Good morning and welcome back to Energy Source, coming to you from New York.
The Dallas Federal Reserve released its quarterly survey of oil and gas companies yesterday, highlighting increased uncertainty and frustration with Biden administration policies across the Permian Basin ahead of the November presidential election.
Nearly 30 per cent of executives said that new rules on methane fees from the US Environmental Protection Agency will have a “significantly negative” impact on their operations, and almost a quarter of executives with gas-focused groups said the White House freeze on liquefied natural gas permits had “significantly” lowered their expectations for production five years from now.
“Uncertainty of the election outcomes and related policy changes have most oil and gas operators just making minimal investments to maintain production levels,” wrote one executive. “We are once again entering an unnecessary period of uncertainty due to inept energy policies.”
On the renewables front, US Treasury secretary Janet Yellen travelled to a solar factory in Georgia yesterday where she warned China not to flood the world with cheap clean energy exports. “China’s overcapacity distorts global prices and production patterns and hurts American firms and workers,” she said. More on the “dire situation” facing US solar factories here.
Yesterday, Biden officials and Senate majority leader Chuck Schumer gathered with union members in Queens to celebrate Equinor’s first project labour agreement for its offshore wind facility Empire Wind 1. The deal comes amid a flurry of brighter news for the troubled offshore wind sector, including the federal approval of Ørsted and Eversource’s Sunrise Wind project in New York earlier this week and a new round of bids for projects in New England.
“I’m cautiously optimistic that we are at a turning point,” Molly Morris, head of Equinor Renewables, told Energy Source at the CERAWeek conference in Houston last week, but added that meeting the White House’s target of 30GW of capacity by 2030 would be “challenging”.
Today’s newsletter looks at a report from the Global Energy Monitor showing new oil and gas exploration and development are continuing despite warnings from the global energy watchdog that they’re not needed to reach net zero.
Thank you for reading,
Amanda
New oil and gasfields expected to grow fourfold despite IEA warnings
Three years after the International Energy Agency sounded the alarm that no new oil and gas projects are needed to keep global warming in check, companies are continuing to drill.
At least 20 new oil and gasfields reached final investment decisions worldwide last year, totalling 8bn barrels of oil equivalent in reserves, according to a tracker released today by the Global Energy Monitor, an environmental research group. GEM expects this figure to grow nearly fourfold by the end of the decade, with another 31bn boe across 64 new fields permitted by 2030.
The new oil and gasfields come despite warnings from the IEA that there was no room for new projects with long timelines for development in the path to net zero. The energy watchdog also expects demand for fossil fuels will peak by the end of the decade.
“There’s overwhelming scientific consensus that new oil and gasfields are incompatible with limiting warming to 1.5 degrees. But even with that, there’s still new discoveries and sanctioning taking place,” said Scott Zimmerman, the tracker’s project manager.
GEM’s findings arrive as oil and gas executives push back against forecasts of a speedy transition to renewable energy and express confidence that demand for hydrocarbons will continue to grow into at least the 2030s.
The US leads the world in approvals of new oil and gas reserves in the past two years, with ConocoPhillips’ controversial Willow project in Alaska marking the largest approved project in the country, according to GEM. The country’s leadership in new oil and gas approvals comes as President Joe Biden faces pressure from environmentalists to take a harder stance on climate while the oil and gas industry accuses the administration of overly restrictive policies.
“Oil and natural gas are projected to remain essential parts of the energy supply mix in coming decades across a broad range of transition scenarios. The Willow project provides exactly the type of environmentally and socially responsible production that is needed through the energy transition,” said a spokesperson for ConocoPhillips, adding that the project also boosted revenue for Alaska Native communities and job creation.
Outside of the US, Guyana and the United Arab Emirates lead in new project approvals. Among the largest approved projects include Abu Dhabi National Oil Company’s Hail and Ghasha gasfield and ExxonMobil’s Yellowtail offshore development in Guyana.
Liam Mallon, head of upstream at Exxon, told Energy Source the upstream business is about “constant renewal” because oil and gasfields mature and resources deplete over time. But Exxon is pursuing the “holy grail” of expanding production beyond its current levels of almost 4mn boe per day while transitioning to a lower-emissions future, he added.
“We firmly believe that we need to continue to grow our oil and gas footprint . . . we believe we can do that and significantly reduce our emissions,” said Mallon.
Companies also remain steadfast in terms of exploration. GEM tracked 50 new project discoveries between 2022-2023, totalling about 20bn boe. Four countries that make up more than a third of discoveries — Cyprus, Guyana, Namibia and Zimbabwe — have had little to no history of production until recently and represent the next frontier of the oil and gas industry.
Oil majors and state-owned companies are behind the majority of new discoveries and approvals. Among the largest projects discovered in the past couple of years are Iran’s Shahini gasfield and TotalEnergies’ Venus oilfield in Namibia.
GEM warns that because the timeline from discovery to production averages 11 years worldwide, the new discoveries won’t come online until the 2030s, when the IEA says we should be cutting production, with some fields even needing to be closed.
A report released last week by Carbon Tracker looked at the 25 largest public oil and gas companies and found that they were “way off” from the Paris climate agreement goals. A UN agency also warned that the world was “so close” to temporarily breaching the 1.5C threshold of the Paris Agreement after it affirmed that 2023 was the hottest year on record.
“The increasing extreme weather events, the sea level rise, all the expectations of what we have seen and will continue to see as temperatures go up are what’s indicative of the world to come as these warnings of no new fields are ignored,” Zimmerman said. (Amanda Chu and Jamie Smyth)
Job moves
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Vikas Anand will succeed Guy Vanderhaegen as chief executive of Origis Energy, one of the largest US renewable developers. Anand previously served as the group’s chief operating officer and chief financial officer. Vanderhaegen will become executive chairman.
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Ørsted has appointed Rasmus Errboe as deputy chief executive officer and chief commercial officer as part of the Danish renewable group’s plan to overhaul its management structure. Errboe currently serves as interim CFO.
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Mike Crawley, president and chief executive of Northland Power, will step down from his role in September after six years in charge. John Brace, chair of the power producer’s board of directors, has been appointed executive chair.
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Brent Berg, president and chief executive of Rare Element Resources, a minerals company, will join Uranium Energy Corp, a North American uranium company, as senior vice-president of US operations.
Power Points
Energy Source is written and edited by Jamie Smyth, Myles McCormick, Amanda Chu and Tom Wilson, with support from the FT’s global team of reporters. Reach us at energy.source@ft.com and follow us on X at @FTEnergy. Catch up on past editions of the newsletter here.
