General
News
U.S. Natgas
Output, Demand To Fall In 2020, 2021 Due To Coronavirus. According
to Reuters, “U.S. natural gas production and demand will drop in 2020 and 2021 from record highs last year as government steps to slow the spread of coronavirus cut economic activity and energy prices, the U.S. Energy Information Administration (EIA) said
in its Short Term Energy Outlook (STEO) on Tuesday. The statistical arm of the U.S. Department of Energy projected dry gas production will drop to 89.84 billion cubic feet per day (bcfd) in 2020 and 84.89 bcfd in 2021 from the all-time high of 92.21 bcfd in
2019. That would be the first annual decline in production since 2016 and the first time output falls for two years in a row since 2005. The EIA also projected gas consumption would fall to 81.69 bcfd in 2020 and 79.17 bcfd in 2021 from a record 84.97 bcfd
in 2019. That would be the first annual decline in consumption since 2017 and the first time demand falls for two consecutive years since 2006. The EIA’s gas supply and demand projections for 2020 in May were lower than its April forecasts of 91.70 bcfd for
output and 83.79 bcfd for consumption. In May, the agency forecast U.S. liquefied natural gas exports would reach 6.04 bcfd in 2020 and 7.31 bcfd in 2021, up from a record 4.98 bcfd in 2019. That is lower than EIA’s April forecasts of 6.96 bcfd in 2020 and
7.72 bcfd in 2021. EIA said gas’ share of power generation will rise from 37% in 2019 to 39% in 2020 before easing to 36% in 2021 as gas prices increase, while coal’s share will slide from 24% in 2019 to 19% in 2020 before rising to 21% in 2021. Nuclear’s
share of generation will rise from 20% in 2019 to 21% in 2020 and 2021, while renewables will rise from 17% in 2019 to 20% in 2020 and 22% in 2021.” [Reuters,
5/12/20
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U.S. Shale
Faces A Grim Earnings Season. According
to Forbes, “The ongoing fallout from the COVID-19 pandemic continues to wreak havoc with the U.S. oil and gas industry. In a new analysis distributed on Monday, RS Energy Group (now a part of Enverus) finds that overall CAPEX reductions announced by U.S. companies
is roughly 43% year over year, with onshore producers showing an even-deeper 50% reduction. RSEG cites Occidental Petroleum with the biggest single year over year capital budget decline: Oxy’s new $2 billion budget represents a 77% drop from a year ago, with
Cimarex and Parsley Energy coming in with reductions of about 70%. Meanwhile, Continental Resources, a big producer in both Oklahoma and the Bakken Shale in North Dakota, told investors on Monday that it would cut its production by as much as 70% during May,
an astonishing reduction that no other producer has come close to matching in investor presentations thus far. By comparison, in its investor call last week, Permian Basin and Eagle Ford Shale producer EOG Resources said it would scale back its oil production
by about 25%. Continental also said it plans to scale back its own drilling program for the remainder of 2020 during an investor call in which the company reported a loss of $186 million for Q1 2020. On its own earnings call on Monday, management for Chesapeake
Energy advised that it no longer has access to capital markets and stated that its ability to continue operating as a going concern is in question due to the ongoing COVID-19 fallout. The company currently expects its 2020 CAPEX to be 50% of its 2019 spend.
In more positive earnings news, Pioneer Natural Resources announced last week that it had managed to turn a profit of $289 million during the first quarter.” [Forbes,
5/12/20
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New Data
Reveals Extreme Emissions And Need For Action In Nation’s Largest Oilfield.
According
to GreenBiz, “In late April, a study drawing on nearly a year’s worth of satellite data revealed that Permian methane emissions are the highest measured from a U.S. oil and gas basin. As the federal government continues its rollback of methane safeguards,
public attention is trained on policymakers and companies in Texas and New Mexico — two leading oil producing states that straddle the Permian Basin. While New Mexico Gov. Michelle Lujan Grisham forges ahead on nation-leading rules to curb oil and gas methane
waste and pollution, state leaders in Texas have yet to get serious about a problem that could undermine the industry’s viability in an economy that increasingly prioritizes cleaner sources of energy. The findings published last month are based on over 200,000
individual readings from the European Space Agency’s TROPOMI satellite instrument, and show Permian oil and gas operators are leaking 3.7 percent of the gas they produce. These measurements validate data published earlier this month by EDF’s PermianMAP initiative,
an ongoing effort to quantify and track emissions in the Permian via aircraft, vehicle surveys and fixed monitoring towers. At a 3.7 percent leak rate, the climate impact of natural gas produced in the Permian is nearly tripled over a 20-year timeframe as
operators waste enough gas to meet the annual needs of 2 million U.S. households. These figures sharply undermine the value proposition of companies billing natural gas as a ‘clean’ fuel in response to growing concern from both investors and consumers who
increasingly prioritize low-carbon alternatives.” [GreenBiz, 5/13/20
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FERC Picks First-Ever Chief Of LNG Division.
According to E&E News, “The Federal Energy Regulatory Commission has tapped a longtime employee and fire safety specialist to lead its new liquefied natural gas division. Andrew Kohout
has been appointed the first director of the Division of LNG Facility Review & Inspection (DLNG). ‘It has been a pleasure seeing the dramatic change & growth in #LNG @ the BEST place to work #FERC,’ Kohout wrote on Twitter. ‘Looking forward to continuously
improving the program.’ Last summer, FERC announced a partial reorganization of its Office of Energy Projects, including the opening of a Houston regional office to help address an increasing workload related to LNG exports (Energywire, July 23, 2019). ‘The
creation of DLNG and expansion in Houston will help prepare FERC for the additional work necessary once LNG project applicants make final investment decisions and move toward construction,’ FERC said in a news release at the time. Prior to his appointment,
Kohout served as the chief of FERC’s LNG Branch 1, where he led a team of engineers through safety, reliability and engineering reviews and inspections of various LNG facilities in the U.S., according to his LinkedIn profile. Kohout has also worked as a FERC
modeling specialist and safety and reliability engineer, and he holds a master’s degree in fire protection engineering from the University of Maryland, College Park. Expanding the agency’s workforce to meet a growing LNG permit application backlog has been
a priority for Republican FERC Chairman Neil Chatterjee for much of his tenure.” [E&E News,
5/13/20 (=)]
Alberta Strengthens Methane Gas Regulations, Clearing Way For Deal With Ottawa.
According to The Globe and Mail, “Alberta is tightening its methane regulations, bringing it closer to controlling emissions from the greenhouse gas, contingent on a review from Ottawa
to ensure they meet federally mandated targets. The province released updated regulations on Tuesday that Alberta expects will bring it into line with Ottawa’s minimum standards to grant a province oversight of the emissions from its oil and gas sector. Methane
is a potent greenhouse gas, making it a key part of Ottawa’s climate change plans. The changes appear to end a years-long tussle over the regulations. Alberta has said a misunderstanding of its modelling was to blame for Ottawa believing the regulations fell
short, while the federal government said substantive changes were needed to bring the regulations up to standard. Ottawa’s goal is to cut methane emissions from the oil and gas sector by 40 to 45 per cent from 2012 levels by 2025. Following ‘aggressive negotiations,’
provincial Environment Minister Jason Nixon said the two governments reached a preliminary equivalency agreement. A federal government source said Ottawa has pre-vetted the changes to the regulations but it will still need to review them before striking a
deal. Once confirmed, the equivalency agreement will be subject to a 60-day consultation period. The regulations will meet Ottawa’s 2025 target and cost industry less, Mr. Nixon said, as he played down the changes released Tuesday, saying there was ‘nothing
of significance’ but rather ‘minor changes.’” [The Globe and Mail,
5/12/20 (=)]
Chad Ellwood
Senior Research Associate
Climate Action Campaign
202.448.2877 ext. 119