CERAWEEK FACTBOX: No energy transition without oil, gas, LNG

CERAWeek by S&P Global got underway March 18 in Houston with a strong affirmation of fossil fuels in the global energy mix. In an agenda peppered with "energy transition," "net zero," "decarbonization" and "climate," as well as "energy security," oil, gas and LNG were always part of the conversation.

Oil, natural gas

• Phasing out fossil fuels is a "fantasy," Saudi Aramco CEO Amin Nasser said. The energy transition narrative will increasingly be written by the developing nations of the Global South, which are expected to drive demand growing beyond 104 million b/d forecast for 2024 into the following year, he said.
• Shell CEO Wael Sawan said his company has "reaffirmed our conviction that this is going to be a multidimensional energy system in the future. Oil and gas will have a role for a long, long time to come." Upstream oil and gas, and LNG support the energy transition, he said. For instance, LNG is replacing coal in Asia and contributing to energy security in Europe. "In addition to that, we continue to see the complementarity of LNG with the nature of the grid as we move to more and more renewables generation," Sawan said.
• North American natural gas demand will increase as industries relocate from Europe, said Richard Holtum, global head of gas, power and renewables at Trafigura. "The US and Mexico have such a competitive advantage. Gas here is $1.70 [per MMBtu] today. It's over $9 in Europe, plus you get the carbon tax. So any industry that can relocate to North America will relocate."

LNG

• US Energy Secretary Jennifer Granholm suggested the Department of Energy would end its "pause" on issuing key LNG export licenses for new projects by this time next year, predicting the suspension "will be well in the rearview mirror." This is the most specific timeline to emerge from the Biden administration for how long the permitting freeze could last since it was announced by the White House on Jan. 26.
• Venture Global said it will acquire a fleet of nine LNG vessels to expand its marketing operations. CEO Michael Sabel said the company will offer shorter-term contracts and market volumes delivered-ex ship to reach a broader pool of customers and play a greater role in the global LNG supply chain.
• TotalEnergies is expanding in the US shale patch with an upstream acquisition in the Eagle Ford of South Texas, Chairman and CEO Patrick Pouyanne said. "We are willing to integrate our LNG position with more upstream gas production," he said.

Energy transition

• The US is undergoing an "undeniable" shift toward cleaner sources of energy despite an equally indisputable need to secure fossil fuel supplies for the foreseeable future, Energy Secretary Jennifer Granholm said. "And these truths are not in conflict," she said. "The momentum of the clean energy transition is undeniable. Even as we are the largest producer of oil and gas in the world, and the largest exporter of LNG in the world, the expansion of Americas energy dominance to clean energy is striking.''
• For natural gas to be a viable part of the climate solution, Richard Newell, CEO of Resources for the Future, said fugitive methane emissions need to be stopped; gas needs to replace higher-emitting fuels, not renewables; and carbon capture and storage needs to be applied to the gas sector itself.
• The jury is still out" on the subsidies for carbon capture projects in the Inflation Reduction Act, said Takajiro Ishikawa, CEO of Mitsubishi Heavy Industries America. "Ever since the IRA was introduced in August of 2022, there has not been one single carbon capture project that has been FID'd." The $85/mt incentive in the IRA "is just not enough" to cover capital expenditure, debt servicing and providing a return, Ishikawa said.
• Funding large-scale clean energy projects should require a more "holistic" approach, said Joanne Salih, a partner at Oliver Wyman's energy and natural resources practice. "If we are talking about CCS, I don't actually believe that the challenge is inherently in the project, but it's the fact that its being phrased as project and project finance to the institutional investors, which makes it very difficult," Salih said on the sidelines of the conference.
• There is no such thing as a totally clean pathway towards clean hydrogen production, not even with "green" hydrogen production, said Stanford University Hydrogen Initiative co-Managing Director Naomi Boness. While there are various upstream emission tradeoffs with all different pathways of hydrogen production, including green, using hydrogen is a "better solution than the current fossil fuel combustion," Boness said.

Power

• Natural gas and renewables have to go hand in glove together, said NextEra Energy CEO John Ketchum, adding that gas-fired generation is an important bridge fuel for renewables. At NextEra subsidiary Florida Power & Light, 75% of the company's installed base today is gas-fired generation, with about 5% renewables. "Our obligation to our customers is to make sure we put the lowest-cost generation resource in their hands, and that's why our bills are 37% lower than the national average," Ketchum said.
• In an interview with S&P Global Commodity Insights, Arshad Mansoor, CEO of the Electric Power Research Institute, emphasized an all-of-the-above strategy for power generation -- particularly as demand grows because of data centers, cryptocurrency and electric vehicles. "You have to be a realist in this ambitious goal for a net-zero future, and realism is keeping the lights on. So yes, some coal plant retirements will be delayed," Mansoor said.
• Amos Hochstein, senior adviser to the White House on energy and investment, said the concentration of supply in a few countries of battery minerals such as graphite, lithium, cobalt and copper presented a "danger of becoming today what OPEC was in the 1970s." Hochstein highlighted dramatic price swings in battery metals prices over the last year as a cause for concern and warned of a scenario when "a single supplier manipulates the market."