Big Oil Is Dead Set On Exploiting The Wind Power Boom

By Alex Kimani - Apr 08, 2021, 

Lately, the solar sector has been hogging the renewable energy limelight, and for good reason. Experts such as the International Energy Agency (IEA) have predicted that solar energy will lead to a surge in renewable power supply in the next decade, with IEA Executive Director Fatih Birol tipping solar to become the “new king of the world’s electricity markets”.

But make no mistake about it: Wind energy will play an equally critical role in the shift to clean energy, with the IEA saying that wind and solar will make up a staggering 80% of the electric energy market by the end of the decade.

Wind power is not only the easiest to tap and most efficient renewable fuel for electricity generation. Still, it is also one of the lowest carbon emitters. Offshore wind, in particular, has been enjoying its moment in the sun, with investments quadrupling to $35 billion in the first half of 2020, representing the most growth by any energy sector during the Covid-19 crisis.

Not surprisingly, Big Oil has been one of the investors making a mad dash into offshore wind.

As per a Reuters report, Europe’s top oil firms, including Total SA (NYSE:TOT), BP Inc. (NYSE:BP), and Royal Dutch Shell (NYSE:RDS.A) are looking to quickly ramp up their renewable power portfolios and lower their reliance on oil and gas to satisfy governments and investors are among the leading investors in offshore wind.

Indeed, governments worldwide are expected to offer a record of more than 30 gigawatts (GW) in tenders for offshore wind sites and capacity this year alone. For perspective, that is almost as much as the total existing UK wind capacity of 35 GW.Related: Investors Rush To Oil Stocks Despite ESG Push

But some experts are now warning that Big Oil’s love affair with offshore wind could come with undesirable consequences, especially for the consumer.

High option fees

Deep-pocketed oil majors are increasingly willing--and able--to part with huge sums of money to gain a foothold in the offshore wind market, even though margins there are much smaller than their legacy oil and gas businesses. 

A good case in point is a leasing round held by the Crown Estate earlier this year for seabed options around the coast of England, Wales, and Northern Ireland whereby BP and German utility EnBW paid around 1 billion pounds ($1.38 billion) to secure two offshore sites representing 3 GW.

Interestingly, traditional offshore wind developers, Orsted, Iberdrola, and SSE were all unsuccessful in the leasing round.

But, perhaps, the biggest revelation: Zero option fees were paid at the last previous Crown Estate offshore round that was held more than a decade ago.

High energy costs

Obviously, option fees are a huge cost component that adds to the overall cost of onshore wind development.

In fact, Mark Lewis, Chief Sustainability Strategist at BNP Paribas, has estimated that the Crown Estate option fee could add as much as 35% to project development costs, at today’s building costs.

The worst part: The consumer could end up bearing the brunt of it all.

“Someone is going to have to pay and it’s probably, at least in part, the consumer,” Duncan Clark, Orsted’s UK head, has warned.

The high fees now threaten to erode the massive cost reductions the wind sector has realized over the past decade and helped it to become cost-competitive with fossil fuels.

Related Video: The Conditions Are Ripe for A Second Shale Boom

Ali Lloyd, Senior Principal, Renewables, AFRY Management, has estimated that the option fees could increase the levelized cost of energy (LCOE) of an electricity generation project as a measure of the total lifetime cost of energy, by 4-8%.

Source: AFRY Management 

On a brighter note, Lloyd notes that the developers could end up paying the increased cost since many of the winning bidders are relatively new entrants into the UK offshore wind development sector and might be willing to accept lower returns as they look to gain a foothold into the industry.

In other words, we will probably have to wait a bit before we can accurately tell who is paying these massive costs.

By Alex Kimani for Oilprice.com

 

Executives' Pay Deters Big Oil From Acting On Climate Change

By Irina Slav - Apr 15, 2021

The way executives at large oil companies are paid encourages these companies to extract more fossil fuels, a study has suggested, as reported by The Guardian, who said it was given exclusive access to the findings.

The study came from the Climate Accountability Institute, an organization that says about itself that it "engages in research and education on anthropogenic climate change, dangerous interference with the climate system, and the contribution of fossil fuel producers' carbon production to atmospheric carbon dioxide content."

According to it, the remuneration packages for Big Oil CEOs are tied to metrics that are mutually exclusive with climate action, or, as one of the authors, Richard Heede, puts it:

"We show that executives have personal ownership of tens or hundreds of thousands of shares, which creates an unacknowledged personal desire to explore, extract and sell fossil fuels," Heede said. "That carbon mindset needs to be revised by realigning compensation towards success in lowering absolute emissions."

The study focused on the four biggest oil companies globally: BP, Shell, Exxon, and Chevron. According to the Guardian, it has been tracking these companies since 1990, and until 2019, the four had made combined profits of $2 trillion, only a tiny portion of which was invested in low-carbon energy.

In all fairness, however, at least one of the four has started untying its remuneration scheme from oil and gas production. Back in 2018, Shell said, under pressure from several institutional shareholders, that it would link executive pay to emission reduction targets with reports estimating that some 1,300 senior executives could be affected by the change.

Now, Shell has said it would tie the bonuses for its top executive directors more closely to the group's performance in reaching its net-zero goals, if shareholders approve the plan at the annual general meeting in May.

By Irina Slav for Oilprice.com

 

Shell To Put Energy Transition Plan To Shareholder Vote

Shell has pledged to become a net-zero energy company by 2050, and said eits oil production peaked in 2019 and was set for a continual decline over the next three decades.

By Charles Kennedy - Apr 15, 2021

Oil supermajor Shell will put its Energy Transition Strategy to a non-binding shareholder vote at its annual general meeting next month, the first time an energy firm will be seeking an advisory approval of its plan to go to net zero.

Shell has pledged to become a net-zero energy company by 2050, and said earlier this year that its oil production peaked in 2019 and was set for a continual decline over the next three decades.

“As we transform our business, it is more important than ever for shareholders to understand and support our approach,” Shell’s chief executive officer Ben van Beurden said in the preface of the company’s Energy Transition Strategy.

“We are asking our shareholders to vote for an energy transition strategy that is designed to bring our energy products, our services, and our investments in line with the goal of the Paris Agreement and the global drive to combat climate change,” van Beurden added.

According to Shell’s strategy, the target for carbon intensity reduction is

6-8 percent by 2023 for the short term, 20 percent by 2030, and 45 percent by 2035, until reaching carbon intensity reduction of 100 percent by 2050.

“The vote is purely advisory and will not be binding. Shell’s Board and Executive Committee remain responsible and accountable for setting and approving Shell’s energy transition strategy,” Shell said in a statement today.

The supermajor will also seek every year, beginning in 2022, an advisory vote from shareholders on its progress in achieving its energy transition strategy.

The Church of England Pensions Board, a shareholder in Shell, will likely support the energy strategy, Adam Matthews, chief responsible investment officer, told The Wall Street Journal.

Shell is also set to tie the bonuses for its top executive directors more closely to the group’s performance in reaching its net-zero goals, if shareholders approve the plan at the annual general meeting in May. The weighting of the progress in the energy transition performance measures in the long-term incentive plans (LTIP) for executive directors is set to grow to 15 percent from 10 percent. 

By Charles Kennedy for Oilprice.com

 

Shell To Exhaust Dwindling Oil & Gas Reserves By 2040

In Shell’s case,  its oil production peaked in 2019 and is set for a continual decline over the next three decades.  

By Tsvetana Paraskova - Apr 15, 2021

Shell expects to have produced 75 percent of its current proved oil and gas reserves by 2030, and only around 3 percent after 2040, the supermajor said in its Energy Transition Strategy that it will put to a non-binding shareholder vote next month.   

Discussing the risk of stranded assets in the energy transition, Shell said that every year it tests its oil and gas portfolio under different scenarios, including prolonged low oil prices, and cross-references assets with break-even prices to assess if they would still be viable in case of low oil and gas prices.

At December 31, 2020, Shell estimated that around 70 percent of its proved plus probable oil and gas reserves, known as 2P, will be produced by 2030, and only 5 percent after 2040.   

Shell’s proved oil and gas reserves have been declining in recent years, shrinking the reserves life to below eight years of production.

In 2020, Shell’s proved reserves—taking production into account—decreased by 1.972 billion barrels of oil equivalent (boe) to 9.124 billion boe at December 31, 2020, the firm’s annual report showed.  

That’s reserves for just seven years of production, lower than most peers.

The declining reserves life is not unique for Shell. The largest international oil companies have seen their average crude reserves drop by 25 percent over the past five years, which could be a challenge for Big Oil’s production and earnings in the coming years, Citi said earlier this month.

The supermajors reported lower reserves in their most recent reports, also due to the 2020 oil price and oil demand collapse, which forced all of them to write off billions of U.S. dollars off the value of assets.  

In Shell’s case, the declining reserves life is not in contradiction to its assessment from earlier this year that its oil production peaked in 2019 and is set for a continual decline over the next three decades.  

By Tsvetana Paraskova for Oilprice.com

 CAPITALI$T WA$TE

Many Drilled U.S. Wells Will Never Be Completed

By Julianne Geiger - Apr 08, 2021, 7:01 PM CDT

Fracking crews are increasing their activity in U.S. shale basins, finishing off a slew of DUC wells, according to the EIA’s latest Monthly Drilling Report. As oil and gas companies focus on finishing off wells they’ve already drilled, on the sidelines, observers are wondering whether this is a fluke or whether the industry has really learned its lesson about drilling rigs that they do not intend to complete. 

Are we seeing typical industry behavior, which may indicate that we are in for another DUC increase now that drilling activity has picked up?

Tackling the Fracklog

The way to describe the DUC count is a “fracklog” because it measures the number of wells that have been drilled but not yet completed—essentially creating a backlog of half-finished wells that are not producing oil or gas. The higher the DUC count, the more money oil companies have spent drilling wells that are not yet working—ostensibly while drilling more wells, which they also may not complete.

For the U.S. shale industry, the DUC count has been a bellwether for the oil industry; the higher the DUC count, the more money oil and gas companies are sinking into wells that are stuck in limbo and not producing. This could either mean fiscal irresponsibility or a rapidly changing shift in the markets that too quickly rendered wells once deemed wise as obsolete.

Of course, there are always DUCs. The logistics behind scheduling drilling and completion crews necessitate a certain number of drilled wells be made available to later complete. Companies often like to keep several months of drilled wells in inventory. And most wells that are drilled are finished within a year.

Related Video: The Conditions Are Ripe for A Second Shale Boom

But an excessive number of DUCs could signify that something is amiss in the industry.

The Whole Story

The true fracklog didn’t boom during the pandemic. The DUC counts started climbing ever higher sometime in 2017—around the time the U.S. shale industry was catching flack for out of control debt loads.  

True, during the pandemic, there were certainly a high number of DUCs. But the EIA reported DUC count of 7,685 in July 2020—after oil demand crashed, rendering foolish the process of spending more money to complete a well that a company didn’t need for production—is just par for the course, according to earlier EIA data. According to the EIA, the DUC count has been over 7,500, for the most part anyway, since mid-2018.

The Dead DUC is Still a DUC

But there are some, like Raymond James analyst John Freeman, who claimed this year in a note to clients that the United States’ true DUC count is much lower, given that many of the wells included in the EIA’s DUC count are dead in the water and many years old, likely never to be completed. According to Freeman, this figure is as much as 22% too high.

A 2019 Federal Reserve of Dallas survey of oil and gas company executives suggests that half of the respondents agree that the EIA is overestimating the number of DUCs.Related: Investors Rush To Oil Stocks Despite ESG Push

In a low oil price environment, oil and gas companies may spend money on finishing off an already drilled well, rather than on drilling a new well. But companies will continue to strive to keep that DUC inventory in their back pocket should the market call for it. But when oil prices have been low for a long time—and demand for crude or gas remains low, those low oil prices may never justify completing a well, resulting in another dead DUC.

Still, those DUCs are counted.

Where We Are Now

In 2014, the number of wells being drilled exceeded the DUC count. When drilling slowed at the end of that year, the number of DUCs continued to rise. There was a period leading up to 2017 that saw a dip in the DUC count. But before too long, DUCs were again on the rise.

The latest data suggests that the number of DUCs began to fall in July 2020 as oil inventories boomed, oil prices were ultra-low, and drilling and fracking activity had slowed to levels not seen in years. The DUC count has continued to fall since then, while drilling and completion activities have started to pick up. The gap between drilling and completion activity has closed over the last few years, while the gap between drilling activity and DUCs has inverted.  

But there is an unmistakable correlation between drilling activity and DUCs, with an anywhere from 20 to 50-week lag from rig count shifts to corresponding DUC shifts. If that pattern holds true, we may be in for another increase in the number of DUCs in the next few months. Unless, that is, the EIA revaluates the method it uses for establishing its DUC counts. Or, as some suggest, shale has learned to belt tighten, and spending is shifted more heavily toward completing rather than drilling.

By Julianne Geiger for Oilprice.com

U.S. Boosts Oil Exports To Canada

By Charles Kennedy - 

Apr 14, 2021


Canada’s crude oil imports fell by 20 percent in 2020 due to lower demand in the pandemic, but the United States further cemented its position as top oil supplier to Canada, supplying nearly four out of every five barrels of oil, the Canada Energy Regulator said on Wednesday.

Canada is a major crude oil producer and exports much more oil than it imports, almost exclusively to the United States. Yet, Canada imports oil from abroad to feed refineries in its Atlantic Provinces, Quebec, and Ontario.

“Less than one third of Canadian crude oil is processed by Canadian refineries for a variety of reasons, such as lack of pipeline access to domestic supplies, specific product requirements of refineries, or because it costs less to import,” the regulator said in its analysis.

Last year, total Canadian crude oil imports plunged by 20 percent annually to 555,000 barrels per day (bpd), down from 693,000 bpd in 2019, because the pandemic crushed demand for fuels.

As imports dropped in volumes, the share of imports from the United States jumped to 77 percent of all imports in 2020 from 72 percent in 2019.

The second-biggest oil supplier to Canada was the world’s top oil exporter, Saudi Arabia, with a 13-percent share of Canadian oil imports, followed by Nigeria with 4 percent of imports and Norway with 3 percent, the Canada Energy Regulator said.

“The source for Canada’s crude oil imports has changed dramatically over the past decade. The United States has moved from a bit player in 2010 to a major supplier today, with the majority of oil imported into Canada coming from our southern neighbour,” Darren Christie, Chief Economist at the Canada Energy Regulator, said in a statement.

The surge in U.S. crude oil production in recent years was the key driver of the U.S. becoming the top provider­—by a wide margin—of foreign oil to Canada.

This year, demand for oil in Canada is returning, and with it, optimism in the Canadian oil sector.

“But the million-dollar question now in terms of what’s going to happen with demand is really what’s going to happen with the pandemic,” Canada Energy Regulator’s Christie told CBC in an interview.

By Charles Kennedy for Oilprice.com

 

Shock Of The Week: Poll Reveals U.S. Pipelines Aren’t Actually Unpopular

By Julianne Geiger - Mar 31, 2021, 

When it comes to oil pipelines, it seems that the American people really haven’t lost that loving feeling after all, according to new research conducted by Wakefield on behalf of the Association of Oil Pipe Lines (AOPL).

AOPL’s new data suggests that oil pipelines have a 70% approval rating, despite the hoopla surrounding many of the pipelines that would lead one to believe that Americans are fed up with fossil fuel’s safest and most economical transportation mode.

That approval rating is higher than the maximum approval rating of President Biden, President Trump, or President Obama.

As it turns out, the American people seem to understand that right now, pipelines are the safest, most economical way to transport fossil fuels. And they are not ready to throw in the towel just yet.

That’s despite the appearance in the media that most people are behind President Biden’s cancellation decision of the Keystone XL. And it’s despite the protests at various oil pipeline sites throughout the United States, including the protests over the Dakota Access Pipeline a few years ago that monopolized news headlines.

Other than finding that 70% of all Americans have a “positive impression” of pipelines, the study found the intensity of support to be increasing.

But that’s not to say that Americans are unconcerned with climate change—they are. According to the poll, 68% of all Americans reported steady concern over the past year. But, as one might assume if left unattended, Americans are also concerned with how a climate change battle might affect their utility bills and steady supply of electricity.

As far as concerns go, the study found that Americans rank safety, affordability, and reliability as the three most important aspects of energy.

The survey also found that ultimately, Americans feel that canceling oil pipelines is not a good way to combat climate change, and oppose measures that would see oil and gas jobs cut.

By Julianne Geiger for Oilprice.com

More Top Reads From Oilprice.com:

THEY SHOULD ONLY USE MIDDLE SEAT
Blocking middle seats on planes reduces risk of COVID-19 spread: CDC

Leaving the middle seat empty could reduce virus spread by up to 57%

By Jeanette Settembre | Fox News


John Hopkins University professor of health policy Dr. Marty Makary weighs in on CDC's new air travel guidance on 'FOX News Live'

Blocking middle seats on planes reduces the risk of exposure to COVID-19, a new study released by the Centers for Disease Control and Prevention (CDC) suggests.

As airlines continue to allow passengers to book middle seats on planes, new research says that leaving the middle seat empty could reduce the spread of the virus by between 23% to 57%, according to the CDC’s report released Wednesday.

Blocking middle seats on planes reduces the risk of exposure to COVID-19, a new CDC report suggests. (iStock)

"Research suggests that seating proximity on aircraft is associated with increased risk for infection with SARS-CoV-2, the virus that causes COVID-19," the CDC said in the report.

In the study, conducted with Kansas State University, researchers measured how far airborne virus particles traveled inside the aircraft using mannequins that emitted aerosol inside a mock plane cabin. The study did not take vaccinations or face mask-wearing into account.

TSA RECORDS 1.5 MILLION TRAVELERS IN SINGLE DAY FOR FIRST TIME SINCE MARCH 2020

Delta is currently the only airline in the U.S. that’s continued blocking middle seats, however, it will begin to allow passengers to book them after May 1. Other airlines have justified the re-booking by suggesting that air filters on most planes are safe to travelers wearing a facemask, a federal regulation. American Airlines ended its middle seat booking ban in July, allowing flight bookings at 100% capacity while United Airlines did not limit seating on planes during the pandemic at all. Southwest Airlines started rebooking middle seats in December.

U.S. travel continues to rebound with airports across the country seeing more than 1 million travelers daily, a milestone not seen since March 2020, the Transportation Security Administration reported. And it’s unclear if airlines will go back to blocking the middle seat on planes as the industry continues to bounce back. Trade group for the largest U.S. carriers, Airlines for America, referred to a Harvard University report that found a low transmission rate of the virus on planes citing the use of preventative measures to prevent the spread like face mask requirements and cleaning protocols, the Associated Press reported.

The CDC earlier this month released new travel guidance suggesting that fully vaccinated passengers can travel safely in the U.S. without getting tested or self-quarantining. The health agency continued to urge all travelers to continue wearing masks, hand washing and social distancing.

The Associated Press contributed to this report

‘SmartFarm’ device harvests air moisture for autonomous irrigation

By E&T editorial staff
Published Thursday, April 15, 2021

A solar-powered, fully automated device that can absorb air moisture at night and release it during the day for irrigation has been developed by a team of researchers from the National University of Singapore (NUS).

Dubbed SmartFarm, the device uses a moisture-attracting material to absorb air moisture at night when the relative humidity is higher, and releases it when exposed to sunlight. The water harvesting and irrigation process can also be fine-tuned to suit different types of plants and local climate for optimal cultivation.

“Atmospheric humidity is a huge source of freshwater but it has remained relatively unexplored,” explained project leader Professor Tan Swee Ching.

“In this work, we’ve tried to mitigate food and water shortage simultaneously. We created a hygroscopic copper-based material and used it to draw moisture from the air. We then integrate this material into a fully automated solar-driven device that utilises the harvested water to irrigate plants daily without manual intervention.”
The research team holding the prototype device

The key component of SmartFarm is a specially designed copper-based hydrogel that is extremely absorbent, and takes in moisture up to three times its weight. After acquiring moisture, the hydrogel changes colour from brown to dark green and finally to light green when it is saturated. It also releases water quickly under natural sunlight - one gram of the copper-based hydrogel releases 2.24 gram of water per hour.

The NUS team also tested the quality of the water that was collected using the copper-based hydrogel, and found that it meets the WHO’s standards for drinking water.

At night, the top cover opens to allow the copper-based hydrogel to attract atmospheric moisture. In the day, at a pre-set timing, the top cover closes to confine the water vapour allowing it to be condensed on the enclosure’s surface, particularly on the top cover.

Water droplets will be gradually formed and when the moisture stored in the copper-based hydrogel is completely released, the top cover automatically opens and water droplets which are wiped off by the parallel wipers fall onto the soil to irrigate the plants. The remaining water droplets on the walls of the device continue to provide a humid environment for healthy plant growth.

As a proof-of-concept, the NUS team successfully used the device to cultivate Ipomoea aquatica (commonly known as kangkong): a popular vegetable in Southeast Asia.

“The SmartFarm concept greatly reduces the demand for freshwater for irritation and is suitable for urban farming techniques such as large-scale rooftop farming,” Tan said. “This is a significant step forward in alleviating water and food scarcity in the near future.”

Natural gel solution effectively removes pollutants from water


By E&T editorial staff
Published Friday, April 16, 2021


Researchers in Sweden have developed a more eco-friendly way to remove heavy metals, dyes and other pollutants from water.

Researchers from KTH Royal Institute of Technology, in Stockholm, Sweden, in collaboration with Politecnico di Torino, engineered a more sustainable technique for producing hydrogel composites, a type of material that is widely studied for wastewater decontamination.

The solution was found in filtering wastewater with a gel material taken from plant cellulose and spiked with small carbon dots produced in a microwave oven.

Minna Hakkarainen, who leads the Division of Polymer Technology at KTH Royal Institute of Technology, said that the hydrogels remove contaminants such as heavy metal ions, dyes and other common pollutants.

“The total amount of water on Earth doesn’t change with time, but demand does,” she said. “These all-lignocellulose hydrogels offer a promising, sustainable solution to help ensure access to clean water.”

The hydrogel composites can be made from 100 per cent lignocellulose, or plant matter, described by Hakkarainen as the most abundant bioresource on Earth. One ingredient is cellulose gum (carboxymethyl cellulose, or CMC), a thickener and emulsion derived commonly from wood pulp or cotton processing byproducts and used in various food products, including ice cream.

Added to the hydrogel are graphene oxide-like carbon dots synthesised from biomass with the help of microwave heat. The hydrogel composites are then cured with UV light, a mild process that takes place in water at room temperature.

Hydrogels consist of a network of polymer chains that not only absorb water, but also collect molecules and ions by means of electrostatic interactions – a process known as adsorption. According to Hakkarainen, the new process also reinforces the stability of the hydrogel composites so that they can outlast ordinary hydrogels for repeated cycles of water purification.




Graphene oxide has become a favoured additive to this mix, because of its high adsorption capacity, but the environmental cost of graphene-oxide production is high.

“Graphene oxide is a great adsorbent, but the production process is harsh,” Hakkarainen said. “Our route is based on common bio-based raw materials and significantly milder processes with less impact on the environment.”

Graphene is derived from graphite, a crystalline form of carbon. In oxidised form it can be used in hydrogels, but the oxidation process requires harsh chemicals and conditions. Synthesising graphene from biomass often requires temperatures of up to 1,300°C.

By contrast, the researchers at KTH found a way to carbonise biomass at much lower temperatures. They reduced sodium lignosulfate, a byproduct from wood pulping, into carbon flakes by heating it in water in a microwave oven. The water is brought to 240°C and then kept at that temperature for two hours.

Ultimately, after a process of oxidation, they produced carbon dots of about 10 to 80 nanometers in diameter which are then mixed with the methacrylated CMC and treated with UV-light to form the hydrogel.

“This is a simple, sustainable system,” Hakkarainen said. “It works as well, if not better, than hydrogel systems currently in use.”

The research was published in Sustainable Materials and Technologies, Volume 27, April 2021.