Friday, May 8th, 2020
Happy Friday and welcome to Energized, your weekly look into the geopolitics, news, and happenings of energy markets.
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Now, onto this week’s issue.
Curated weekly oil and gas newsletter
Oil Prices and Markets
Light, sweet crude (dollars per barrel): $25.22
Last week: $16.94
Natural Gas (dollars per million British thermal units): $1.95
Last week: $1.746
Rig count (United States): 408
Last week: 465
+ April Market Overview – Commodity Research Group
Our friends at Commodity Research Group have put together this 15-page analysis of the following topics for the month of April:
- Market Highlights / Outlook
- Energy Products and Natural Gas
- Investment Funds vs. Oil Prices
- LME Metals
- HRC, Iron Ore and Freight
- Precious Metals
- Currencies, S&P-500, 10-Year Note
+ Fall of natural gas prices speeds energy shift in East Asia – The Wall Street Journal
A good follow up to our coverage of the Southeast Asian energy mix from last week.
“Natural gas in East Asia costs about the same as coal for the first time, a milestone that is likely to accelerate the region’s U.S.-style energy transformation.”
“Taiwan plans to generate half its power from natural gas by 2025 and reduce coal’s proportion to less than a third from nearly half in 2017.”
“In South Korea, the government last month temporarily shut down 28 of the country’s 60 coal-fired power plants.”
“And China in the next few years is set to overtake Japan as the world’s largest importer of liquefied natural gas, or LNG.”
This article provides a breakdown of the economic and environmental side of switching from coal to natural gas. On the economic side, prices are now competitive with coal, and on the environmental side, natural gas emits about half as much carbon as coal.
The article argues that the environmental argument is all the more relevant for cities across East Asia that are crowded and polluted. More so than many western cities, the environmental argument is also an argument for health and wellbeing, not just climate change.
“In 2017, South Korea’s ministry of trade said it would ban new coal plants and retire old ones. It is also converting some to LNG. The country has raised import taxes for coal by 28% while cutting them for LNG by 75%, according to the Institute for Energy Economics and Financial Analysis.”
So what are the risks? Well, they’re mainly financial.
“One risk for LNG is a sudden shift from feast to famine in a few years if investment in new LNG production dries up. That could make prices volatile.”
“Demand from developing nations such as Vietnam may also help coal producers make up for losses elsewhere.”
But still, “with the decline in LNG spot and contract prices, we expect this will help fuel Asia’s movement toward LNG and away from petroleum and coal fuels,” said Saibu spokesman Takashi Kuwahara.”
+ Permian oil fields leak enough Methane for 7 million homes – Society of Environmental Journalists
This is the original source of a story picked up by the Houston Chronicle and Bloomberg. The story is based on a new study from Harvard University and the Environmental Defense Fund that finds the methane emissions in the Permian are the largest from any oilfield ever recorded.
“The methane over the Permian Basin emitted by oil companies’ gas venting and flaring is double previous estimates, and represents a leakage rate about 60% higher than the national average from oil and gas fields, according to the research, which was published Wednesday in the journal Science Advances.”
A timely article that argues now is the perfect time to address excessive flaring in Texas which is now over 100 billion cubic feet of natural gas each year. With the rig count collapsing as global oil and gas supply is well ahead of demand, this opinion piece suggests that the best way to approach this topic is from the angle of conserving natural resources and protecting the royalties and rights of mineral owners that lose out from excess flaring.
“That’s why some stakeholders including EDF support the idea of using flaring levels as one of the metrics for allocating production under any proration plan.”
In sum, addressing flaring “could help in reducing oil supply, reducing the waste of natural gas, and demonstrating to an observing public the industry’s commitment to continued environmental stewardship.”
+ Fracking once lifted Pennsylvania. Now it could be a drag – The New York Times
“Natural-gas companies operating in the state were looking shaky before the coronavirus hit. Local economies are now at risk.”
Struggling parts of Pennsylvania were rewarded with high paying jobs in the gas business but companies were already in trouble from “self-inflicted” wounds going into the pandemic.
The article goes into Wall Street’s criticism of shale players and how the businesses have virtually no support, leading to high-interest rate debt obligations and volatile stock prices.
Stories like this one offer poignant examples of the folks that rely on the oil and gas industry for their livelihood. Whether it’s the construction of a new plant or a desperately needed pipeline to increase takeaway capacity, the economies of many places like these rural Pennsylvania communities rely on the energy industry.
Commodities and Trading
EKT Interactive’s president, Marty Stetzer, says this is the “Best article I’ve seen on negative oil prices. The article has a good history of trading instruments as well.”
Give it a read to find out why!
Health and Safety
“In just a span of 9 years 1,566 workers perished trying to extract oil in America. The same number of U.S. soldiers that died during the war in Afghanistan.”
The article lists several risks that workers in the oil and gas industry are exposed to. Health and safety organizations like the Occupational Safety and Health Administration (OSHA) try and protect workers but the article points out “three main issues constantly plaguing the OSHA and its Safety Officers.”
The three main issues are:
1. Constant exposure of workers to hazardous machinery/equipment
2. The area [oilfield] is huge and requires traveling long distances
3. Employees working long hours at a breakneck pace
For more information about health and safety in oil and gas, visit EKT’s courses.
+ Texas Railroad Commission rejects statewide oil production cuts – Houston Chronicle
As discussed in our April spotlight issue, The Texas Railroad Commission was considering implementing a production cut that would help reduce supply and hopefully raise prices to protect Texas jobs and companies.
On Tuesday, that proposal was rejected 2-1.
The sole proponent, Ryan Sitton, said “”I’m not disappointed that we didn’t proration,” Sitton said. “I’m disappointed that we didn’t do the work to really analyze how proration would have addressed waste.””
Reduced production would naturally limit the amount of flaring, or burning off of natural gas across Texas. Flaring is a major environmental and PR concern for the oil and gas industry.
The commission did scale back fees related to storage in an effort to increase storage volumes, among a few other things.
+ A small country, an oil giant, and their shared fortune – The New York Times
As covered in this newsletter, Exxon’s bold bet on Guyana has proven more complicated than ever, given the timing. This article goes into Guyana’s election, sinking oil prices, and how the livelihood of the people of Guyana and the fortunes of Exxon are closely intertwined. Some interesting points are the terms of Exxon’s project and how much of it goes to Guyana in the form of funds for the state and jobs for the people.
“A consortium led by Exxon plans to produce 750,000 barrels a day by 2025 from its Guyanese fields — an enormous addition to its current global production of four million barrels a day.”
“Exxon executives insist that their discoveries will improve life for Guyana’s 750,000 residents.”
There’s also some good commentary from Guyanese workers, political officials, medical professionals, and more on the “lucrative” and “adventurous” potential of the project but also a weariness, knowing full well how poorly big oil projects have gone in the past for many South American nations.
The article is a great read if you’re curious to see both sides of the project, what Exxon believes is fair, what the majority of the Guyanese people think is fair, and the ultimate reality that their fates are intertwined based on the success of Exxon’s projects.
+ The Virtual Offshore Technology Conference – Spears & Associates
The Offshore Technology Conference (OTC) is the largest oil and gas trade show in the world. 2019 was the 50th anniversary of the event. Traveling to Houston from all around the world are over 1,000 companies and 60,000 guests. Executives and industry experts host panels on various trends and challenges. Networking events, technical sessions, white papers, and seminars occur all 4 days of the conference.
This year, the conference will be virtual. The Spears brothers discuss:
What’s the attendance?
How are the exhibitors doing?
What are the odds for next year’s OTC?
+ Elon Musk vs. The Oil and Gas Industry – COI Tracker
A pro-oil and gas article that addresses the pleas of one of the most vocal anti-fossil fuel voices – Tesla CEO and founder, Elon Musk.
The author gives credit where credit is due, “public demand for electric vehicles has been increasing over the past ten years. In fact, the global stock of electric passenger cars passed five million in 2018. That’s a 63% increase from the previous year. By 2040, Electric Vehicles are set to represent 35% of all car sales.”
But the article also underscores the point that “fossil fuel has dominated energy production over other resources. 35% of the world’s energy was produced by oil and gas in 2018. Even the most bull-headed environmentalist cannot deny that we still need the oil and gas industry to live our day-to-day lives.”
The author concludes by saying that ” whichever perspective you support, oil and gas will continue to stay forever. Despite what Elon Musk says, renewable energy still has a long way to go.”
Have a great weekend!
EKT Interactive Managing Editor