Monday, July 13th, 2020
Happy Monday and welcome to Energized, your weekly look into the geopolitics, news, and happenings of energy markets.
We had some technical difficulties this past week, but not to worry. Energized will resume its weekly Friday publication starting this week.
Before diving into this week’s content, we’d like to remind you to join over 400 members in our Energized LinkedIn Group. We will be releasing frequent news and snippets of Energized newsletters through the group. We hope to see you there. Also, if you haven’t already, visit our website to gain access to our free Oil 101 introductory course, our popular series of mobile-ready videos describing “How the industry works.” Ready for more? Check out our in-depth Oil 201 course which covers exploration, drilling, production, well completions, and refining. If your company or group is interested in Oil 101, let’s talk. We license our courses for use as internal training for sales, IT, and operations teams. Think you know someone who would enjoy this newsletter? Pass it on! They can subscribe and access our Energized archives. Finally, be sure to check out the 2019 Energy Recap for a quick refresher on 2019 content.
Now, onto this week’s issue.
Curated weekly oil and gas newsletter
Oil and Gas Prices and Markets
Light, sweet crude (dollars per barrel): $40.65
Last week: $38.49
Natural Gas (dollars per million British thermal units): $1.482
Last week: $1.495
Rig count (United States): 263
Last week: 265
+ Recent advances in the Industrial Internet of Things (IIoT) in the process industry – EKT Interactive
We are excited to announce an upcoming podcast episode that will premier shortly!
In Energized #67, we’ll release this latest discussion to the EKT Interactive podcast network.
The conversation is between EKT Interactive president, Marty Stetzer, and Joe Perino of LNS Research. Joe specializes in operational excellence research in the process industries, including emerging technologies: IIoT, big data, cloud, advanced analytics, edge computing, digital twins, robotic process, automation, blockchain, and the connected worker.
Marty and Joe will discuss rapid advancements in the application of IIoT trends, technology, and opportunities for a career in the IIoT space.
+ Update on Automatic Tank Gauging for Oil Lease Tanks – Oilman Magazine
This article discusses the technological and regulatory weaknesses regarding automatic tank gauging for oil lease tanks. Although some technology exists, the improvements are hard to implement without modifying the tank. Regulations also stand in the way. “Most of the level measurement technologies (radar, guided wave radar, ultrasonic, and servo) do not offer the ability to measure the temperature of the liquid without a secondary device.”
The article also discusses the history of automatic tank gauging for oil lease tanks, existing technologies, and more.
+ Marketing during COVID-19: A guide for upstream oil & gas marketers – Reuters Events
Our good friends at Reuters Events have released a new report on marketing during the pandemic.
The full report contains:
- More than 25-pages of unique insights and historical analysis, including A FOUR STEP plan for Marketing during COVID-19
- The Upstream Oil & Gas Market & COVID-19 – by speaking to executives from across the industry you can see how they’re adapting to labor stresses, new working conditions, changes in demand, pricing wars and stress in the supply chain
- Lessons Learned: How Crises Impact Marketing Investment – a study of data, lessons learned and marketing best practices from The Great Depression to the Global Financial Crisis of 2008/9
- Lessons Learned: Marketing for the Recovery – a deep dive into the changes you can make to your marketing strategy to ride out the current crisis, and provide the foundations for future profitability and brand growth
For questions, contact Ben Moss, Senior Project Director at Reuters Events. firstname.lastname@example.org
+ Is This the End of New Pipelines – The New York Times
+ Grim Day for Pipelines Shows They’re Almost Impossible to Build – Houston Chronicle
Pipeline projects are some of the largest infrastructure projects, requiring heavy amounts of funding, planning, and regulatory approval. Now more than ever, pipeline construction is being challenged by opponents such as environmentalists or folks that don’t want a pipeline carving through their property.
This past week has seen a lot of news regarding pipelines. The Dakota Access Pipeline may shut down pending an environmental review. The Trump Administration’s proposal to allow construction of the Keystone XL pipeline was rejected by the Supreme Court. Finally, after three years of delays, Dominion Energy sold its Atlantic Coast Pipeline assets to Warren Buffett-led Berkshire Hathaway. That being said, in mid-June, the Supreme Court voted 7-2 in favor of the construction of the Atlantic Coast Pipeline 600 feet below the Appalachian Trail.
All in all, around 3,000 miles of pipe were affected this week.
These two articles showcase the recent success of environment groups to stymy the progress of pipelines. There are many headwinds now facing pipeline construction outside of prime energy states like Texas or Louisiana. Even if pipelines are eventually approved, the delays can be very costly. It puts the midstream sector in an awkward position in terms of running its existing infrastructure as well as planning for growth in the years ahead.
+ Warren Buffett’s Bet Is A Midstream Buying Signal – The Wall Street Journal
This article takes an optimistic standpoint on Buffett’s purchase of Dominion Energy’s midstream assets associated with the Atlantic Coast Pipeline.
Buffet’s investments in sagging sectors such as oil and gas and railroads are an “all-in wager on the economic future of the United States.” He has been purchasing these assets when others are selling them, which aligns with his famous maxim to “be fearful when others are greedy, and be greedy when others are fearful.”
+ Oil Bust Helps Slash Permian Gas Emissions – Houston Chronicle
Reduced drilling and well shut-ins as a result of falling energy demand are leading to lower emissions out of the Permian Basin. Permian production had been on the rise going into the pandemic, which resulted in record amounts of emissions out of the region.
Flaring is a common industry practice that consists of the burning of natural gas associated with drilling for crude. Flaring can occur when it’s uneconomical to transport associated gas out of the oilfield to customers, or when the amount of gas exceeds the infrastructure in place.
The industry argues that pipelines offer a way to utilize this excess gas so it doesn’t get flared. Environmentalists argue that if drilling and production decreased, flaring wouldn’t be as big of a problem because existing infrastructure could then support the associated gas.
The article notes that emissions could increase if oil prices rebound as the COVID-19 pandemic improves. One way to decrease flaring regardless of oil prices is a process known as carbon capture and storage (CCS). Carbon is naturally captured by crops and trees that utilize CO2 for photosynthesis, but new technology is also unlocking man-made solutions that can capture and store CO2 for use in industrial processes.
Energized #63 discussed several new European projects that are tackling CCS, including Norway’s “Northern Lights” and “The Full Scale Project”, and the Netherlands’ PORTHOS project.
The article mentions a bill that was introduced Thursday that would incentivize CCS efforts in the form of tax credits to industrial plants and factories, as well as ranchers and landowners. The tax credits could be used to invest in CCS efforts in the form of man-made solutions or simply by planting more crops and trees.
+ A New Weapon Against Climate Change May Float – The New York Times
This article discusses the offshore wind industry’s latest technological advancement, floating offshore wind platforms.
Wind energy was long confined to onshore, that is, until the 1990s when the wind industry looked towards the seas so that wind turbines could avoid encroaching on human civilization. Since then, the offshore wind industry has grown immensely as supports that extend down 200 feet to the sea bottom opened the door to offshore wind. However, if floating platforms could place wind turbines anywhere in the ocean, it would not only protect landowners from living close to turbines, it would also allow the industry to harness optimal seafaring wind patterns unlike never before.
That is the purpose of WindFloat Atlantic. José Pinheiro is the project director of WindFloat Atlantic.
“Mr. Pinheiro’s machine floats on three partly submerged columns, each about 100 feet long. Steel catwalks bridge the gaps between the giant cylinders. Sensors signal to pumps to add or remove water from the columns to keep the platform at the right level for optimal wind generation. In a gentle sea in the bay, the vessel, which weighs thousands of tons, seemed remarkably stable.”
Offshore wind energy is particularly popular in Northern Europe, but even globally, it’s grown “at nearly 30 percent per year over the last decade.” Floating wind platforms could potentially use similar technology to that of the oil and gas industry, which uses floating drilling platforms to drill down to depths up to a mile deep.
“Analysts at the International Energy Agency, a Paris-based group, estimated that if floating technology were widely adopted, the industry would have the technical potential to eventually supply the equivalent of 11 times the world’s demand for electric power.”
The beauty of offshore wind is that it could benefit almost every energy stakeholder. The oil and gas industry can better reach its emissions reduction goals by converting the technology used in deepwater projects to the offshore wind industry. Pension funds can invest in predictable cash flows commonplace in power generation while also contributing to climate change. Offshore wind farms could also avoid the potential hassle of regulatory approval onshore.
For context, a wind farm being installed off northwest Portugal consisting of three platforms that each house turbines with blades more than 260 feet long can generate enough electricity for 60,000 people.
“Stronger and more consistent wind is available further at sea. Having more spots to choose from should also provide more leeway to reduce potential conflict between fishing interests and the wind projects.”
Engineering, Procurement, and Construction
This article not only discusses the role of the EPC company as “the hands and feet of any major oil and gas new construction operation”, but also, what happens to an EPC in the middle of a pandemic?
Oil and gas firms entrust EPCs with a varying amount of specifications that must be met from a regulatory and economic standpoint. Successful EPCs are able to hit their deadlines, while also ensuring that every “i” is dotted and “t” is crossed.
The article uses Alfred Miller Contracting, based in Lake Charles, Louisiana, to illustrate the consequences of a pandemic on a small-scale EPC.
The article is well written and worth a read to understand another aspect of the global oil and gas industry, and how it’s being affected by the pandemic.
+ Oil & Gas Majors in Floating Wind: Opportunities Ahead – Reuters Events
Be sure to sign up for free for the 11th annual Offshore & Floating Wind Europe digital conference & exhibition, October 1-2 2020, hosted by Reuters Events.
For now, here are our main takeaways from the recent webinar by Reuters Events.
- Wind energy has been outpacing solar and other renewables.
- Wind has accounted for around 50% of renewable generation over the past few years.
- Wind and solar accounted for 40% of primary energy growth in 2019.
- Offshore wind is expected to be a $10 trillion industry by 2030.
- Main growth is expected in Europe, China, and the U.S.
- A recent McKinsey study notes that the jobs created for every $10 million in spending is 75 jobs for renewable technologies, 77 jobs for energy efficiency, and just 27 jobs for oil and gas and coal.
- The floating offshore wind opportunity is gaining. July 2020 figures, compared to July 2019, represent a 39% increase in the number of projects, a 23% increase in the number of units, and a 40% increase in the total capacity.
- Estimate nearly 13,000 floating turbine units by 2050.
- Shell sees hydrocarbons playing a role in many industries going forward, but they also see the importance of a revolutionized energy mix that “provides low-carbon energy to the right place at the right time.” This respect is why they are aggressively raising their carbon emission reduction goals.
- Shell’s experience in the industry, financial backing, and technological advancement, leads the company to believe that it can be a helpful asset in the development of offshore wind assets.
- Equinor wants to be a major player in offshore wind, but it also understands that it will take a lot of major players to invest properly in offshore wind.
- Aker Solutions is a developer of offshore wind and has a strong technology portfolio. It believes that the industry is ready to scale up, even though it’s taken 20 years to get everything in place. The potential is “really there” for Aker.
- Shell believes that if the industry works together, a lot can be done. Competition can be good. A compelling future is in store with the right amount of imagination.
- Shell highlights that the progression of offshore wind doesn’t have to be a divide between fixed and floating, it can use the right combination for the right application.
- Shell also stressed the advantages of the sheer sophistication of an already established supply chain, slew of assets, and more. The offshore experience of Shell and other companies like it can have an impact on offshore wind.
- Commercial can be small projects. The success of many projects doesn’t have to be massive installations. 5, 10, or 15 installations in an area can be cost-effective. It also saves some hassle with permitting and consenting. In many ways, a focus on the system’s efficiency can lead to small-scale project efficiency.
- At the same time, if you want to build electricity at scale, you need to build the project at scale. In a lot of situations, you aren’t aiming for offshore wind to dominate electricity generation in a region, so scaling up is doable.
- Many of the reductions to bottom-fixed technology would not have been possible without government funding and support.
- Jobs are being created and costs are coming down.
- Each company goes into the importance of the supply chain, specifically, how it already plays a key role in the success of projects.
- Shell outlines the importance of leveraging familiar skills and industries in a region, whether that be fabrication skills that can translate to offshore wind, procurement, etc.
- Although there isn’t an established supply chain for offshore wind, there is a network of processes that exist in many mature economies that can be used and translated to offshore wind.
- According to Shell, the trick isn’t necessarily to construct a new supply chain model, but rather, work within the confines of the established model to leverage as much value as possible.
- Aker Solutions believes that most of the steel fabrication occurs in Asia, but a lot of the main manufacturing is in Europe. As a result, you can play to the strengths of each country. Therefore, you can’t localize everything. In general, there’s a CAPEX premium you pay when you localize things.
- However, according to Shell, there’s a long-term benefit of using local in the right areas. For example, it would decrease the risk of the project and increase the chances of it actually being completed, at the expense of increasing deterministic CAPEX. This price, in some instances, is a reasonable price to pay.
- Equinor believes that offshore wind has the greatest potential for job creation out of any renewable segment.
- There are skills that translate from oil and gas that can be used in offshore wind, and ways to translate other applicable skills.
Have a great rest of your week!
EKT Interactive Managing Editor