TITLE: US oil and gas output set for another record year as climate concerns grow
https://www.thenationalnews.com/business/energy/2024/04/02/us-oil-and-gas-output-set-for-another-record-year-as-climate-concerns-grow/
EXCERPT: The US oil sector witnessed significant mergers and acquisitions last year as energy majors sought to enhance their presence in key domestic shale oilfields.
Exxon Mobil announced the acquisition of Pioneer Natural Resources in a deal valued at $59.5 billion. Meanwhile, Chevron agreed to acquire its smaller rival Hess in a $53 billion deal.
The main driver of the current surge in production is a delayed response to the Russian invasion of Ukraine in February 2022, which led to oil prices soaring to levels exceeding $100 per barrel for the first time in nearly a decade.
Roughly three quarters of American crude supply comes from its shale plays.
A shale resurgence, centred around the Permian Basin of Texas and New Mexico, turned the country into the world’s largest crude producer in 2018.
"We think US tight oil M&A consolidation will continue. Scale remains key in valuation multiples, and we expect companies to get larger," said Nathan Nemeth, principal research analyst, lower 48 upstream at Wood Mackenzie.
Oil production in the US Lower 48 states, which excludes Alaska and Hawaii, will continue to increase gradually until the mid-2030s, but the rate of growth will be more subdued compared to previous years due to a combination of factors such as capital discipline, industry consolidation, and offsetting production declines, Mr Nemeth told The National.
While the increase in US production over the last two decades has helped address domestic fuel price volatility, it has also sparked concerns regarding greenhouse gas emissions, challenging America’s credibility on climate issues.
“Short-term guidance provided by some of the largest US onshore oil and gas companies shows significant production increases for 2024 compared to 2022,” Guy Prince, senior analyst at Carbon Tracker, told The National.
“Unless they switch from a production growth strategy, it’s hard to see how their overall production rates will come down within the next few years, despite the shorter duration of unconventional projects,” he said.
The US sanctioned the exploration of the highest volume of oil and gas reserves in 2022 and 2023, followed by Guyana and the UAE, according to a report from the Global Energy Monitor.
The country was also the largest emitter of methane from oil and gas operations last year, closely followed by Russia, according to the International Energy Agency.
This was despite actions taken by President Joe Biden’s administration to rein in fossil fuel-related emissions.
TITLE: How federal tax dollars meant to fight climate change could end up boosting Louisiana's fossil fuel production
https://theconversation.com/how-federal-tax-dollars-meant-to-fight-climate-change-could-end-up-boosting-louisianas-fossil-fuel-production-225885
EXCERPT: Louisiana has been wrestling with environmental issues and coastal erosion since the early part of the 20th century, sped by a confluence of federal flood control levees on the Lower Mississippi River and oil and gas drilling.
Over the years, the fossil fuel industry drilled thousands of leaky wells and dug over 10,000 miles of pipeline and navigation canals. Coastal erosion accelerated, which also left oil and gas infrastructure exposed.
In the late 1990s, state leaders joined with the oil and gas industry on a public relations campaign to convince Congress to help fund a $14 billion coastal restoration plan. The effort stalled after Congress declined to approve the spending.
Then hurricanes Katrina and Rita hit the state in 2005. Oil and gas production in the region went offline, and U.S. energy prices surged.
Within days of Hurricane Katrina, Republicans in Congress were calling for lifting a 25-year drilling moratorium on the Gulf of Mexico’s Outer Continental Shelf.
Within the year, Congress had voted to lift the moratorium and to share 37.5% of the federal royalties from the wells with Louisiana and the other Gulf states. The money would help fund the state’s coastal restoration plans, which were later bolstered by the huge disaster settlement from BP’s Deepwater Horizon oil spill.
The arrangement made coastal restoration dependent on future revenue from an industry that continues to damage the coast.
Carbon capture has similarly turned the oil and gas industry into a critical component of mitigating climate change while the industry continues producing products that are heating the planet.
Congress first created a tax credit for carbon sequestration in 2008, but the 2022 Inflation Reduction Act opened the flood gates. It boosted the federal tax credit to $85 per ton of carbon dioxide captured and stored from industrial facilities and $180 per ton for carbon captured from the air and stored. Companies that reuse carbon dioxide for industrial products or enhanced oil recovery will receive $60 per ton.
The tax credits by some estimates could cost the federal treasury well over $100 billion, depending on the program’s popularity, according to the nonpartisan Congressional Budget Office.
At least 24 carbon capture applications are now pending in Louisiana. Many more are in preliminary stages, according to a Louisiana Department of Natural Resources spokesman.
Environmental advocacy groups say the program is riddled with problems, including lacking third-party verification that the carbon is being stored as claimed. An earlier federal investigation by the U.S. Treasury found that 90% of the $1 billion in tax credits awarded to companies for carbon storage between 2010 and 2019 was incorrectly documented.
Globally, there are only about 40 commercial carbon capture, use and storage facilities in operation. They capture 45 million metric tons of carbon annually – just over 1% of global emissions. The vast majority of this captured carbon is used to increase oil production from old wells.
Carbon capture technology is now being used as a rationale to maintain oil and gas production.
Gregory Upton, executive director of the Louisiana State University Center for Energy Studies, testified on Capitol Hill in September 2023 that the Biden administration’s plan to limit new offshore leases would jeopardize Louisiana’s carbon capture projects. “In my opinion, policies aimed at reducing fossil fuel supply in the U.S. put this decarbonization strategy at risk,” he said.
Indeed, many planned carbon capture projects are tied to natural gas.
For example, a $4.5 billion “blue hydrogen” plant proposed by the Pennsylvania-based company Air Products uses natural gas to produce hydrogen, which also generates carbon dioxide emissions. The company has proposed burying 5 million metric tons of carbon dioxide per year below Lake Maurepas, and presumably would garner $510 million in tax credits over 12 years.
Critics argue that using carbon capture as a transition technology will divert billions of dollars in federal resources away from more proven renewable energy development and require building thousands of miles of specialized pipelines.
Capturing and storing emissions also requires energy. Adding carbon capture to a power plant, for example, requires one-sixth to one-third more power production, according to a Congressional Budget Office report. The tax credit rules also don’t account for the emissions released to produce the natural gas or transport and store the carbon dioxide.
When Louisiana petitioned the Environmental Protection Agency for regulatory primacy over these projects, the agency received 45,000 public comments. Residents raised fears that projects would contaminate underground aquifers or that stored carbon dioxide could escape through the state’s thousands of old oil wells.
The company Air Products triggered a public outcry when it began seismic testing with dynamite below Lake Maurepas, which had enjoyed no-dredging, no-drilling protection for decades.
Supporters of the industry, meanwhile, suggested to a state carbon capture task force that resisting even a single project would send a message that Louisiana is not open for business.
But, as I see it, the message seems quite the opposite. With a windfall of federal funding, Louisiana has put out the welcome mat.
TITLE: Pennsylvania's many orphaned wells just might yield a pot of gold
https://www.post-gazette.com/business/powersource/2024/04/01/pennsylvania-orphan-wells-oil-and-gas/stories/202403170069
EXCERPT: Earlier this month, more than 100 scientists, regulators and well operators gathered in a Cranberry ballroom for a dense two-day conference on what to do about orphaned and abandoned wells. Zefiro [Methane] (a Vancouver, Canada-based outfit that boasts a leadership team of former carbon market traders at J.P. Morgan) had a booth at the event and Luke Plants was among the speakers.
One common theme was how to prioritize which of the many such wells in Pennsylvania should be plugged first, now that an unprecedented amount of federal funding is being doled out at unprecedented speed to plug them.
The Infrastructure Investment and Jobs Act of 2022 allocated $4.7 billion for well plugging. Pennsylvania believes that it will see $400 million of that, and Gov. Josh Shapiro recently traveled to Butler County to mark the plugging of the 200th orphaned well with these federal funds.
Many people in the room at the conference had been waiting for years to have a problem like that and the excitement was palpable. Scientists and entrepreneurs pitched solutions like pumping bacteria into wells that would feed on methane and excrete limestone — essentially plugging the well — or using a drone-mounted magnet to identify hidden wells and, even, hidden leaks.
When it came time for the carbon credits panel — the last session of the conference — Dan Arthur, a former environmental regulator who now works as a consultant to the oil and gas industry, asked the audience to have an open mind.
Whatever you think of them, he said, “without carbon credits...these wells aren’t going to get plugged.”
The $4.7 billion from the federal government would make a dent, but only a dent in the problem. For the rest, it might be up to former hedge fund managers to apply their financial wizardry to the emerging carbon market.
Exhibit A: Sam Arnold, who got interested in carbon trading while serving out his 18-month-long non-compete period after leaving a hedge fund where he was head portfolio manager of oil and gas investment.
Mr. Arnold co-founded CarbonPath, a registry for credits generated by plugging orphaned wells and low-producing wells still in operation. His Houston-based company walks a project through design and verification and, when it’s done, it issues carbon credits as digital tokens.
ZeroSix, another blockchain-based carbon credit issuer, deals exclusively with low-producing, or marginal wells.
The company found plugging such wells is one of the easiest ways to verify that carbon emissions will be avoided as a result and to demonstrate a core tenet behind carbon credits called additionality. It means that emission abatements wouldn’t have happened if not for the carbon credit mechanism.
In Pennsylvania, if a well still has oil or gas coming out of it, it does not have to be plugged. So getting the operator of that well to agree to shut things down early — forgoing the fuel that would have eked out in the future and plugging the well before it might become abandoned and even orphaned — is a huge deal, said Ondrej Sestak, ZeroSix’s head of engineering.
The same metrics that the oil and gas industry uses to estimate and publicly report how much fuel is in the ground — known as proved reserves — serve as the basis for ZeroSix’s calculation of the emissions that will be avoided by keeping them there.
“They had been down there for millions of years. And unless we mess with it, they're going to remain down there for millions more years,” Mr. Sestak said. “So you really couldn't ask for much more permanent solution to this.”
ZeroSix hasn’t publicly launched its platform yet. Mr. Sestak said it’s waiting to complete an unassailable pilot project before it does.
Last year was a hard one for carbon credits. The number of new credits fell again after decreasing in 2022. Prices fell too, as some companies held off on purchasing new credits and the quality of others was in dispute.
Panelists at the American Association of Petroleum Geologists conference on orphaned wells in February said they faced pushback from potential credit buyers who didn’t want to support projects in this industry.
“There's a million reasons to say no to a lot of projects but I would say the biggest one is just people don't want to have anything to do with the oil and gas industry,” Mr. Arnold said.
An analysis of the past few years of voluntary carbon market data from KPMG showed that it’s actually fossil fuel companies that buy the largest share of voluntary carbon credits. Shell is at the top, the data shows.
“So, we've been trying to target buyers who are actually in the oil and gas communities themselves,” said Melanie Martin, operations manager at a Houston-based carbon registry, BCarbon, which specializes in nature-based solutions. “So far, haven't had any luck with that.”
Plugging wells has not been a profitable industry and there’s been little in the way of technological innovation over the years to make work easier or more efficient.
“Every time I talk to a government agency, they’ll say, ‘Well, why doesn’t Halliburton do this?’” Steve Plants said. “Because Halliburton can make a lot more money doing other stuff.”
Some plugging rigs are as old as the wells they’re working on — many were converted from drilling rigs decades ago. Specialty tools are sometimes rented from suppliers who, as Mr. Plants put it, have a different sense of urgency than he does.
And the only way to learn how to do it right is to put your hands on the rig and feel it, said Dennis Mong, a veteran rig operator with Plants & Goodwin.
“You can't teach somebody how to run [this],” he said. “They got to grab a hold of it. They got to do it.”
The world of blockchain and fungible tokens for orphaned well plugging cannot be more different from the work on the ground. Yet companies like Zefiro see the voluntary carbon markets as playing a significant role in taking care of an old problem, by making it profitable.
Their calculation is this: The number of companies that have pledged to go net zero — to decrease and offset their carbon footprint entirely — is growing. Their deadlines for doing so are approaching. Leaking wells are waiting.