Energy Review

By Tsvetana Paraskova

The US oil and gas sector saw major projects approved over the past month while the industry continues to call for a lasting, bipartisan permitting reform that would unlock more domestic energy resources.

Biden administration approves Willow project in Alaska

The Biden Administration approved in March ConocoPhillips’ Willow oil project in the National Petroleum Reserve-Alaska (NPR-A), allowing three out of five proposed drill sites. The scaled-down project would be profitable and will work, the company and analysts say.

ConocoPhillips welcomed the decision, saying that it continues to review the Department of the Interior’s Record of Decision (ROD) and would advance internal approval processes towards a Final Investment Decision.

“Willow fits within the Biden Administration’s priorities on environmental and social justice, facilitating the energy transition and enhancing our energy security, all while creating good union jobs and providing benefits to Alaska Native communities,” said ConocoPhillips chairman and CEO Ryan Lance.

The Willow project is expected to produce 180,000 barrels of oil per day at its peak, decreasing American dependence on foreign energy supplies, ConocoPhillips says. The project is set to deliver between $8 billion to $17 billion in new revenue for the federal government, the state of Alaska, and North Slope Borough communities.

Even with a three-well pad development instead of the five-pad project ConocoPhillips had sought, Willow would be economically viable, consultancy Wood Mackenzie said.

“ConocoPhillips has frequently said that anything less than the “Alternative E” project scope for three well pads would render the Willow project uneconomic. Our independent economic model substantiates that claim,” said Mark Oberstoetter, head of Americas (non-L48) upstream for Wood Mackenzie.

“With Willow joining other projects like Pikka, new pads at Milne Point, Narwhal, Nuna and Coyote, we see production returning to 700,000 b/d by 2030, levels last seen in 2008. Without production from Willow and these other new projects, the Trans Alaska Pipeline System (“TAPS”) would eventually run into low flow issues, jeopardising all production coming from the North Slope,” Oberstoetter added.

In addition, Wood Mackenzie projections suggest Willow’s Scope 1 and 2 emissions intensity would be lower than other Alaska projects, and lower than many of the current sources of US oil imports.

The project approval was welcomed by the oil and gas industry and slammed by environmental campaigners.

The American Petroleum Institute (API) and North America’s Building Trades Unions (NABTU) welcomed the approval of the project.

“The approval of critical energy infrastructure investments like Willow is essential to strengthening U.S. energy security and creating new economic opportunities across the country. Our organisations appreciate the support shown by the President to safeguard national energy security while securing middle class sustaining employment opportunities that will drive our country forward as we transition to a sustainable future derived from our vast energy resources,” API President and CEO Mike Sommers and NABTU President Sean McGarvey said in a joint statement.

Energy Workforce & Technology Council President Tim Tarpley also welcomed the news but also called for a streamlined approval process.

“Investments in domestic energy, including oil and gas, are essential for our economic and national security and that of our allies. However, the process for approving these projects must be streamlined, and not take a decade to decide, shorting our nation of vital energy resources,” Tarpley said.

While the industry applauded the decision, environmental organisations were disappointed with President Joe Biden breaking a key campaign pledge not to allow new drilling on federal land.

People vs. Fossil Fuels, a national coalition of over 1,200 frontline, climate justice, and progressive organisations, strongly condemned the Biden Administration for its decision to approve the Willow Oil Drilling Project.

“Biden’s presidential powers allow him to reject all new fossil fuel projects and declare a climate emergency that would ensure the survival of our communities and our planet. Instead, he is choosing to fatten the wallets of Oil CEOs by expanding fossil fuel infrastructure that will drive us further into climate chaos,” the coalition said.

Friends of the Earth also slammed the decision, with Raena Garcia, Fossil Fuels and Lands Campaigner for the organisation, saying that “President Biden’s approval of the Willow project is a colossal and reprehensible stain on his environmental legacy.”

“While the Administration sides with Big Oil and exploitation of our public lands, we will keep fighting until this project is stopped dead in its tracks,” Garcia added.

Another US LNG export reaches FID

Venture Global LNG announced in March a final investment decision (FID) and successful closing of the $7.8 billion financing for Plaquemines Phase Two LNG project, the first US LNG project to take FID in 2023.

The company also issued a full notice to proceed to KZJV to continue construction on phase two of Plaquemines LNG.

“Investments in domestic energy, including oil and gas, are essential for our economic and national security and that of our allies. However, the process for approving these projects must be streamlined, and not take a decade to decide, shorting our nation of vital energy resources,”

“Venture Global is proud to announce a positive Final Investment Decision (FID) for phase two of Plaquemines LNG, less than 10 months after sanctioning phase one,” said Mike Sabel, CEO of Venture Global LNG.

Together, phase one and phase two represent approximately $21 billion of investment, the largest project financing ever done.

Policy issues in US oil & gas industry

Several Republican Senators sent a letter to US Ambassador to Japan Rahm Emanuel in early March, urging the Biden Administration to publicly support the export of abundant US natural gas to America’s allies in Europe and Asia, particularly Japan, which has prioritised energy security in its term leading the G7.

“Excessive restrictions on public financing of gas projects and unnecessary delays in approving privately-financed projects impede the development of critical infrastructure to expand output and exports,” the Senators wrote in the letter.

“These impediments must be addressed immediately, as U.S. allies and partners continue to face energy insecurity, with many forced to increase reliance on or return to higher-emitting energy sources.”

The American Petroleum Institute, National Association of Manufacturers, and American Clean Power Association sent in March a letter to United States Trade Representative Katherine Tai calling for continued action to hold Mexico accountable for its discriminatory energy policies by using every tool available under the U.S.-Mexico-Canada Agreement (USMCA).

Measures like Mexico’s holdup in the issuance of permits for energy activities undercut US companies and can restrict the supply of energy that North American manufacturers and consumers need, the trade groups say.

“The Government of Mexico’s escalating pursuit of discriminatory policies dramatically favors Mexico’s state-run electrical utility and state-run oil and gas companies, hindering private sector investment, threatening companies in the United States and their workers, and undermining North American energy integration and our regional competitiveness vis-à-vis China and other rivals,”

“The Government of Mexico’s escalating pursuit of discriminatory policies dramatically favors Mexico’s state-run electrical utility and state-run oil and gas companies, hindering private sector investment, threatening companies in the United States and their workers, and undermining North American energy integration and our regional competitiveness vis-à-vis China and other rivals,” the letter states.

API President and CEO Mike Sommers expressed support for the Lower Energy Costs Act, a bipartisan proposal that could help ensure meaningful action on permitting reform to unlock more domestic oil and gas supplies.

“Real, lasting change comes from bipartisan, common-sense, economically-sound solutions,” Sommers writes in a letter to House Speaker Kevin McCarthy and House Democratic Leader Hakeem Jeffries.

“We all share the common goals of providing reliable energy to Americans; enhancing our energy security; cementing our energy independence for years to come; and making energy safer, cleaner, and more affordable.”