The BBB or BoerBurgerBeweging (Farmer-Citizen Movement) party won 17 seats in the Senate, more than any other party.
Archive for the ‘energy policy’ Category
Are the Netherlands Senate elections a positive sign for more rational energy policy?
Posted in climate, energy policy, Uncategorized, tagged BBB, elections, farmers, Netherlands on March 19, 2023| Leave a Comment »
EIA Energy Outlook 2023
Posted in energy, energy policy, natural gas, tagged EIA, Energy Outlook 2023, natural gas production, oil production on March 17, 2023| Leave a Comment »
Yesterday, Lars Herbst attended the EIA’s Annual Energy Outlook presentation. The slides are attached.
Below is a custom chart from the EIA data tables. While EIA predicts growth in renewable generating capacity, US oil and gas production are nonetheless projected to increase slightly through 2050.
The sad state of the US OCS oil and gas leasing program
Posted in Alaska, energy policy, Gulf of Mexico, Offshore Energy - General, tagged active leases, areas excluded from leasing, drilling, OCS Leasing Program, producing leases on March 16, 2023| 1 Comment »
Of the 1.7 billion acres of Federal land on the US Outer Continental Shelf, only about 73 million acres in the Gulf of Mexico and 1 million acres in the Cook Inlet may be offered for oil and gas leasing. Official or de facto exclusions prohibit leasing in the entire US Atlantic, the entire US Pacific, all Alaska areas except the Cook Inlet, and most of the Eastern Gulf of Mexico. No other coastal nation has restricted access to oil and gas resources to this extent.
As demonstrated in recent sales, many of the tracts being offered have little or no production potential. Only 308 tracts (1.7 million acres) received bids in GoM Sale 257. 94 of the high bids were for sequestration purposes and were arguably invalid. Sale 258 in the Cook Inlet only received a single bid.
The number of active leases, currently 2153, has been at a historically low level for the past 2 years. Only 0.7% of our OCS is leased and thus open to exploration. 26% (552) of these leases are already producing, leaving a historically low number of nonproducing leases.
Oil is where you find it, not where you wish it was or want it to be. Denying access to all but a small portion of the OCS limits exploration strategies and prevents publicly owned resources from supporting our economy in the manner intended by the OCS Lands Act.
Bye bye Beaufort. So many memories😢
Posted in Alaska, energy policy, tagged Alaska, Beaufort Sea, Hilcorp, Kulluk, Liberty, Mukluk, Northstar, Presidential withdrawal, Willow Project on March 15, 2023| Leave a Comment »
The shrinking of the OCS oil and gas program continues. In an attempt to placate opponents of the Willow project, the President has removed the entire Beaufort Sea from oil and gas leasing consideration. Unsurprisingly, the opponents of Willow are no less irate.
Under the authority granted to me in section 12(a) of the Outer Continental Shelf Lands Act, 43 U.S.C. 1341(a), I hereby withdraw from disposition by oil or gas leasing for a time period without specific expiration the areas designated by the Bureau of Ocean Energy Management as the Beaufort Planning Area of the Outer Continental Shelf that have not previously been withdrawn.
WP: “Why Big Oil is less worried about Biden phasing out fossil fuels”
Posted in climate, energy policy, Offshore Energy - General, tagged Biden administration, fossil fuels phase out, offshore program on March 11, 2023| Leave a Comment »
HOUSTON — Oil and gas industry leaders say they’ve seen a big shift in tone from the Biden administration over the past year, helping to smooth over one of the president’s rockiest relationships.
Washington Post
Perhaps the Washington Post reporter is correct, but the “big shift in tone” is not apparent in the offshore sector. The only lease sales have been mandated by Congress, the 5 year plan is still 9 months from completion, the lease sale terms have been less than favorable, and language in the draft 5 year plan does in fact express the intent to phase out oil and gas.
Rystad Energy: Offshore is back!
Posted in energy policy, Gulf of Mexico, Guyana, Norway, Offshore Energy - General, UK, tagged Brazil, Guyana, Norway, offshore investment, Offshore is back!, Rystad, UK on March 10, 2023| Leave a Comment »
The offshore oil and gas (O&G) sector is set for the highest growth in a decade in the next two years, with $214 billion of new project investments lined up. Rystad Energy research shows that annual greenfield capital expenditure (capex) broke the $100 billion threshold in 2022 and will break it again in 2023 – the first breach for two straight years since 2012 and 2013.
Offshore activity is expected to account for 68% of all sanctioned conventional hydrocarbons in 2023 and 2024, up from 40% between 2015-2018.
Rystad
Comments:
- Middle East investment continues to be strong
- Good for South America thanks to Brazil (16 new FPSOs by the end of the decade) and the Guyana success story.
- Strong forecast for Norway and the UK boosts Europe.
- North America could do far better with less obstructive access policies.
Senator Manchin on the delayed 5 Year Leasing Plan
Posted in climate, energy policy, Offshore Energy - General, tagged 5 year leasing plan, DOI, OCS Lands Act, Senator Manchin on March 9, 2023| Leave a Comment »
Washington, DC — Today, U.S. Senator Joe Manchin (D-WV), Chairman of the Senate Energy and Natural Resources Committee, released the following statement on the Department of the Interior’s (DOI) unprecedented delay in releasing a five-year leasing plan.
“Monday night, the Department of the Interior made it painfully clear – again – that they are putting their radical climate agenda ahead of our nation’s energy security, and they are willing to go to great lengths to do it. The earliest that Interior will release a legally required program for 2023-2028 offshore oil and gas leasing will be the end of this year. That’s 18 months late. This is the first time in our nation’s history that we haven’t had a 5-year leasing program released before the old plan expired. Every other Administration, Democrat and Republican, has managed to follow the law in a timely fashion.
“Let me be clear – this is not optional. The Outer Continental Shelf Lands Act mandates that the Secretary of the Interior “shall prepare” this program to “best meet national energy needs.”
“What is even more terrifying is that on top of this disturbing timeline, Interior refuses to confirm if they intend to actually include any lease sales in the final plan, which is an issue I sounded the alarm about when Secretary Haaland appeared before the Senate Energy and Natural Resource Committee on May 19, 2022. I will remind the Administration that the Inflation Reduction Act also prevents them from issuing any leases for renewables, like offshore wind or onshore solar unless there are first reasonable lease sales for oil and gas that actually result in leases being awarded. And I will hold their feet to the fire on this.”
Senator Manchin
Plain English; no need for interpretation 😉
Did the IRA’s royalty provisions and DOI lease sale decisions penalize small offshore producers?
Posted in Alaska, energy policy, Gulf of Mexico, Offshore Energy - General, Regulation, tagged Alaska, Cook Inlet, Inflation Reduction Act, Lease Sale 258, lease terms, royalty rate, Sale 244, Sale 256, Sale 257, Senator Manchin on March 9, 2023| Leave a Comment »
Senator Manchin and the Alaska delegation criticized the DOI decision memo for Sale 258. The memo implied that the highest allowable royalty rate was chosen to minimize bidder interest and limit future production. Unfortunately, the “Inflation Reduction Act,” which mandated these lease sales, was not particularly helpful in creating interest in the less attractive OCS tracts like those in the Cook Inlet and the shallower waters of the Gulf of Mexico.
Sec. 50261 of the IRA raised the minimum allowable royalty rate from 12 1/2% to 16 2/3%, while capping the maximum rate at 18 3/4%. This provision favors deepwater operators, typically majors and large independents, whose royalty rates were capped at 18 3/4%, the same rate as for previous OCS sales.
Conversely, the IRA royalty provisions penalize the smaller companies and gleaners who are critical to sustaining shallow water (shelf) operations, including environmentally favorable nonassociated (gas-well) natural gas production, by raising the minimum royalty rate to 16 2/3%. DOI exacerbated IRA’s impact by electing to charge the highest allowable royalty rate for Cook Inlet and GoM shelf leases. The net result was a 50% royalty rate increase from prior sales (12.5 to 18.75%).
The table below illustrates the royalty rate implications of the IRA language and the DOI decisions.
| Area | Sale | Date | % royalty: <200m water depth | % royalty: >200m water depth |
| Cook Inlet | 244 | 6/21/2017 | 12.5 | 12.5 |
| GoM | 256 | 11/18/2020 | 12.5 | 18.75 |
| GoM | 257 | 11/17/2021 | 12.5 | 18.75 |
| Cook Inlet | 258 | 12/30/2022 | 18.75 | 18.75 |
| GoM | 259 | 3/29/2023 | 18.75 | 18.75 |
Notes:
- The base primary term for GoM shelf leases is only 5 years vs. 10 years for leases in .>800 m of water.
- In lease year 8 and beyond the rental rates are nearly double for shelf leases vs. deepwater leases ($40/ac vs. $22/ac).
- While deepwater development typically requires more time, the higher rental penalty for delayed shelf production (which must be approved by BSEE) is not warranted. $40/acre or $240,000 per year (plus inspection and permitting fees) is a high cost for a marginal shelf lease.
- Cook Inlet Sale 244 drew 14 high bids totaling more than $3 million. Sale 258 drew only 1 bid of $64,000. While many factors influence lease sale participation, the 50% increase in royalty rate certainly made the Cook Inlet leases less attractive.
- Other than the increased royalty rate, the terms for both Cook Inlet sales were essentially the same. The primary lease term was 10 years and the minimum bonus bid was $25/hectare for both sales. The rental rate was increased by only $3/hectare ($13 to $16).
The other national debt: 355 million barrels
Posted in energy policy, Offshore Energy - General, tagged legislation, national debt, SPR depletion, Strategic Petroleum Reserve on March 8, 2023| Leave a Comment »
That is the amount of oil the US government has “borrowed” from the Strategic Petroleum Reserve without replacing. At $80/bbl, that’s ~$28 billion worth of oil. Not refilling the SPR exposes the US to much greater costs, in terms of economic and national security risks. Those who were around during the 1970’s certainly remember the embargoes and the resulting disruptions that led to the establishment of the SPR.
The SPR has a fill rate of only 685,000 bopd, so a complete refill would require 518 days, which would have to be spread over years because of supply, operational, maintenance, and price considerations. The promised purchase of 3 million bbls in February never occurred, and we are now told that DOE “would like to start buying within the next year, depending on the window of opportunity.” This is not particularly encouraging, especially given that the mandatory sale of another 26 million bbls is upcoming this spring. So it looks like the SPR may be down another 20+ million barrels heading into 2024, an election year. Good luck making significant purchases then.
This is the hole we are in as a result of non-emergency SPR sales for price moderation purposes. Meanwhile, Congress has proposed the following legislation:
- Prohibit sale of SPR oil to China
- Prohibit sale of SPR oil to “certain countries”
- Require that the Strategic Petroleum Reserve only includes petroleum products produced in the US
- Prohibit non-emergency withdrawals Secretary of the Interior has issued a plan to increase the production on Federal land.
The last bill is interesting, but has little chance of passing and would be difficult to implement given other legislative, judicial, and administrative constraints on leasing and production. Having a plan is one thing; implementing it is quite something else.
Cook Inlet (Sale 258) Decision Memo is raising eyebrows
Posted in Alaska, energy policy, Offshore Energy - General, tagged 5 year leasing plan, Cook Inlet, Lease Sale 258, OCS Lands Act, royalty, Senate Energy and Natural Resources, Senator Manchin on March 6, 2023| Leave a Comment »
An internal memo from the U.S. Interior Department suggesting that the agency set the highest possible royalty fee on potential oil and gas development before last year’s Cook Inlet lease sale is drawing blowback from the Democratic chair of the Senate Energy and Natural Resources Committee.
West Virginia Sen. Joe Manchin said in a statement he was “appalled” by the memo, which he said was leaked and prioritized a “radical climate agenda” over the energy needs of Alaskans and the U.S.
Anchorage Daily News
From the decision memo:
While a 16 ⅔ percent royalty may be more likely to facilitate expeditious and orderly development of OCS resources and potentially offer greater energy security to residents of the State of Alaska, a reasonable balancing of the environmental and economic factors for the American public favors the maximum 18 ¾ percent royalty for Cook Inlet leases.
Sale 258 Decision Memo
The lower royalty rate probably would not have made much difference in the outcome of this sale, which only drew one bid, but the attitude expressed in the decision memo is rather disappointing given the Department’s mission, as expressed in the OCS Lands Act, to make resources available for expeditious and orderly development.
What might have made the sale more attractive was royalty suspensions, Option D.5.b (below). This would have been the best means of supporting the objectives of Senator Manchin, the other authors of the congressional leasing mandate, and the State of Alaska.
Option D.5.b: Offer Royalty Suspensions
Sale 258 Decision Memo
BOEM could offer royalty suspensions with the goal of making resources available for expeditious and orderly development. However, BOEM does not recommend royalty suspensions as the recommended lease term options are expected to balance the goals outlined earlier in this memo
Those who are concerned by the Sale 258 Decision Memo should be more troubled by the Proposed 5 Year Leasing Plan, most notably this stunning sentence which justifies the minimalist plan and signals a phasing out of offshore oil and gas leasing:
“The long-term nature of OCS oil and gas development, such that production on a lease can continue for decades makes consideration of future climate pathways relevant to the Secretary’s determinations with respect to how the OCS leasing program best meets the Nation’s energy needs.“
Bud's Offshore Energy (BOE) 