WAIT,WHAT?

Foran’s ambitious net zero plans for McIlvenna Bay attract investors

Kelsey Rolfe | September 28, 2022

The camp at Foran Mining’s McIlvenna Bay polymetallic project in Saskatchewan.

 Foran Mining

Vancouver-based Foran Mining’s (TSXV: FOM) executive chairman and CEO Dan Myerson doesn’t want to build just one mine. He has designs on creating Canada’s next copper mining camp in the Prairies.


Foran has had a busy year as it advances the McIlvenna Bay copper-zinc-gold project in Saskatchewan, which it says will be the world’s first zero-carbon operation. It released a positive feasibility study for the project in February that outlined a long-life underground mine producing 38.8 million lb. copper, 63.6 million lb. zinc, 20,000 oz. of gold and 486,000 oz. of silver annually for its first 15 years. It received its permits for an advanced exploration decline to do bulk sampling for metallurgical testing, which Myerson told The Northern Miner has so far confirmed the company’s assumed mineralogy and metallurgy for the project.

In July, the company inked a deal with Sandvik to supply it with an electric battery underground vehicle fleet. A month later it announced an investment from a major Canadian pension fund.

The camp at Foran Mining’s McIlvenna Bay polymetallic project in Saskatchewan. 

Credit: Foran Mining

It has also put out a flurry of positive drill results over the course of the year. In June the company reported a near-mine discovery at its Tesla zone, where it encountered 200 metres of continuous massive and disseminated sulphides with 12.4 metres at 1.8% copper equivalent, including 1.2 metres at 8.3% copper equivalent and 5.4 metres at 3.3% copper equivalent among its initial assay results. Also in June, it reported positive assay results from its Bigstone and Marconi sites, including an intercept of 21 metres at 3.6 % copper.

Myerson said the company has chosen to be aggressive with continued exploration to build its long-term project pipeline. “We’re trying to create the next copper mining camp in Canada. So to do that you have to start exploration now, and we’ve ramped that up,” he said.


KEEP READING AT NORTHERN MINER

Researchers push for using metals to treat infections

Staff Writer | September 28, 2022 

A Petri dish with red agar on which grows a fungal strand in the shape of the element symbol for platinum (Pt). (Image courtesy of the Community for Open Antimicrobial Drug Discovery).

Researchers at the University of Bern, the University of Queensland and other institutions demonstrated that 21 highly-active metal compounds containing cobalt, nickel, rhodium, palladium, silver, europium, iridium, platinum, molybdenum and gold can be used to treat fungal infections.


In a paper published in the journal JACS Au, the scientists explain that, globally, more than 1 billion people contract a fungal infection and that although they are harmless to most, over 1.5 million patients die each year as a result of such infections.

According to the group led by Angelo Frei, despite more and more fungal strains becoming resistant to one or more of the available drugs, the development of new drugs has come to a virtual standstill in recent years. This lack of interest is what inspired him and his colleagues to look into using metals to breathe new life into the search for treatments.

“The opinion that metals are fundamentally harmful to us is widespread. However, this is only partially true. The decisive factor is which metal is used and in which form,” Frei said in a media statement. “Many of the metal compounds [tested] demonstrated a good activity against all fungal strains and were up to 30,000 times more active against fungi than against human cells.”

The researcher said that out of the 21 compounds, the 11 most active ones were tested in a model organism, the larvae of the wax moth. Only one of the metal compounds showed signs of toxicity, while the others were well tolerated by the larvae. In a subsequent step, some metal compounds were tested in an infection model, and one compound effectively reduced the fungal infection in larvae.

“Our hope is that our work will improve the reputation of metals in medical applications and motivate other research groups to further explore this large but relatively unexplored field,” Frei said.

“If we exploit the full potential of the periodic table, we may be able to prevent a future where we don’t have any effective antibiotics and active agents to prevent and treat fungal infections.”

CAPITALI$T REACTION

There's an ESG backlash inside the executive ranks at top corporations

Eric Rosenbaum - CNBC

IN THIS ARTICLE

ESG Rising fast
Top corporations have embraced ESG publicly as core to their shareholder and stakeholder policies, but behind the scenes, executives exhibit less support for the rising influence of the investing philosophy.

Only 25% of CFOs surveyed by CNBC say they support the Securities and Exchange Commission's climate disclosure proposal.

Meanwhile, CFOs are more likely than not to say they support the moves by Texas and Florida to ban pension funds from investing based on ESG factors.



In public, U.S. corporations say the right things about environment, social and governance factors as part of their mindset. But how do executives really feel about the push to make ESG a core component of management philosophy?

Inside the C-suite, there is concern about the value of ESG metrics, while there is also support for recent political pushback against ESG by Republican leaders at the state level including Florida Governor Ron DeSantis and Texas Governor Greg Abbott.

That's according to results from a new CNBC survey of chief financial officers at top companies in the U.S. which shows executive frustration with both regulators and asset managers when it comes to current ESG momentum.

CFOs are always worried about over-regulation. In the quarterly survey, over-regulation is often cited by CFOs among prominent external risk factors, including the new latest results. The most direct way in which ESG regulation is set to affect companies is through Securities and Exchange Commission rulemaking, including the climate disclosure proposal currently moving closer to implementation. Only 25% of CFOs surveyed by CNBC support the SEC's climate disclosure proposal, according to the survey. More than half (55%) of CFOs are opposed to the SEC climate rule, and 35% say they "strongly oppose" it.

The CNBC CFO Council Survey was conducted from Sept. 12-Sept. 27 with responses from 21 CFOs. The council includes CFOs from many Fortune 500 companies (44%), and half of those are Fortune 100 companies.

In recent conversations with CFOs on the council, there is evidence of a split between technology firms that see opportunity to help firms across sectors of the economy with the data requirements of ESG disclosures, and a broader set of CFOs struggling to understand how the costs their companies will incur in making new disclosures will generate a return on investment — and how the disclosures will both be used by investors in stock selection and generate value for investors.
Proving climate materiality

A critical issue for CFOs with the new SEC climate disclosure is the lack of a clear correlation between the climate data and financial statements. The closest reporting analog CFOs have to this new approach is non-GAAP metrics that within industries have become accepted in the dialogue between Wall Street and management (if not always by the SEC). But non-GAAP metrics within an industry are different from a blanket assertion across industries like greenhouse gas emissions.

"Proponents are saying we need to do something here because there are costs that are coming to companies in the economy if we don't understand carbon transition better. Then the next question is 'how do we understand it better?' … The SEC is speculating that general GHG disclosure will facilitate that understanding. Requiring information with the expectation or hope that it will be meaningful to investors is an uncommon approach to disclosure mandates," said Jay Clayton, former SEC chairman and a senior policy advisor at Sullivan & Cromwell.

The first task for CFOs on climate disclosure, Clayton says, is to be candid with investors and stakeholders about this disconnect. "Don't be aspirational. Don't say it is more than it is, or less than it is. … Here are the numbers and we're trying to figure out how to use them," he said.

For some within the investment community, it's already too late for companies to argue over the materiality of climate disclosure or broader value of ESG. Eileen Murray, former co-CEO of Bridgewater Associates, the world's largest hedge fund, and who now serves on the boards at Guardian Life, Broadridge Financial Solutions and HSBC, says cost should not be viewed as an impediment.

"If a company has to do disclosures, and it has some executives who are 'not into ESG,' it should be thinking about the cost of not becoming more concerned and focused on it as a company," Murray said.

Her experience leading an investment management firm during a regulatory battle over credit exposure disclosures leads her to be skeptical of the view that the new disclosure is too costly or complex. "I could tell you years ago, 'Here is my credit exposure today,' and if I didn't have the policies and procedures and people to manage it as well, if not better than my competition over time, I would be in a bad place. And I'm saying the same thing about ESG," Murray said. 

To critics like Clayton, the issue is that the disclosure may not be the most useful data to provide to investors on climate risk. Property and casualty companies are an example he cites where direct greenhouse gas emissions are less relevant to climate risk disclosure than, for example, a company analysis of global greenhouse gas emissions, as well as temperature and sea level rise, in the decades ahead.

"They will have to do the work and produce the numbers. … But there is a better place to have a dialogue," Clayton said. "'Here is how we model sea level rise and what it means for our book.' That's much more relevant," he said.

For many companies that will have to comply with the new disclosure requirements, he says it may be better for their investors and stakeholders if they go further and outline the most relevant climate factors for their business — which may not be their own emissions.

ESG investing and politics

ESG investors are feeling the heat. Impactive Capital co-founder and managing partner Lauren Taylor Wolfe said at Wednesday's CNBC's Delivering Alpha conference that it all comes back to financial performance. "We believe that ESG without returns is simply not sustainable," she said. "We are exclusively focused on risk-adjusted returns," she added.

"We are not blanket defenders of ESG," said Martin Whittaker, founding CEO of ESG research nonprofit Just Capital, which releases an influential ranking of top companies on ESG annually. And he said the view being expressed by CFOs is probably replicated across many companies. "It's that ESG ratings drive companies crazy. ... They're not transparent, they are total black boxes," Whittaker said.

ESG rating firms have recently been called to Capitol Hill to explain their methodologies.

"We don't know who is using them, and there are no standard metrics and no validation of the underlying data, so the ESG community itself has created a lot of its own problems," Whittaker said. "But I do think investors, including pension funds and asset managers, who see the risks and opportunities, and investment relevance through an ESG lens ... that's real, that needs to be properly analyzed."

Just Capital is watching what's happening and being in support of the world of capital and business "as a force for good" requires more and better data being brought into the market. "We are here to try and create real outcomes," he said. "And that has a self interest for business too."

The asset manager most closely associated with ESG, BlackRock (also the world's largest money manager) has taken steps to moderate its position as it becomes the public face of political pushback. While its CEO Larry Fink has rejected assertions that ESG is "woke capitalism," in his most recent annual letter to shareholders he did irk some climate investors by stating that, "Divesting from entire sectors — or simply passing carbon-intensive assets from public markets to private markets — will not get the world to net zero. And BlackRock does not pursue divestment from oil and gas companies as a policy."

But more state leaders are pushing their own form of divestment from firms including BlackRock that are viewed as investing state assets based on ESG factors with which these politicians disagree. In states including Texas, West Virginia, and Florida, asset managers seen as ESG-friendly are being barred from managing state funds and bidding on new state business contracts.

Ken Griffin, founder and CEO of hedge fund giant Citadel, and a prominent backer in the markets of Florida Governor Ron DeSantis, drew something of a line at Florida's battle with Disney over gender and sexual identity politics — DeSantis moved to revoke Disney's special tax status after its CEO Bob Chapek, under pressure from his own employees, came out against a Florida law banning the instruction of sexual identity in schools to young children.

"That's a complicated fight with Disney," Griffin told CNBC's Scott Wapner at Delivering Alpha on Wednesday. "First of all, I think Disney put themselves in a position to be punched back. I think the Governor of Florida is completely appropriate in punching back in words," he said. But Griffin added, "I always get anxious when government does things that look retaliatory. So when the State of Florida revoked Disney's special tax status, that to me could be interpreted as retaliation. And I think it's incredibly important that the U.S. government, at the state level and federal level, stays above anything that looks like politically-based retaliation at all times."

CFOs, though, were more broadly in favor of the ESG pushback from states, according to the CNBC survey, with 45% of CFOs saying they supported the moves by states to ban investment managers that use ESG factors from state pension fund business. While 30% of CFOs said they were neutral on the issue, only 25% of CFOs said they opposed the state moves, and only 5% expressed "strong" opposition.

"I think the criticism is deserved," Wolfe said at Delivering Alpha. "When you have so much capital flowing into one space without, you know, in some ways, almost a wild wild west of things. We have trillions of dollars of capital that were allocated over the past couple of years to quote, unquote ESG strategies. ... you're narrowing your universe of investment opportunities, which makes you narrow your return opportunities," Wolfe said. But she rejected the idea it will be "concessionary" when it comes to investment returns and achieving improved ESG performance.

"When the pendulum swings any one way ... It's going to swing back and there's going to be criticism. And so I think right now we're just weeding out between some of the more ... some of the less attractive strategies," Wolfe said.

The SEC has been scrutinizing ESG funds more closely, too.

Another reason why CFOs at publicly traded companies may support pushback against the asset management community and firms like BlackRock has less to do with fund performance than proxy battles. As the large index fund managers have come to dominate investment flows and represent as much as one-third of the shareholder base of companies, they have been increasingly using that power to influence the outcome of shareholder votes on ESG issues, and on climate most prominently. That's caught BlackRock's attention too, as it has faced more scrutiny from regulators and Capitol Hill. It is now taking steps to limit its own influence in proxy votes through a process called pass-through voting, giving shares it controls back to underlying clients to vote on their own.

Murray, who has many conversations with CFOs and other executives about ESG implementation, is concerned about the direction in which the discussion has moved. "It should be about progress, not about having a victory, and on the topic of ESG, it's become very polarized," she said. "Really smart people are spending time on how to polarize it. Let's spend time on solutions," she added.

ESG, geopolitics ranked top risks for mining companies, EY survey shows

Staff Writer | September 28, 2022 |


Global mining and metals executives view environment, social and governance (ESG), geopolitics and climate change as the top three risks facing their business over the next 12 months, according to this year’s ranking of the Top 10 business risks and opportunities for mining and metals in 2023 by EY.


“We’ve witnessed huge upheaval and change over the last year, namely due to the war in Ukraine, climate events, new governments in mining regions and shifting relationships in others — all coming together to drive substantial impact on the sector,” explains Theo Yameogo, Americas mining and metals leader.

“These external factors combined with inflation will continue to shift the sector’s risks and opportunities as pressure form stakeholders and capital markets hold leaders accountable on multiple fronts. Companies that can demonstrate their ability to future-proof their business models to better deal with disruption and changing commercial relationships will ultimately gain a competitive advantage.”

While evidence has shown that mining and metals companies are integrating ESG factors into corporate strategies, decision-making and reporting, survey respondents continued to rank ESG issues as the number one risk to their business, with climate change following closely behind in the third position (see below).


“Net zero is still a focus, but mining and metals companies are also mitigating broader transition and physical risks,” says Yameogo. “Companies must play a role in enabling a just transition — achieving decarbonization targets while considering the long-term impact of mine closures on workers and communities.”

Respondents ranked geopolitics as the second business risk — up from fourth last year, with 72% identifying resource nationalism as the top geopolitical factor likely to impact their operations as governments seek to fill revenue gaps after spending throughout the pandemic and capitalize on higher commodity prices through new or increased mining royalties.

Respondents also listed water stewardship (76%), decarbonization (55%) and green production (35%) as the top issues they expect will face the most scrutiny from investors (see below).

Various external and societal factors such as the impact of Covid-19, the war in Ukraine and rising energy prices have magnified the challenges that have been looming for some time. In response, respondents say they are seeking to improve end-to-end supply chain visibility, leverage technology to improve operations and performance, and be more strategic when analyzing new technologies and supplier portfolios.

“Major disruption and rapidly changing expectations, together, may impact the ability for mining and metals companies to build sustainable value,” Yameogo adds. “Risk mitigation and maximizing opportunity requires companies to make significant changes to their business through a proactive, diversified approach that’s integrated into strategy and broader planning.”

Read the report for more insight into the top risks and opportunities for mining and metals companies.

Russia At The Forefront Of Development Of Huge Iranian Oil Fields

By Simon Watkins - Sep 27, 2022, 6:00 PM CDT

• Iran fast-tracks development of two West-Karoun oil fields with $7 billion plan.
• 
  
• The Azadegan fields are shared with Iraq in which it forms the supergiant Majnoon field.
• 
  
• Russian oil firms are at the forefront of the development

The ramping up of production from its hugely oil-rich West Karoun cluster of oil fields to at least 1 million barrels per day (bpd) remains one of Iran’s core strategic economic priorities, along with maintaining gas production of at least 1 billion cubic metres per day, and continuing to build out its value-added petrochemicals production to at least 100 million metric tons per year. Two of these West Karoun fields – North Azadegan, and South Azadegan – are now the focus of a concerted US$7 billion fast-track development plan, involving Russian oil firms at the forefront, with some support from China. Both fields are shared fields with neighbouring Iraq, in which it forms the supergiant Majnoon oil field, which means that the provenance of the oil coming from them can be obfuscated, allowing for transport to any destination.  At the signing ceremony for the new US$7 billion development program, Iran’s Petroleum Minister, Javad Owji, outlined that the project would be undertaken by a consortium of Iranian banks and exploration and production companies, including the Khatam al-Anbia Construction Headquarters (KAA). According to the U.S. Department of the Treasury, Khatam is: “The engineering arm of the IRGC [Islamic Revolutionary Guard Corps] that serves to help the IRGC generate income and fund its operations. Khatam al-Anbiya is controlled by the IRGC and is involved in the construction of streets, highways, tunnels, water conveyance projects, agricultural restoration projects, and pipelines.” As part of the IRGC, according to several sources spoken to by OilPrice.com, and to the U.S.’s FDD, the KAA has a specific disbursement line in the country’s annual budget and helps finance Iran’s nuclear program, ballistic missile development, and terrorist activities. In short, the inclusion of the KAA, and several other companies named in the roster of those that will work on the Azadegan development program, appears to be another clear sign that Iran does not see a new iteration of the Joint Comprehensive Plan of Action (JCPOA) being agreed anytime soon, as OilPrice.com has posited for some time.

For Russia, though, the oil and gas opportunities in Iran have always been seen as enormous, and rightly so, as, despite its already high levels of oil (and gas) production, Iran can still be seen as an extremely under-developed oil (and gas) power. In crude oil terms alone, the Islamic Republic has an estimated 157 billion barrels of proven crude oil reserves, nearly 10 percent of the world’s total and 13 percent of those held by OPEC. The North and South Azadegan oil fields alone have a combined 32 billion barrels of oil in place, according to the very latest figures from Iran’s Petroleum Ministry, ranking as Iran’s largest joint oil field and the 10th largest oil field in the world. The lifting cost of crude oil at both North and South fields is also exceptionally advantageous for developers, rating on a par with Saudi Arabia’s and Iraq’s best fields as the lowest in the world, at just US$1-2 per barrel. The ultimate production aim for the two Azadegan fields, as announced by Owji, is for a combined 570,000 bpd within the next seven years, up from the current 190,000 bpd. “During the 20-year operation period of the Azadegan field, if we consider the base price of oil per barrel to be 80 dollars, it will generate more than US$115 billion in revenue and income for the country and create employment for 24,000 people,” he added. 

Given the inclusion of KAA within the development group for Azadegan, it is no surprise to see Russian companies fully re-engage in the project as part of a broad-based renaissance of Moscow’s involvement in Iran as a whole, after a period when Russia took the backseat to China. Prior to the reimposition of U.S.-led sanctions on Iran in 2018, Russian companies were on the verge of taking over several new major oil and gas projects in the Islamic Republic. This resulted in initial agreements being signed by Gazpromneft for feasibility studies for the Changouleh and Cheshmeh-Khosh oilfields, Zarubezhneft for the Aban and Paydar Gharb fields and Tatneft for the Dehloran field. These were on top of the previous memoranda of understanding (MoU) signed by Lukoil and the National Iranian Oil Company (NIOC) for studies of the Ab Teymour and Mansouri oil fields, resulting in Russian firms being assigned seven field studies, the most of any country to that point. Even more significantly, though, was that these deals were only a part of a very wide-ranging 22-point MoU signed by Iran’s deputy petroleum minister, Amir-Hossein Zamaninia, and Russia’s deputy energy minister, Kirill Molodtsov, at the time. These included not just the studies and plans for exploration and extraction of oil but also for the transfer of gas, petrochemical swap operations, research on the supply and marketing of petrochemical products, the manufacture of oil equipment together with local Iranian engineering firms, and technology transfer in the refinery sector

One of the shorter-term benefits that will continue to accrue for Iran and Russia from Tehran’s push to develop North and South Azadegan, along with its other shared oil fields with Iraq, is the scope and scale that these shared fields offer for disguising the origin of crude oil being moved from the unsanctioned Iraq, as analysed in depth in my latest book on the global oil markets. “It is impossible, literally, to distinguish Iraqi oil from Iranian oil in the shared oil fields, with the oil on the Iraqi side of the border being drilled from the same reservoirs as the oil being drilled on the Iranian side, and sometimes even through long-distance horizontal directional drilling,” a senior source who works closely with Iran’s Petroleum Ministry exclusively told OilPrice.com. “Even if the Americans or their trusted appointees stationed people at every single rig in every single shared field in Iraq, they would not be able to tell if the oil coming out it was from the Iranian side,” he added. 

Once the oil has been re-categorised as coming from non-sanctioned Iraq, rather than Iran, it is easy to send it to wherever Iraqi oil can go, which is anywhere. The bulk of this can be done through Iraq’s existing crude oil export infrastructure, including very large crude carriers loaded in and around the southern export hub of Basra. It can also be done directly into southern Europe via the Turkish port of Ceyhan through the crude oil pipelines running through the semi-autonomous Iraq region of Kurdistan (although these have been subject to ongoing disruptions for years), and there are also plans for further pipelines from Iraq to Jordan and Syria. Once in Europe, this oil – all of which is discounted in price from the benchmark – has historically gone into some of the less rigorously policed ports of southern Europe that need oil and/or oil trading commissions, including those of Albania, Montenegro, Bosnia and Herzegovina, Serbia, Macedonia and Croatia. From there, the oil can easily be moved across borders to Europe’s bigger oil consumers, including through Turkey. 

These crude oil export methods from Iraq can be supplemented where necessary by various shipping-related methods, with one of the most basic methods being the disabling (literally just flicking a switch) of the ‘automatic identification system’ on ships that carry Iranian oil, as is just lying about destinations in shipping documentation. As Iran’s then-Petroleum Minister himself, Bijan Zangeneh, said in 2020: “What we export is not under Iran’s name. The documents are changed over and over, as well as [the] specifications.” Even before that, in December 2018 at the Doha Forum, Iran’s Foreign Minister, Mohammad Zarif, stated that: “If there is an art that we have perfected in Iran, [that] we can teach to others for a price, it is the art of evading sanctions.” For Asian-bound shipments, the reliable methodology has allegedly involved Malaysia (and to a lesser degree Indonesia) in forwarding oil exports to China, with tankers bound ultimately for China engaging in at-sea or just-outside-port transfers of Iranian oil onto tankers flying other flags. 

As of the end of last week, the Iran source exclusively told OilPrice.com: “Russian companies are now in a gold rush to Iran, with [Russian President, Vladimir] Putin commenting a few days ago that 80 Russian companies are on their way to Tehran with a view to expanding Russia’s presence in the oil, gas, petrochemicals, and automotive sectors as primary goals.” He added: “In total, around nine hundred senior Russian business figures are expected in Tehran in the next four weeks, all with promises for deals in these sectors [above] and, in return, Iran is receiving promises of the latest Sukhoi fighter jets, two submarines, sixteen S-300 batteries, and an undisclosed number of military and security advisors.” He concluded: “It’s pretty much a fire-sale of Iran’s natural oil and gas assets.”

By Simon Watkins for Oilprice.com

Extremely Dangerous Hurricane Ian Shuts In 11% Of Gulf Of Mexico Oil Production

By Tsvetana Paraskova - Sep 28, 2022

• Hurricane Ian is now a category 4 hurricane and deemed top by extremely dangerous and expected to cause catastrophic winds and flooding.
• 
  
• Oil and gas operators have evacuated 12 platforms in the Gulf of Mexico, meaning that 11% of the area's crude oil production is now shut in.
• 
  
• The Gulf of Mexico accounts for around 15% of all U.S. crude oil production.

Oil and gas operators have evacuated 12 platforms in the Gulf of Mexico, shutting in 11% of the area’s crude oil production as the storm Ian barreling toward Florida strengthened to an extremely dangerous Category 4 hurricane.

Late on Tuesday, the National Hurricane Center said that “Air Force Hurricane Hunters Find Ian Has Strengthened Into An Extremely Dangerous Category 4 Hurricane. Expected to Cause Life-Threatening Storm Surge, Catastrophic Winds and Flooding in the Florida Peninsula.”

The latest data as of 6:35 a.m. ET on Wednesday indicated that Ian was rapidly intensifying, and maximum sustained winds are now up to 155 mph, the National Hurricane Center said early on Wednesday.

As the hurricane strengthened on Tuesday, operators in the eastern Gulf of Mexico evacuated platforms and shut in production.

According to operator reports, around 11 percent – or 190,358 barrels per day (bpd) – of the current oil production, and 8.56 percent of the natural gas production in the Gulf of Mexico was shut in as of late Tuesday, the Bureau of Safety and Environmental Enforcement (BSEE) said.

Earlier this week, in anticipation of Hurricane Ian, supermajors Chevron and BP evacuated personnel and shut in production at some of their platforms in the Gulf of Mexico, in the first shut-in of U.S. offshore oil and gas output this hurricane season.

The Gulf of Mexico accounts for around 15% of all U.S. crude oil production.

Chevron has shut in its Petronius and Blind Faith platforms, while BP shut in production and evacuated all personnel from its 130,000-bpd Na Kika platform. The oil and gas major was also shutting in production and evacuating all essential personnel from the Thunder Horse platform, which has the capacity to pump 250,000 bpd of oil.

Late on Tuesday, BP said that “With forecasts indicating the storm will track toward the Florida peninsula, bp has determined Hurricane Ian no longer poses a significant threat to our Gulf of Mexico assets.”

The supermajor is now working to redeploy offshore personnel to the Na Kika and Thunder Horse platforms after determining conditions are safe to return, BP said.  

By Tsvetana Paraskova for Oilprice.com

Russia Is Flaring Less And Keeping Natural Gas In The Ground

By Tsvetana Paraskova - Sep 29, 2022

• Some analysts assumed that cutting Russian gas exports would force the country to either shut down some production of natural gas or flare it.
• 
  
• Satellite data shows that flaring in Russia has declined substantially since it invaded Ukraine, but that doesn’t mean it has shut down wells for good.
• 
  
• To deal with seasonal demand, Gazprom had already designed its operations so that it could reduce production and then turn it back on again when needed.

When the breakup between Russia and the European Union began earlier this year, one of the reasons for the severity of the EU’s response to Russia’s invasion of Ukraine was the assumption that Russia could not afford for its gas exports to drop.

The assumption was an enduring one for oil and gas both. A number of analysts toured the media, arguing that if production at an oil or gas field is suspended, this field eventually risks becoming unproductive forever.

While this is a valid argument overall, Gazprom appears to have found a way to avoid permanent loss of gas production, and it’s not flaring, either. In fact, flaring in Russia—a major “flarer”—is down.

This is according to satellite data cited by a Bloomberg report on Gazprom’s production, which has declined substantially since the Ukraine invasion and the EU’s response to it.

Total gas production is down by 473 million cubic meters daily since the start of the year, data showed, to a total of 838 million cubic meters daily, but flaring is also down, at least over the past month, by 28 percent from a year ago. And this, according to the analysts Bloomberg talked to, is because Gazprom is simply producing less. And it has been doing it for years.

Because demand for natural gas is highly seasonal in nature, Gazprom has organized production at its biggest fields in such a way as to be able to increase or reduce it in relatively short order.

“Due to the uneven consumption patterns, Gazprom has to change its production significantly on monthly basis every year,” Vyacheslav Kulagin, a department head at the Energy Research Institute in the Russian Academy of Sciences, told Bloomberg. “Gazprom’s several major upstream projects function like gas cylinders, where the tap is sometimes opened to the full, and sometimes significantly turned down.”

This means that the risk of Gazprom losing production permanently may well be limited. However, it does not change the fact that most supply to Europe is now almost certainly permanently gone after the suspected sabotage of Nord Stream 1 and Nord Stream 2.

This decline in Russian gas imports may be in line with the European Union’s plans to wean itself off Russian gas fully, but it will mean a shortage while the weaning-off process is taking place.

According to a report by Rystad Energy, European countries are in for a gas shortage from next year to 2025 if Russia stops all deliveries of gas to the continent. This would change in the second half of the decade thanks to more LNG imports, but over the short term, LNG would not be able to cover the lost Russian supply.

European decision-makers seem to be aware of this and have started promoting demand reduction as an integral part of energy crisis plans. Earlier this year, the EU agreed on a Commission proposal for a 15-percent reduction in EU-wide gas demand this winter, but that was a voluntary cut. Now, cuts are on their way to being made mandatory, despite higher than usual gas-in-storage levels in most of the EU.

Meanwhile, although exports of natural gas to Europe have been decimated, exports elsewhere made up for the lost market: Gazprom reported earlier this month that total exports outside the Commonwealth of Independent States were down by 37.4 percent in the first eight months of the year and production was down by 14.6 percent.

Production flexibility appears to be a winning demand management tool for a commodity whose demand patterns are highly variable depending on the season. And it seems Gazprom is weathering the blow from losing most of the European market better than Europe would like to see.

By Tsvetana Paraskova for Oilprice.com