The SPR is down to 480.1 million barrels as of 7/15/2022. For prior years, the figures are year-end. See previous SPR post.
Archive for the ‘energy policy’ Category
Strategic Petroleum Reserve update
Posted in energy policy, tagged oil reserves, SPR on July 19, 2022| Leave a Comment »
Former Minerals Management Service (MMS) Director Randall Luthi comments on Federal lease sale in Wyoming
Posted in energy policy, Uncategorized, tagged Gov. Gordon, Luthi, Wyoming on July 15, 2022| Leave a Comment »
This blog does not normally cover onshore leasing; pontificating about offshore issues is challenging enoughđ. However, Randall Luthi – the former head of the MMS (and thus the US offshore program) – is now dealing with similar issues to those being experienced in the offshore sector.
âThe bad news is the sale was 18 months late, was approximately 75% smaller than originally planned, had a huge number of state director deferrals, and offered many less-than-desirable leases,â testified Randall Luthi, who serves as chief energy advisor to Gov. Mark Gordon. âIn summary, it was a long-awaited, but paltry sale.â
According to Luthi, the federal government controls approximately 67% of Wyomingâs mineral estate, and nearly 50% of its surface.
Wyoming News
In light of the overwhelming federal control, Wyoming has much in common with the Outer Continental Shelf!
Interesting, but not surprising
Posted in energy policy, Offshore Energy - General, Uncategorized, tagged energy transition, market evalutations, oil and gas companies, Wood Mackenzie on July 14, 2022| Leave a Comment »
Per Wood Mackenzie, companies with low transition scores (i.e. the purer oil and gas plays) command higher valuations. I’d like to see the scores for other US independents.
“First, investors piled into the pure play oil and gas producers that are most leveraged to oil prices, much as they would in any upcycle. US independents led the sector rise through early June before the oil price and shares fell back over the last month.“
“Euro Majors are also reaping the earnings and cash flow boom. Share price performance has been strong relative to the wider stock market, but most have lagged their US peers. US Majors have long commanded a premium rating to their European counterparts, partly a function of the relatively high rating of the US stock market. The gap though has widened.”
Wood Mackenzie
Washington Post on the 5 Year leasing plan
Posted in energy policy, Gulf of Mexico, Offshore Energy - General, tagged 5 year leasing plan, nonproducing leases, Washington Post on July 14, 2022| Leave a Comment »
Given the differences in our views on energy policy, particularly with regard to oil and gas, this WP opinion piece is pretty reasonable. The Post acknowledges the continued need for oil and gas, and the importance of domestic production. That said, two statements in the paragraph pasted below warrant immediate comment.
“In reality, neither argument is convincing. The Biden administrationâs proposal â which opens the door to up to 11 potential lease sales, 10 in the Gulf of Mexico and one off the coast of Alaska â would have little impact on current energy prices. It would take between five and 10 years to produce oil after a new offshore lease issuance, according to the Interior Department, while more than three-quarters of already-leased offshore federal waters are not in production.”
WP Opinion
Comments:
- The purpose of the 5 year leasing plan is to minimize future energy supply and security risks, not to reduce current prices. However, acknowledgement of the importance of offshore production and support for regular lease sales could influence market psychology.
- The old and tired arguments about non-producing leases have been frequently addressed on this blog. When you purchase leases, you are not buying oil and gas. You are buying only the opportunity, for a limited period of time, to explore for these commodities. The current percentage of producing leases is actually rather high by historical standards. For more on this topic, see this and this.
Has the President, VP, or any member of the cabinet ever visited an offshore platform?
Posted in energy policy, Gulf of Mexico, Offshore Energy - General, tagged deepwater platform, DOE, DOI, offshore visit, President's Cabinet on July 14, 2022| Leave a Comment »
In particular, the Energy and Interior Secretaries would benefit from a visit to a deepwater production facility. They would no doubt be impressed and would be better able to make informed decisions affecting US offshore leasing, exploration, and development.
The offshore workers would be respectful and would welcome the opportunity to discuss the technology, safety precautions, and environmental protection measures.
Kudos to BSEE on the refurbishment of the Ohmsett spill response research facility
Posted in energy policy, Offshore Energy - General, oil spill response, tagged BSEE, Costner, Lautenberg, MMS, ohmsett, Tennyson on July 13, 2022| Leave a Comment »
My involvement with Ohmsett dates back to the 1970s when EPA operated the facility and I was on the Ohmsett Interagency Technical Committee. The facility fell into disrepair in the late 1980s. Thanks largely to the vision and initiative of my Minerals Management Service (MMS) colleague Ed Tennyson and the enactment of the Oil Pollution Act of 1990, the MMS began restoring the facility in 1990 and resumed testing activities in 1992. Senator Frank Lautenberg (NJ) and a host of dignitaries participated in the grand reopening event.
The facility has lived up to the hype and the current BSEE leadership team seems committed to continuing the testing and innovation. For more information about testing at Ohmsett, including renewable energy concepts, check their website. For an excellent summary of Ohmsett activities from 1992-97, see this paper.
Among the many companies to test equipment at Ohmsett is one that was partially owned by actor Kevin Costner. See the article and photo below. If you build it (and maintain it), they will come!
US offshore sector “leads” worldwide decline in oil reserves
Posted in energy policy, Gulf of Mexico, Offshore Energy - General, Uncategorized, tagged exploratory drilling, oil reserves, Rystad, US offshore on July 12, 2022| Leave a Comment »
Per Rystad’s independent and highly regarded global energy assessment:
“The (worldwide) drop in reserves is driven by the 30 billion barrels of oil produced last year, plus a significant reduction in undiscovered resources, to the tune of 120 billion barrels. The US offshore sector has contributed the largest total to that drop, where 20 billion barrels of oil will remain in the ground, largely thanks to leasing bans on federal land.“
The decline in reserves should come as no surprise to those who follow the US offshore sector. Note the sharp decline in exploratory drilling in the (updated chart below) and the calls for action on this blog a year ago and more recently.
The OCS oil and gas program requires a sustained, consistent commitment by government and industry. Such a consistent commitment, even though required by legislation, is difficult to achieve in our political system, .
The proposed 5-year leasing plan portends further declines in the OCS program. Those who are celebating the progam’s downfall may not be so smug 5-10 years from now.
The commitment by the oil and gas industry has also been uneven and in some cases disappointing. BOE continues to be troubled by the reduction in exploration by some companies and the decision by others, including leading US companies with a long history of Gulf of Mexico operations, to exit the US offshore sector completely (see the chart below). The exploration decline began before the leasing shutdown (now 600 days in duration). Inconsistent signals from the Federal government and corporate directors, market considerations, and competing investment opportunities are major factors, but there are no doubt other considerations. Constructive dialogue to address these issues is badly needed.
600 Days…
Posted in energy policy, Gulf of Mexico, Offshore Energy - General, tagged 600 days since the last US offshore lease sale, active oil and gas leases, producing leases on July 11, 2022| Leave a Comment »
… since the last US offshore oil and gas lease sale. As a result…
- the number of active leases has fallen below 2000 (1987 as of July 1, 2022) for the first time in at least 40 years
- 99.4% of the US OCS is closed to exploration
- exploration opportunities continue to dwindle negatively affecting reserves (more on this in an upcoming post)
Of the 1.7 billion acres on the US OCS, 10.6 million are currently open to exploration and development.
April GoM production, BOEM’s production forecast, and the proposed OCS leasing program
Posted in climate, energy policy, Gulf of Mexico, Offshore Energy - General, tagged 2022 production forecast, 5 year leasing plan, BOEM, EIA, Gulf of Mexico oil production, King's Quay on July 7, 2022| Leave a Comment »
April production increased from March by 72,000 BOPD to 1.763 million BOPD. The increase is associated, at least in part, with Murphy’s King’s Quay field which began producing in early April. 2022 GoM production remains below the levels reached in the first 7 months (pre-Hurricane Ida) of 2021, and is well below BOEM’s forecasted 2022 production rate of 1892 MBOPD. Perhaps BOEM was assuming earlier startup dates for other projects that will begin production later this year or next year. The 2022 YTD dip in production points to the importance of sustained exploration and development.
BOEM’s short-term production forecast is considerably more optimistic than EIA’s. This optimistic forecast, along with unrealistic expectations regarding the “energy transition” are reasons for proposing so few lease sales in the new 5 year leasing program. The logic for this minimalist leasing program seems to be that future production is neither necessary nor desirable. Indeed the program implies that the long-term nature of offshore production is a liability and is justification for limiting OCS oil and gas leasing:
“BOEMâs short-term (20-year) production forecast for existing leases shows steady growth from 2022 through 2024 and declining thereafter (see Section 5.2.1). 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 Secretaryâs determinations with respect to how the OCS leasing program best meets the Nationâs energy needs.“
5 Year Leasing Program, p.3
Basing leasing decisions on “future climate pathways” would seem to be a considerable stretch of the Secretary’s authority under the OCS Lands Act and may be inconsistent with the recent SCOTUS decision in West Virginia vs. EPA. A strategic shutdown of the offshore oil and gas program would dramatically increase energy supply and security risks going forward, and should be authorized by Congress.
Norwegian offshore workers strike
Posted in energy policy, Norway, Offshore Energy - General, tagged Norway, offshore workers, strike on July 5, 2022| Leave a Comment »
“Norwegian offshore oil and gas workers went on strike Tuesday. The stoppage could reduce the country’s gas output by almost a quarter and intensify supply chain shortages due to Russian gas boycotts by EU nations.”Â
dw.com
I couldn’t find any data on the typical length of these strikes, but my recollection is that they are usually rather brief.
Bud's Offshore Energy (BOE) 