Big Oil Could Face $12 Billion Bill To Clean Up Nigerian Spills

By Tsvetana Paraskova - May 16, 2023

The clean-up of oil spills in Nigeria’s oil-producing Niger Delta could cost around $12 billion, and oil majors including Shell and Eni should be held responsible for most of the environmental pollution, a new report by a local commission showed on Tuesday.

The report by the Bayelsa State Oil & Environmental Commission said that decades of oil production has left the state of Bayelsa “in the grip of a human and environmental catastrophe of unimaginable proportions,” as carried by Bloomberg.  

“The report finds failures of strategy, prevention, response and remediation by oil companies,” the commission said in the report, as quoted by Reuters.

A spokesperson for Shell’s Nigerian unit, Shell Petroleum Development Company of Nigeria Limited, told Reuters that Shell was not privy to the final report and could not comment on its findings.

Eni, for its part, attributed the oil spills in the Niger Delta to sabotage, oil theft to feed illegal refineries, and illegal exports. Still, Eni has moved to remedy all spills, a spokesperson told Reuters.  

According to the report of the Bayelsa State Oil & Environmental Commission, there are “strong reasons to believe that the official statistics significantly and systematically over-state the number of leaks caused by sabotage while downplaying those attributable to other causes.”

Eni and Shell have been called out for years by human rights and environmental organizations for neglecting the clean-up of oil spills in the Niger Delta.

For example, Amnesty International said back in 2018 that its researchers “have identified that at least 89 spills may have been wrongly labeled as theft or sabotage when in fact they were caused by ‘operational’ faults.” Of these, 46 were from Shell and 43 from Eni.

Earlier this year, the Nigerian upstream watchdog said that metering errors account for around 40% of the crude oil losses in Nigeria’s production generally attributed to oil theft.

WTO Chief: Nigeria Can’t Rely On Oil & Gas Revenues

 May 16, 2023

African OPEC producer Nigeria will have to prepare to diversify its budget revenues as oil and gas will not be its main source of revenues for much longer, according to Ngozi Okonjo Iweala, a Nigerian economist serving as Director General of the World Trade Organization (WTO).

“We need to start preparing now for a time when our oil and gas will no longer serve us as the main sources of revenue,” Iweala said at the Nigerian Governors’ Forum in Abuja this week, as carried by local media.

Nigeria has depended on the oil and gas sector for 90% of its export revenues and for 85% of government revenues in recent years.

Yet, the country has failed to capture the upside of soaring oil prices after the Russian invasion of Ukraine as investments in the Nigerian oil industry are drying up, and oil production is well below Nigeria’s quota per the OPEC+ agreement.  

Addressing the governors’ forum, Iweala told the incoming governors of Nigerian states, “It is important that you governors start now to diversify your revenue sources. We ought to be seeking to double our growth rate and sustain that higher growth until we attain upper middle-income status.”

At the end of last year, the non-oil sector was running the economy of Africa’s largest oil producer, Finance Minister Zainab Ahmed said earlier this year. In the third quarter of 2022, the ICT and agricultural sectors contributed much more to the economy than oil and gas, whose contribution was just 5.66%, the minister added.

Currently, Nigeria is producing 1 million barrels per day (bpd) less than it can produce, the country’s federal government estimated last week.

The government cited a lack of investments, a shortage of funding sources because of the energy transition, and insecurity among the factors driving the much lower output compared to production capacity.  

By Tsvetana Paraskova for Oilprice.com

Why The Revival Of Nuclear Energy Is Good News For Russia

By Haley Zaremba - May 16, 2023

• The world seems to be in the midst of a nuclear energy renaissance due to its ability to both improve energy security and reduce emissions.
• 
  
• One key issue with expanding nuclear power as it currently exists, however, is that the West relies on Russian-enriched uranium as a fuel.
• 
  
• Nearly one in five nuclear power plants worldwide are either in Russia or are Russian-built, and building a supply chain without Russia will be an important and difficult task.

It seems increasingly likely that we are witnessing the dawn of a new nuclear era. After decades of decline in the West, a potent mix of climate goals and politically motivated energy wars have changed public and private opinion regarding the controversial energy source. Nuclear has notorious drawbacks, but it’s also a proven form of carbon-free energy production, with plenty of existing infrastructure. It also doesn’t entail any of the issues with variability that are associated with wind and solar power. Many advocates of nuclear power argue that we can no longer afford to ignore it as a key source of clean energy in the fight against climate change. And increasingly, the public and private sectors are listening.

In the United States, the Biden administration has kept momentum building for a nuclear renaissance with its Inflation Reduction Act, which includes tax breaks and other incentives all along the nuclear energy supply chain. Meanwhile, in the European Union, nuclear advocates are trying to push through policy supporting nuclear power as Europe reconfigures its energy landscape in the context of its energy war with Russia. As the bloc scrambles to replace the historically huge role of Russian natural gas in its energy mix, many see nuclear as a clear solution. Currently, pro-nuclear France is leading a campaign to convince the European Commission to take nuclear power’s role in the clean energy transition seriously. Public opinion, too, is shifting. A brand new Gallup poll shows that support for nuclear energy in the United States is at a 10-year high. 

But there are some considerable drawbacks to the nuclear revolution. For one thing, the West doesn’t have nearly enough nuclear fuel to power the kind of comeback that many are expecting. After decades of neglect, nuclear infrastructure and supply chains in the West have atrophied. But some countries never stopped developing their nuclear power industries. China, South Korea, and Russia, for example, have robust nuclear energy sectors and the supply chains to back them up. This puts the West in the ironic position of potentially having to rely on Russian nuclear fuel to build up a homegrown nuclear sector robust enough to replace Russian fossil fuels. That’ll show ‘em. 

In fact, as the European Union and the United States have condemned Russia’s illegal war in Ukraine through a litany of sanctions, the Russian nuclear sector has never stopped raking in export revenue. Russian state-operated nuclear energy firm Rosatom remains a key global source of nuclear fuel, enrichment services, and lines of funding for new nuclear facilities, all of which are prohibitively expensive for nearly any private company. Nearly one in five nuclear power plants worldwide are either in Russia or are Russian-built. And the long arm of Rosatom is still growing. Currently, the company is involved in the construction of 15 more nuclear plants around the world. In fact, Russia has been using nuclear expansion as a tactic to increase influence in African countries that could not otherwise afford to build the massively expensive plants. 

According to the Royal United Services Institute in London, companies in the United States alone sent nearly $1 billion to Rosatom in 2022. “That’s money that’s going right into the defense complex in Russia,” Scott Melbye, executive vice president of uranium miner Uranium Energy and president of the Uranium Producers of America, was quoted by the Wall Street Journal. “We’re funding both sides of the war.” But slapping sanctions on Russian nuclear would be a logistical and political nightmare, thanks to a “Russian doll’s worth of interlocking dependencies,” in the words of Paul Dorfman, chair of Nuclear Consulting Group. 

But weaning the West off of Russian nuclear supplies is not only a matter of principle, it’s a matter of energy security. If the past year has taught us anything, it’s not to put all your eggs in a despot’s basket. Building up alternative supply chains is therefore paramount to the success of the new nuclear revolution, but it won’t be easy. That being said, there are already major efforts underway to diversify uranium sources. $700 million of the money allocated by the Inflation Reduction Act is earmarked for just that: developing a domestic supply chain for high-assay low-enriched uranium. To be sure, it’s nothing compared to the scale of Rosatom’s operations, but it’s a start. 

By Haley Zaremba for Oilprice.com

ICYMI

Wind Generates More Power Than Gas In The UK For 3 Straight Months

By City A.M -

The UK’s growing fleet of wind turbines generated more electricity than gas-fired power stations in the first three months of this year, according to new data released by Drax.

Almost a third (32.4 per cent) of the UK’s electricity was supplied from wind power during the first quarter of 2023, outpacing gas which delivered 31.7 per cent.

 

It is the first time wind has provided the largest share of power in any quarter in the history of the country’s electricity grid.

The findings have been released ahead of the next installment of the quarterly Drax Electric Insights report.

The publication is an independent report by academics from Imperial College London commissioned through Imperial Consultants.

Across the three months, Britain’s turbines generated 24 TWh of electricity – enough to charge more than 300m Tesla Model Ys.

Output from wind was three per cent higher than during the same quarter last year, while gas was down five per cent.

Wind’s growing role in the UK’s electricity generation (Source: Drax)

Almost 42 per cent of Britain’s electricity came from renewable sources (wind, solar, biomass, and hydro) in the first three months of 2023.

Fossil fuels supplied 33 per cent, with the rest coming from imports from abroad and the country’s shrinking nuclear fleet.

Black future for coal?

The UK now has just one coal-fired power station left following Drax ending the use of the fuel at its plant in North Yorkshire last month.

Over the last decade four of the power station’s six generating units have been converted to use sustainable biomass, burning imported wood pellets in former coal terminals.

Lead author of the report, Dr Iain Staffell of Imperial College London, said: “In the space of a decade the UK has almost completely cut out coal, after relying on the most polluting fossil fuel for over a century to power our country.

“There are still many hurdles to reaching a completely fossil fuel-free grid, but wind out supplying gas for the first time is a genuine milestone event, and shows what can be achieved when governments create a good environment for investors in clean technology.”

The government is currently targeting a vast ramp up in wind power – including boosting offshore wind from 14GW to 50GW over the current decade and is looking to reform planning restrictions around onshore wind developments.

By Nicholas Earl via CityAM

 May 10, 2023

France’s Top Bank To Stop Funding New Oil And Gas Fields

By Tsvetana Paraskova - 

France’s biggest bank, BNP Paribas, said on Thursday that it would no longer provide any financing for the development of new oil and gas fields regardless of the financing methods, as part of its energy transition goals.

The French bank will not provide any financing for the development of new oil fields, including project financing, reserve-based lending, and Floating Production Storage and Offloading (FPSO) projects.

BNP Paribas will phase out financing to non-diversified oil exploration and production players (independent oil companies) which is intended to support oil production.

The bank also pledged to reduce its financing of oil exploration and production by 80% by 2030.

BNP Paribas is also committed to reducing financing for natural gas exploration and production by more than 30% by 2030 compared to a September 2022 baseline.

The commitments of the French bank are the latest from a European bank on reducing exposure to the fossil fuels sector.

Under pressure from ESG trends and shareholders, some banks have announced in reent months tougher rules on the financing of fossil fuels.

ING, for example, is further restricting financing to the oil and gas industry, reducing the volume of traded oil and gas it finances and no longer financing midstream infrastructure for new oil and gas fields, the Netherlands-based bank said earlier this month. Last year, ING said it would aim to grow new financing of renewable energy by 50% by year-end 2025 and would no longer provide dedicated finance to new oil and gas fields.

Barclays has said it will no longer provide financing to oil sands companies or oil sands projects and tightened conditions for thermal coal lending in an updated policy, which fell short of announcing overall pledges or targets in funding oil and gas. 

In the U.S., Citigroup, Bank of America, and Wells Fargo are also under pressure from activist shareholders and environmental groups to wind down or phase out financing for fossil fuels.  

By Tsvetana Paraskova for Oilprice.com

May 11, 2023

Trump Promises To "Drill, Baby, Drill" If Elected

By Julianne Geiger 

"Drill, baby, drill" will be the first order of business for Donald Trump should he be elected president, the former president said at a Republican presidential town hall on Wednesday.  

Asked about what would be the first thing he would do to cut food and gasoline costs, Trump simply said, "Drill, baby, drill."

Trump is leading in the polls of Republicans for their preferred nominee for next year's presidential election with a wide margin ahead of the nearest potential nominee, Florida Governor Ron DeSantis.

Still, U.S. shale firms are much more disciplined since Trump's stay in the White House, so another term of a President Trump may not be enough to spur a shale revolution 3.0., even if the current regulatory uncertainty goes away. But it certainly can't hurt, and oil prices were already feeling the pressure at just the mention of a return to "drill, baby, drill" mode.

This year, U.S. shale production continues to grow but at a much slower pace than before. A combination of cost inflation and mixed messages from the Biden Administration have left some observers worried about the prospect of peak production.

Shale executives say that peak Permian production will occur this decade.

This could lead to structurally higher prices at the pump as consumers will feel the pinch from U.S. shale losing global market share at the expense of OPEC, which is only set to increase its control over global oil supply.

The new priorities of the shale patch—capital discipline and a focus on returns to shareholders and debt repayments—have coupled with supply chain constraints and cost inflation to drag down U.S. oil production growth in recent months.

American oil executives already said in early March that OPEC is once again the most influential force in global oil supply, and will be so for the foreseeable future now that U.S. shale production growth is slowing. 

Scott Sheffield, CEO at the largest pure-play shale producer, Pioneer Natural Resources, told the Financial Times earlier this year, "I think the people that are in charge now are three countries — and they'll be in charge the next 25 years."  

"Saudi first, UAE second, Kuwait third."

By Julianne Geiger for Oilprice.com

- May 11, 2023

U.S. Coal Capacity Set To Drop Dramatically By 2050

By Charles Kennedy - 

U.S. coal power generation capacity is set to drop by half between now and 2050, the Energy Information Administration has forecast, citing rising costs because of tighter emission regulation and intensifying competition from gas, wind, and solar.

The forecast is under the EIA’s so-called High Zero-Carbon Technology Cost scenario. Under a Reference Scenario, coal capacity is seen shrinking by as much as 64% to 73 GW by 2050. Under the most ambitious scenario, envisaging low costs for the transition to zero carbon, the EIA predicts an 88% drop in coal capacity by 2050.

The forecast comes as the Environmental Protection Agency proposes new, more stringent regulations for power generators that would likely affect the economics of coal power in quite a negative way.

The environmental regulator proposes to establish emission guidelines for large, frequently used existing fossil fuel-fired stationary combustion turbines, generally natural gas-fired, as well as to strengthen the current New Source Performance Standards (NSPS) for newly built fossil fuel-fired stationary combustion turbines.

The proposal limiting how much greenhouse gases fossil fuel power plants can emit would mean that plants currently not complying with the proposed limits would either have to shut down or install new equipment to curb emissions.

According to EPA, the proposal for coal and new natural gas power plants would avoid up to 617 million metric tons of total carbon dioxide through 2042. This would be equivalent to reducing the annual emissions of 137 million passenger vehicles, roughly half the cars in the United States.

EPA has also estimated that the net climate and health benefits of the standards on new gas and existing coal-fired power plants could be up to $85 billion through 2042.

Meanwhile, the North American Reliability Corp. has warned that electricity shortages threaten most of the United States this summer because of high demand and lower than necessary supply due to, among other things, the retirement of coal-fired plants.

“A combination of extreme peak demand, low wind, and high outage rates from thermal generators could require system operators to use emergency procedures, up to and including temporary manual load shedding,” NERC said.

By Charles Kennedy for Oilprice.com

May 12, 2023