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Archive for the ‘energy policy’ Category
The decline in GoM nonassociated gas production and why we care
Posted in climate, energy policy, gas, Gulf of Mexico, natural gas, Offshore Energy - General, tagged CCS, natural gas, nonassociated gas, offshore gas production on December 16, 2021| Leave a Comment »
Offshore gas production (see chart below) has declined for the past 20 years and now accounts for only 4% of total US gas production, down from 20% in 2005 and 25% in the 1990s. Associated gas production (oil-well gas) has remained relatively constant owing to the strength in deepwater GoM oil production. 73% of 2020 gas production was from deepwater wells, and was mostly oil-well gas. Associated gas production surpassed nonassociated gas production (gas-well gas) in 2016 and the latter has continued to decline.
The case for natural gas has been well documented (see the EQT letter linked below). Recent natural gas advocacy has emphasized the carbon/GHG advantages given that methane (CH4) is essentially a hydrogen transporter that emits far less CO2 than other fossil fuels when burned. However, natural gas’s other important air quality advantages – low NOx. SO2, and particulate emissions – have greater local significance from a human health standpoint. Those who have ridden a bike behind a natural gas powered bus have no doubt experienced the natural gas advantage firsthand. These buses are literally a breath of fresh air!
Other environmental advantages of offshore natural gas, particularly nonassociated gas, receive less attention but are nonetheless significant. Advantages of nonassociated offshore gas include the following:
- Fewer wells required than for shale gas
- No risk of fresh water contamination
- Platforms provide beneficial reef effects
- Minimal space preemption and land disturbance relative to onshore gas production and wind/solar operations
- Low facility density and navigation risks relative to wind operations;
- Lower elevation and fewer view-shed, aesthetic, and aviation issues than for wind
- Minimal avian risks relative to on- and offshore wind operations
- Minimal spill risk relative to oil and associated gas production
- Significantly less flaring than for oil well gas. While the overall % of US offshore gas production that is flared is low (approx. 1.0 -1.5% from 2016-2020 per EIA data), the % of gas-well gas that is flared has historically been less than 0.5%.
Low natural gas prices and competition from nimble and efficient shale operations have constrained offshore gas exploration. Ultradeep (subsurface) drilling has shown promise from a gas resource perspective but has proven to be expensive and operationally challenging. Some independent producers are still acquiring gas prone shelf tracts and that needs to be encouraged. Consideration should be given to incentives such as making nonassociated gas production royalty free. That would certainly seem preferable to subsidizing complex, expensive, and uncertain carbon disposal operations on offshore leases.
EQT makes compelling case for natural gas
Posted in climate, energy policy, natural gas, tagged climate, EQT letter, natural gas, polar vortex, surge in gas demand on December 14, 2021| Leave a Comment »
This letter from EQT CEO Toby Rice to Senator Elizabeth Warren summarizes data demonstrating the importance of shale gas in dramatically reducing US GHG emissions. A few excerpts:
In 2019, the United States emitted 970 million metric tons less than in 2005, with 525 million metric tons of that emissions reduction resulting from replacing coal with natural gas in power generation. Said another way: since 2005, in the United States, all emissions reduction efforts combined have had less impact than coal to gas switching alone.
The emissions associated with the production of natural gas are dwarfed by the emissions reduction of switching from the consumption of coal to gas.
Meanwhile, China, which produced only 3% of the worldâs natural gas but the majority of the worldâs coal, saw its methane emissions increase by an amount roughly equivalent to adding a second Europe to the world.
Letter from EQT to Senator Warren
Meanwhile, natural gas prices have soared to record levels in Europe and a predicted polar vortex may spike US demand. This OilPrice.com chart illustrates the remarkable divergence between US and European gas prices.
Will natural gas demand lead to a resurgence in US offshore gas-well drilling?
Waiting for the Judge’s ruling on the Sale 257 suit. Will the Carbon Sequestration bidding complicate his decision? Who pays for offshore CCS?
Posted in CCS, climate, energy policy, Gulf of Mexico, Offshore Energy - General, tagged Build Back Better, CCS, EarthJustice, Exxon, infrastructure bill, Lease Sale 257 on December 7, 2021| Leave a Comment »
What, if anything, will the Judge say about the leases that are intended to be carbon sequestration sites? How can BOEM sell OCS leases for purposes that were neither announced nor environmentally assessed? What do EarthJustice and the other plaintiffs think about the sequestration bids given that the environmental community is split on CCS?
Who is going to pay the enormous cost of sequestration on the Outer Continental Shelf – platforms, wells, pipelines, processing equipment, maintenance, monitoring, decommissioning, and more? The Federal government (i.e. taxpayers) features large in this grand scheme, and will no doubt be assuming most of the economic and performance risks. And all of these costs are for disposal purposes, not for offshore energy production of any kind.
Together with the bipartisan infrastructure bill enacted in November, which included more than $12 billion in funding for carbon capture and carbon removal technologies, the Build Back Better legislation would hand fossil fuel companies nearly every item on their carbon capture wishlist.
Inside Climate News
The reality of offshore CCS is not anywhere near as simple as portrayed in the slick graphic below:
Opportunity Lost
Posted in energy policy, gas, natural gas, Offshore Energy - General, tagged Baltimore Canyon, Hudson Canyon Unit, natural gas discovery on December 6, 2021| Leave a Comment »
More than 43 years ago, natural gas was discovered in the Atlantic about 100 miles SE of Atlantic City. The prospect was unitized (Hudson Canyon Unit) and 7 additional wells were drilled over the next 3 years. 725 miles of 3-D seismic data were collected. The geology was complex and more time was needed to evaluate the data. MMS refused to extend the leases without further drilling activity. One unit partner committed to funding a confirmation well if the other companies would relinquish their interest. They would not and the leases expired in 1984. This Hudson Canyon “end game” reflected poorly on the unit partners and the regulator, and the opportunity to produce regionally significant quantities of natural gas was forever lost. Seemed petty then; seems petty now.
Excellent Dan Yergin piece in The Atlantic
Posted in energy, energy policy, tagged Colorado Oil and Gas Assoc., the Atlantic, Yergin on December 2, 2021| Leave a Comment »
Dan starts by retelling the story about the North Face hypocrisy that earned the company the Colorado Oil and Gas Association’s first ever Customer Appreciation Award for being an extraordinary oil and gas customer. This award rivals the Not My Job Award as a means of recognizing extraordinary individual and organizational chutzpah. North Face refused to sell jackets to an oil industry service company because doing so would be counter to its âgoals and commitments surrounding sustainability and environmental protection.â As the Colorado Oil and Gas Assoc. pointed out:
At least 90 percent of the materials in North Face jackets are made from petrochemicals derived from oil and natural gas. Moreover, many of its jackets and the materials that go into them are made in countries such as China, Vietnam, and Bangladesh, and then shipped to the United States in vessels that are powered by oil. To muddy matters further, not long before North Face rejected the request, its corporate owner had built a new hangar at a Denver airport for its corporate jets, all of which run on jet fuel.Â
Yergin in The Atlantic
Yergin goes on to point out the extraordinary complexities of energy transitions particularly for developing nations:
Aissatou Sophie Gladima, the energy minister of Senegal, put it more pithily: Restricting lending for oil and gas development, she said, âis like removing the ladder and asking us to jump or fly.â
Yergin in The Atlantic
He talks about other energy transitions:
The 19th century is known as the âcentury of coal,â but, as the technology scholar Vaclav Smil has noted, not until the beginning of the 20th century did coal actually overtake wood as the worldâs No. 1 energy source. Moreover, past energy transitions have also been âenergy additionsââone source atop another. Oil, discovered in 1859, did not surpass coal as the worldâs primary energy source until the 1960s, yet today the world uses almost three times as much coal as it did in the â60s.
Yergin in The Atlantic
California Decommissioning: old disputes prevent common sense solutions
Posted in California, decommissioning, energy policy, rigs-to-reefs, tagged California, decommissioning, rigs to reefs on November 30, 2021| Leave a Comment »
Despite scientific support, California’s “rigs to reefs” program has made little progress. Comments in yesterday’s LA Times article help explain why:
Fed by concerns from some environmental advocates and a skepticism about the motives of Californiaâs billion-dollar oil industry, the Rigs to Reefs program that passed in 2010 was so complicated by political compromise that the permitting process became almost unworkable, (State Sen.) Hertzberg said.
Not a single oil company has applied in the history of the program, according to the State Lands Commission, which has jurisdiction over state waters.
LA Times
âOil companies want a clear path to compliance,â he said. âTheyâre operating in many cases at a loss, but itâs cheaper to operate at a loss than it is to face millions for decommissioning.â
Gary Brown, Orange County Coastkeeper
DOI Report on the Federal Oil and Gas Leasing Program (11/26/2021)
Posted in energy policy, Gulf of Mexico, Offshore Energy - General, Regulation, tagged BOEM, BSEE, DOI, financial assurance, leasing report, royalty on November 29, 2021| Leave a Comment »
Observations and comments on the offshore findings and recommendations in the Dept. of the Interior’s report:
- From an offshore perspective, this report is more moderate than expected. No major complaints.
- The report was issued the Friday after Thanksgiving. Was there a desire to minimize attention?
- The report does not include a recommendation on raising royalty rates. DOI will continue to study such actions (prudent decision).
- BSEE estimates current liability for “orphaned infrastructure” at only $65 million. They must be using a very narrow definition of orphaned infrastructure.
- “Financial assurance coverage should be strengthened.” (Few would argue with that statement.)
- “BSEE and BOEM will carefully consider comments on the 2020 proposed financial assurance rule.” (Deja vu? Expect a long, slow process.)
- BOEM will establish a “fitness to operate standard.” Comments: (1) This is an old concept that has proven to be difficult to execute. Hold companies accountable, make them demonstrate financial assurance, and don’t pander to bad actors (see the case of Hogan and Houchin) (2) Why is BOEM establishing this standard and not BSEE, the safety bureau? (The division of responsibilities between BOEM and BSEE has created serious overlap, inefficiency, and confusion and needs to be addressed.)
- “BOEM should consider advancing alternatives to the practice of area-wide leasing.” Tract selection makes sense in frontier areas with little operational history. It would have been perfect for the Mid- or South Atlantic or the EGoM, all of which were cynically removed from future leasing consideration by the previous President just before the 2020 election. The Central and Western Gulf of Mexico is too mature for a return to tract selection; employing that approach after 40 years of area-wide leasing is likely to generate less revenue and production.
Sale 257 and Federal funding of carbon sequestration
Posted in CCS, energy policy, Gulf of Mexico, Offshore Energy - General, tagged BOEM, CCS, infrastructure bill, Lease Sale 257 on November 24, 2021| Leave a Comment »
The text below, excerpted from the Infrastructure Bill (signed 2 days before Sale 257), requires the Federal government to provide funding for commercial CCS projects. $2.5 billion is appropriated. Given these incentives, how does BOEM possibly issue leases for CCS purposes when there was no public notice (as required by 30 CFR § 556.308) that CCS bids would be accepted at the oil and gas lease sale?
SEC. 40305. e) Large-scale Carbon Storage Commercialization Program.-- ``(1) In general.--The Secretary shall establish a commercialization program under which the Secretary shall provide funding for the development of new or expanded commercial large-scale carbon sequestration projects and associated carbon dioxide transport infrastructure, including funding for the feasibility,site characterization, permitting, and construction stages of project development. (h) Authorization of Appropriations.--There is authorized to be appropriated to the Secretary to carry out this section $2,500,000,000 for the period of fiscal years 2022 through 2026.
DOE announces Strategic Petroleum Reserve release
Posted in energy policy, tagged DOE, SPR release on November 23, 2021| Leave a Comment »
WASHINGTON, D.C.â At the direction of President Biden, U.S. Secretary of Energy Jennifer M. Granholm authorized that 50 million barrels of crude oil from the U.S. Department of Energyâs (DOE) Strategic Petroleum Reserve (SPR) be made available.Â
DOE
Not a fan of this decision. Using the SPR in an attempt to manipulate prices discourages the investment needed to ensure ample secure oil supplies in the future.
Will OPEC respond?
âThe battle lines are being drawn,â said John Kilduff, founding partner at Again Capital LLC. âCertainly, OPEC and the Saudis can win this in that they are holding all the cards. They can keep more oil off the market than a SPR release can put on the market. If you see WTI get under $70, then I would expect a response from OPEC+.â
World Oil
Bud's Offshore Energy (BOE) 