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UK EYES NEW OIL AND GAS DRILLING, NO WORD ON FRACKING: The British government is opening the door to new North Sea oil and gas development as part of a new energy security strategy responding to the war in Ukraine’s ballooning effect on energy prices, although a decision on whether to pull back a moratorium on fracking is still outstanding.
Ministers put forward the plan yesterday to accelerate “homegrown power” in the U.K., where electricity prices averaged around a record $327 per megawatt hour during March, according to Rystad Energy. Oil and gas prices remain exceedingly high, too, like everywhere else in Europe.
The plan is heavy on carbon-free energy — it envisions up to 50 gigawatts of offshore wind by 2030 and faster permitting — and it refines the government’s long-held nuclear energy goals.
It says a new body will be set up to ensure investment in nuclear reactor projects, which would work to deliver up to eight reactors this decade.
The strategy also details plans for new licensing for oil and gas projects in the North Sea to be carried out this fall, something a number of Conservative lawmakers have pressured the government to do quickly alongside demands for a fracking boom (Ministers are thinking long and hard about the matter and earlier this week commissioned the British Geological Survey to study the safety of fracking.)
The announcement said the North Sea efforts would be accompanied by a new taskforce “providing bespoke support to new developments” and said the government acknowledges “the importance of these fuels to the transition and to our energy security, and that producing gas in the UK has a lower carbon footprint than imported from abroad.”
The timeline: Prime Minister Boris Johnson’s statement accompanying the strategy said it would secure energy and make things more affordable “in the decade ahead.”
Marshall Hall, a senior research fellow at the Oxford Institute for Energy Studies, said he sees nothing in the plan that will influence the price of oil, gas, or wholesale electricity in the next 18 months to two years.
“It’s not really an energy security strategy, because it barely mentioned the word demand at all,” he told Jeremy. “It’s more supply security.”
North Sea prospects: Hall also said interest by industry to exploit oil and gas deposits in the North Sea has diminished considerably, along with the prospects of finding substantial recoverable reserves.
The area has also been targeted heavily by environmentalists, and Shell pulled back from its involvement in development of the Cambo oilfield project in December.
A Shell spokesperson said at the time that “the economic case for investment in this project is not strong enough at this time.”
Notably, the market dynamics have changed significantly since then, and governments have shown a measure of willingness to ease up on their green energy ambitions, insofar as they entail additional restrictions on oil and gas, in the short term.
Hall said he wouldn’t be surprised if the Cambo field finally goes ahead this year.
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IN UNANIMOUS VOTE, SENATE BANS RUSSIAN ENERGY IMPORTS: Senators voted 100-0 this morning to ban all U.S. imports of Russian oil, gas, and coal — essentially codifying an executive order signed by President Joe Biden last month.
Although the bill is nearly identical to Biden’s executive order and thus will not have an immediate effect in the short-term, passage of the legislation will make it much more difficult for a future president to overturn.
“This package is about bringing every tool of economic pressure to bear on Vladimir Putin and his oligarch cronies,” Sen. Ron Wyden said in a statement. “Putin’s Russia does not deserve to be a part of the economic order that has existed since the end of World War II,” he added.
Senators also unanimously voted this morning to strip Russia of its “most favored nation” trade status, delivering a major blow to Moscow that paves the way for the U.S. to enact new and damaging tariffs on the country.
Both bills now head to the House for a vote, where they are expected to pass with overwhelming support.
MOMENTUM IS ALSO BUILDING AGAINST RUSSIA IN EUROPE… The EU is weighing a proposed ban on Russian coal that could take effect in August. That effort could be announced as early as this week, European Commission officials said, and comes as the bloc faces mounting pressure to punish Russia for its atrocities in Ukraine.
Leaders expect the coal ban will cost Russia an estimated $4 billion per year. Analysts and coal importers told the AP that Europe could feasibly replace their Russian coal supply in a few months with supplies from other countries, including the U.S.
Still, it’s the least aggressive step the EU could take in inflicting pain on Russia’s energy sector. While the bloc pays Russia roughly $20 million per day for coal, that’s just a fraction of the oil and gas money, which on average amounts to roughly $850 million a day, according to the AP.
The move represents the first shift away from Russian energy supplies: But it has been a source of deep division in the bloc, as EU nations, especially Germany and Italy, have struggled to divest themselves from Russian oil and gas.
Speaking to reporters last night, Italian Prime Minister Mario Draghi told reporters that no Russian gas embargo is currently in consideration. “And I don’t know if it ever will be on the table,” he said.
But Draghi acknowledged it could be a decision leaders are forced to make down the line, noting that “the more horrendous this war gets, the allied countries will ask, in the absence of our direct participation in the war, what else can this coalition of allies do to weaken Russia, to make it stop.”
Asked if Italy would support a proposed Russian gas embargo, Draghi said Italy would be “happy to follow it” if it would make peace in Ukraine possible. “If the price of gas can be exchanged for peace…what do we choose? Peace? Or to have the air conditioning running in the summer?”
Leaders also remain divided over a more sweeping embargo on Russian oil and gas supplies: European Commission President Ursula von der Leyen said this week that her team is working on a sanctions package targeting Russian oil, telling reporters: “We are working on additional sanctions, including on oil imports, and we are reflecting on some of the ideas presented by the member states, such as taxes or specific payment channels such as an escrow account.”
MEANWHILE, CHINA BEGINS USING THE YUAN TO PAY FOR RUSSIAN SUPPLIES: China is slated to receive the first cargoes of Russian coal and oil it paid for using the the yuan as early as this month, Bloomberg reports, citing the Chinese consultancy Fenwei Energy Information Service Co.
The shipments will be the first paid for by the Chinese yuan since Western countries moved in recent weeks to penalize Russia for the war in Ukraine, including cutting many of its major banks off from the international financial system.
The move comes as Russia also seeks to weigh new and more flexible options for buyers, including offering India the option to purchase supplies in rupee-ruble payments, according to Bloomberg. Saudi Arabia is also in talks with Beijing to price some of its crude in yuan.
HUNGARY OPEN TO RUBLE PAYMENT SCHEME: Hungary is prepared to pay for its Russian gas imports in rubles, Prime Minister Viktor Orban said yesterday, Reuters reported.
Orban is diverging from fellow EU leaders who have balked at the notion and called Putin’s demands for rubles, directed particularly at “unfriendly” nations, a breach of purchasing agreement terms.
OIL EXECUTIVES ANSWER TO GOUGING CHARGES: Energy and Commerce Democrats vented frustration at leading oil and gas industry executives yesterday for spending too much on shareholder returns and too little on new production while drivers face some of the highest gasoline prices ever.
“You have a decision with the profit. You put it into stock buybacks, that helps shareholders. You put it into dividends, it helps shareholders,” said Vermont Rep. Peter Welch. “Or you put it into production… you say, ‘You know what, maybe we’ll lighten up a little bit on the stock buybacks, maybe we’ll lighten up a little bit on the dividends, and maybe we lighten up a little bit to help folks in Vermont who are getting hammered with the price at the pump.”
Others shared their outright suspicions that companies are unethically profiting off the war in Ukraine via higher oil prices.
Maryland Rep. John Sarbanes accused executives of using “hocus pocus language” in responding to questioning. “I don’t trust you,” he said. “I don’t trust you not to take advantage of this situation.”
The witnesses, which included the heads of Shell, BP, ExxonMobil, Shell, Devon Energy, and Pioneer Natural Resources, retorted generally that their companies sell oil into a global market and don’t set its price.
Chevron Chairman and CEO Mike Wirth said he is overseeing both investment in production and prioritizing shareholders. The two are “not mutually exclusive,” he said.
Rick Muncrief, head of Devon Energy, emphasized that many of his company’s shareholders are pension funds for public employees like police officers and teachers, ostensibly to rebut notions that his company’s capital strategy is all about enriching executives or Wall Street firms.
The GOP line: Republicans inside and outside the committee pushed back against Democrats and blamed Biden’s energy policies for tying the hands of energy companies. Sen. Ted Cruz called it a “kangaroo court” hearing.
A number of oil and gas company heads have said publicly that they’re emphasizing capital discipline to avoid growing production too quickly in a way that could come back to bite them. Supply chain issues and worker shortages have also been blamed.
Production’s up: Oil production has grown in consecutive weeks, however. Output has stood around 11.6 million barrels per day for much of the year, including the week ending March 18, but it rose to 11.7 million bpd the last full week of March and to 11.8 million bpd through April 1.
GLOBAL METHANE EMISSIONS SOARED BY RECORD AMOUNT IN 2021, PER NOAA: Global methane emissions soared by roughly 17 parts per billion in 2021, according to a new NOAA report—the highest single-year jump recorded since the administration began its measurements nearly 40 years ago. The rise in 2020, which was just above 15 parts per billion, had previously been the highest recorded.
NEARLY ALL PRIVATE CAR SALES IN NORWAY ARE NOW ELECTRIC: Of all new passenger sales registered in March, 86.1% were electric, according to Norway’s Road Traffic Information Council.
Separating out corporate sales, nearly all private car sales – 96% – were of electric vehicles.
Teslas accounted for about a third of all sales, according to The Driven.
AWKWARD: ERNST CONFRONTS TVA NOMINEE OVER DISPARAGING TWEET: Tennessee Valley Authority board of directors nominee Beth Geer ran into trouble over old tweets at yesterday’s Environment and Public Works Committee confirmation hearing.
Sen. Joni Ernst confronted Geer, the chief of staff for former vice president Al Gore, over a 2015 tweet in which Geer seemingly (but watch the clip for yourself) called Ernst “hideous” — presenting a print-out of the offending tweet.
Geer said she was sorry if she offended Ernst.
Past tweets also caused trouble for another TVA nominee, Michelle Moore, who was challenged by Republicans for saying that she was “overjoyed” by the defeat of “disgusting” pipelines.
The Rundown
Washington Post Fox caught on Capitol grounds and euthanized tests positive for rabies
Euractiv Speed up green transition to break from Russian fossil fuels, say 11 EU countries
The Hill Boston to replace school buses with electric ones by 2030
Calendar
THURSDAY | APRIL 7
10:00 a.m. 366 Dirksen The Senate Energy and Natural Resources Committee will hold a hearing on the scope and scale of critical mineral demand and recycling in the U.S.
2:00 p.m. The Bipartisan Policy Center will hold a forum on the SEC’s proposed rule on climate-related risk disclosure featuring former SEC Commissioner Troy Paredes.
