The Hidden Cost of a Subsidized Energy Transition
Delve into the hidden economic challenges of the subsidized energy transition, dissecting its impact on offshore wind viability, fossil fuel strategies, and the global energy market dynamics.
On Today’s Energy Shots:
Weekly Energy Industry News Recap
The Hidden Cost of a Subsidized Energy Transition
Weekly Energy News Recap:
US Rig Count
US oil and gas rigs fell for the third week in a row, according to Baker Hughes Co.
In the week ending October 6th, US oil rigs fell by five to 497.
US gas rigs increased by two to 118.
Exxon Explores Pioneer Acquisition
Exxon Mobil is exploring a $60 billion deal to acquire Pioneer Natural Resources.
Pioneer is the third-largest oil producer in the Permian Basin behind Chevron and ConocoPhillips.
In 2Q23, Exxon’s Permian operations produced roughly 620,000 barrels of oil equivalent per day (boe/d) compared to Pioneer’s 711,000.
Trans Mountain to Start Line Fill 1Q24
Canada’s Trans Mountain Corp announced plans to begin filling lines for the Trans Mountain oil pipeline expansion project in the first quarter of 2024.
Line fill will require approximately 4.5 million barrels over six-to-seven weeks. Trans Mountain expects to begin commercial operations at the end of 1Q24.
The pipeline’s expansion from Alberta to Canada’s Pacific Coast will roughly triple capacity to 890,000 bpd.
Chevron’s Aussie LNG Talks Take a Turn
September’s tentative deal between Chevron and Australia’s Offshore Alliance union hit a barrier this week.
According to union representatives, Chevron failed to finalize last month’s agreed-upon terms.
The union coalition plans to file a strike notice on Monday, after which Chevron will have seven days to take action before strikes begin for a second time.
The deal risks destabilizing production at two Australian facilities responsible for ~7% of global LNG supplies.
Germany plans to extend energy price caps through 1Q24
According to a Reuters report this week, Germany plans to extend last year’s price caps on electricity and gas through March 2024.
Last year’s energy crisis exposed Germany’s fragile reliance on Russian energy imports, culminating in Berlin’s $211 billion relief package to subsidize electricity and gas bills.
Federal data showed households are still feeling the pain.
In the first half of 2023, households paid 52% more YOY for natural gas and 26.2% more YOY for electricity.
Crude’s Weekly Scorecard
Friday:
Brent futures rose 51 cents to $84.58/barrel
WTI futures rose 48 cents to $82.79
Weekly:
Brent fell 11% on the week
WTI fell 8% on the week
Notable updates:
China’s National Day travel rose 71.3% YOY and 4.1% vs 2019
US nonfarm payrolls increased by 336,000 in September
The Hidden Cost of a Subsidized Energy Transition
Last Friday, the Biden administration released its auction schedule for offshore oil and gas leases through 2029.
The three total sales set a new record low since the government began publishing auction plans.
The Department of the Interior (DOI) attached the following statement to the offering:
“These three proposed lease sales are the minimum number that will enable the Interior Department to continue to expand its offshore wind leasing program through 2030.”
The DOI’s mandated minimum stems from provisions in 2022’s Inflation Reduction Act (IRA).
Under the IRA’s requirements, offshore oil and gas leases are tied to offshore wind sales.
In other words, no oil and gas, no wind.
The DOI’s paltry attempt to support US oil and gas production largely stems from President Biden’s offshore wind target of 30 gigawatts (GW) by 2030 from a mere 41 megawatts (MW) now.
But the administration’s push for a renewable energy transition at the expense of oil and gas welcomes two long-term consequences:
Fragile subsidized energy infrastructure
Exposure to supply-side risk via The Hierarchy of Energy Needs
Keep reading with a 7-day free trial
Subscribe to Mobius Risk Group to keep reading this post and get 7 days of free access to the full post archives.