the Carbon Investment ‘Bubble’. Wall Street Journal, op-ed. Buzzwords about “stranded” and unburnable assets are making some investors anxious. The carbon-bubble movement is also putting pressure on endowments, foundations and pension funds to divest fossil-fuel equity holdings. Yet is the carbon-based investment risk real or is it part of a cry for action on climate change? Look closely and financial-market realities deflate the carbon-bubble theory.
U.S. Drivers Start 2015 With Cheapest Gas in Six Years. Bloomberg. Drivers paid an average of $2.2021 a gallon for regular gasoline at U.S. pumps last week, the lowest level for this time of year since 2009, according to Lundberg Survey Inc. U.S. oil output rose to 9.13 million barrels a day in the week ended Jan. 2, after reaching 9.14 million Dec. 12, the highest level in weekly Energy Information Administration data dating back to 1983. U.S. production has increased 66 percent in five years as companies have used horizontal drilling and hydraulic fracturing to tap into hydrocarbon-rich layers of underground shale rock.
NY shale ban to have little impact on national supply. Associated Press. New York's recent decision to ban fracking is hardly seen as a big loss for the nation's production of natural gas. That's because scientists say New York's available reserves of natural gas in the sprawling Marcellus Shale are minuscule compared to what can be extracted in other states. Penn State University geologist Terry Engelder estimates that the entire Marcellus Shale region has 127 trillion cubic feet of commercially viable shale gas reserves, mostly in Pennsylvania and West Virginia.
Saudi prince: $100-a-barrel oil 'never' again. USA Today, Q&A. Saudi billionaire businessman Prince Alwaleed bin Talal told me we will not see $100-a-barrel oil again. The plunge in oil prices has been one of the biggest stories of the year. And while cheap gasoline is good for consumers, the negative impact of a 50 percent decline in oil has been wide and deep, especially for major oil producers such as Saudi Arabia and Russia.
Houston Chronicle. The board of the state corporation expected to be a key player in efforts to advance a major liquefied natural gas project in Alaska is trying to determine how it can operate if members do not sign confidentiality agreements. ... Dan Fauske (NGP Photo), president of the gas-line corporation, also known as AGDC, said a confidentiality pledge is needed because information is shared between the two gas-line projects being pursued by AGDC — the liquefied natural gas project and a stand-alone in-state gas pipeline — to reduce costs.
Calgary Sun. Statement from Premier Jim Prentice (NGP Photo) on the Nebraska Supreme Court ruling
Premier Jim Prentice issued the following statement after the Nebraska Supreme Court upheld a state law granting the governor the authority to approve the Keystone XL route through the state:
“Today’s ruling in Nebraska clears the path for approving the Keystone XL pipeline.
“This ruling clarifies the regulatory process in Nebraska allowing the State Department to proceed with the Presidential Permit for the cross-border portion of the pipeline based on its own findings. The facts support the approval of this important project.
“The rigorous studies of the project, including the State Department’s thorough environmental analysis, have recognized Alberta’s progressive environmental initiatives and the numerous benefits of the pipeline.
“Keystone XL supports North American prosperity and economic growth and offers Americans energy security and jobs from a friend and ally committed to responsible resource development.
“I will be traveling to the U.S. the first week of February to discuss Alberta’s commitment to the environment and what safe pipelines and job creation can mean on both sides of the border.
“I look forward to working with incoming Nebraska Governor Pete Ricketts, with whom I have spoken, who is a supporter of the Keystone project.”
Will The Keystone XL Ever Be Built?
James R. Halloran, Independent Energy Analyst
Most of the readers know we deal with trends, not forecasts. We have only made three forecasts that involved “a rate and a date” in fifteen years; our record is 2-1, and would be perfect if natural gas had moved $0.10 higher in 2013. However, we have gone out on a bit of a limb with two forecasts recently. The first one is well known:The Keystone XL Pipeline, at least the five feet that crosses the US/Canadian border, will not get built. Ignore the headlines coming out of the Beltway these days; they are just smoke and puffery. Save the time otherwise spent on that topic for something more rewarding. Our position is stated here:
With Overwhelming Citizen Support, Keystone XL Can Be Approved
Don't underestimate the effectiveness of Alberta Premier Jim Prentice who is intent on lobbying Washington!
Our esteemed friend, reader and energy expert, Jim Halloran, has presented a logical view of the future of Keystone, assuming the President believes he can get away with continuing to block the future of that pipeline / lifeline (Yes, it could be an economic lifeline to tens of thousands who need good jobs).
President Obama will deliver the 2015 State of the Union Address on Tuesday, January 20, 2015. He will likely try to tout economic improvements which are more due to the oil and gas shale phenomenon (on mostly private property), than on his leadership.
The Consumer Energy Alliance urges its members -- as we urge our readers -- to call U.S. House of Representatives Members TODAY in support of H.R. 3, “The Keystone XL Pipeline Act.” The bill will give congressional approval of the Alberta-to-Texas, crude oil Keystone XL pipeline that has been under review for more than six years. The U.S. House of Representatives is expected to vote on the legislation TODAY, January 9, 2015.
Yesterday, the Consumer Energy Alliance (CEA) sent a letter to House Leadership expressing support for the legislation. Please refer to CEA’s letter for assistance in helping to draft your own letter to members of the House of Representatives. Also, refer to BuildKXLNow.org, for more information.
You might also be interested in the Senate's action on Keystone yesterday. Scroll down to the 1-8-15 page for the video review of Senator Lisa Murkowski's Energy Committee Business Meeting.
With a lot of bipartisan support from Congress, the President will find it harder to continue blocking Keystone XL.
We may not be able to change his mind, but a strong show of support could certainly put pressure on democrat candidates for 2016 elections to urge White House approval.
And if, even then, we fail, we would at least have done our best.
Thank you for your column, Jim; truly, it is a wake up call of what is likely to happen absent overwhelming citizen action! -dh
“Will the northern portion of the XL project get built any time soon?” The answer, in our opinion, is decidedly NO.
The environmental lobby (in England this amorphous set of interest groups is referred to as the “Green Blob”) has drawn a line in the sand to keep this pipeline from ever seeing the light of day. Fighting XL has become a Line of Business for many of them, with its own ongoing fund-raising group. They have a great playbook ready to go, to tie XL up with litigation and the aid of various government agency rules. The game is to tie it up as long as it takes to defeat it. This effort reinforces future “lines of business” when the Green Blob decides to take a stand. It is highly likely they can tie it up for a further seven years or so, by which time the market will have found ways to deal around its absence.
But we also believe Obama will never approve it, part of his “legacy” (most would call it narcissistic petulance). He would not have time to do so, anyway, between golf games, schmoozing with billionaires, and screwing up foreign policy. But even if he were to approve it, the Greens would then take over in court, and it will not get built.
The second forecast is known by fewer people, but I have a record of it with certain people (Nick and John, you are the source for the truth). I went on record in early December that the Energy sector of the market, as represented by the XLE, would hit its cycle bottom on December 15, 2014. There is an historical reason for the date, which I will share later if this works out. So far, the forecast is holding. The second part of the forecast is to be overweight energy in 2015. Looking back on the markets over the years, energy has occasionally finished last among the sectors, but it has never done it two years in a row. That does not mean it bolted to the head of the pack the following year, but it made out well in the trailing year, except for 1998-99 (the Dot-com Era). After that exception, it took off for several years in row.
Energy was last in 2014 even before crude oil tanked in the fourth quarter; cutting the price in half was just the cherry on the sundae. See the chart below for commodity behavior.
(Graph is being reformatted for insertion here....)
Attached is a note from Sanford Bernstein about the market rebounds for the Energy sector over the years. Take a look at Exhibit 2, which shows that it has been a long time since Energy has been this small a relative component of the market (below 10%). As a bet on a rebound, it has a least good set of odds in its favor.
What does this mean for oil prices? That is a subject for other notes. But on “follow the money” basis, we like the possibility that enough trends have spotted by observers that they will form a decent recovery over the next 18-24 months (the market is generally about nine months ahead of an actual recovery in business operations).
The Bottom Line: We do not know where oil (and natural gas) will bottom out. But we suspect that the market is telling us the seeds of a shake out of the weak is underway, which will help a decent rebound.
The flows into Energy are getting ahead of the price increase; see the note below.
Investors betting oil will rebound from the lowest prices in 5 1/2-years poured the most money in more than four years into funds that track crude.
The four biggest oil exchange-traded products listed in the U.S. received a combined $1.23 billion in December, the most since May 2010, according to data compiled by Bloomberg. Another $109.9 million was added this month through Jan. 5.
Investors are piling into oil ETFs even after West Texas Intermediate crude, the U.S. benchmark, tumbled the most since 2008 last year amid signs of rising supply and weak demand. Shares outstanding of the four funds surged to the highest since 2009.
“Commodity investors can be contrarian investors,” said Matt Hougan, president of San Francisco-based research firm ETF.com. “There are a lot of true believers in the commodity space. A lot of people are attached to the idea that oil’s natural price should be $100, not $50.”
The U.S. Oil Fund, the biggest oil ETF, attracted $629.9 million in December and $100.4 million so far this month. The fund, which follows WTI prices, added 1.8 percent to $18.369 yesterday on the New York Stock Exchange.
The number of U.S. Oil Fund shares on loan to short sellers was 3.93 million on Jan. 5, down from as high as 9.53 million last month, data compiled by Markit and Bloomberg show.
Money is pouring into oil ETFs even as commodity-linked index liquidations surged to a record $17 billion in the first 11 months of last year, Barclays Plc said in a report yesterday. Total commodity assets under management fell to $276 billion in November, the lowest since early 2010, according to the bank.
The four funds also include ProShares Ultra Bloomberg Crude Oil, iPath S&P GSCI Crude Oil Total Return Index ETN and PowerShares DB Oil Fund. They had 171.6 million shares outstanding as of Jan. 6, the highest since March 2009, according to exchange data compiled by Bloomberg.
WTI futures slid below $50 a barrel for the first time since April 2009 earlier this week. The benchmark, which tumbled 46 percent in 2014, climbed 39 cents, or 0.8 percent, to $49.04 in electronic trading on the New York Mercantile Exchange at 2:19 p.m. Singapore time.
Oil has slumped as U.S. production grew to the highest in more than three decades and the Organization of Petroleum Exporting Countries kept its output above quota for a seventh month in December. OPEC, which pumps about 40 percent of the world’s oil, decided to maintain its output target at 30 million barrels a day at a Nov. 27 meeting in Vienna.
The CBOE Crude Oil Volatility Index, which measures oil price fluctuations using options of the U.S. Oil Fund, dropped to 53.25 yesterday after reaching 57.67 on Jan. 5, the highest since October 2011.
Keystone XL Status Release From Senator Murkowski's Office Today:
Nebraska Supreme Court Decision Removes Last Excuse for Delay
WASHINGTON, D.C. – U.S. Sen. Lisa Murkowski, R-Alaska, today issued the following statement on the Nebraska Supreme Court ruling upholding the state’s approval of the current Keystone XL pipeline route through the state.
“Today’s court decision wipes out President Obama’s last excuse,” Murkowski said. “He’s had six years to approve a project that will increase U.S. energy supplies and create closer ties with our nearest ally and neighbor, and he’s refused to act. Regardless of whatever new excuse he may come up with, Congress is moving forward.”
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