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A CLOSER LOOK AT BIDEN’S REMARKS: President Joe Biden’s remarks yesterday on a windfall profit tax on oil supermajors went notably further than some of his other recent comments in stressing the need for spending on more refining capacity.
Biden took aim at Shell and ExxonMobil by name as part of a broader sweep against the majors and said companies earning so much have a duty to “invest in America” both by increasing production and refining capacity.
Administration officials, including Energy Secretary Jennifer Granholm, have publicly been giving more attention to the price pressures driven by refining constraints, but they’re asking the industry to invest in assets that several companies have been offloading due to the changing market conditions and pressures to reach net zero.
What’s been happening: Exxon just days ago reached a sales agreement with a Texas-based holding company to sell its 60,000 barrels per day oil refinery in Montana, which manufactures gasoline and diesel fuel.
In an announcement, Exxon said the company is focused on investing in “higher-value products,” such as lubricants and chemicals.
Shell closed its 240,000 bpd capacity Convent refinery in Louisiana in November 2020 in support of the company’s strategy to consolidate its manufacturing sites to include those “that are also strategically positioned for the transition to a low-carbon future.”
Moreover, a significant share of existing oil refining capacity, including facilities operated by some major refiners like Phillips 66 and Marathon, has been or is going to be converted to manufacture biofuels in part to enable companies to make progress toward net zero. More than 1 million bpd of US capacity has been shut or converted over the last few years.
Major refiners have planned some oil refining capacity additions. Chevron began construction on an expansion project at its refinery in Pasadena, Texas in July.
But, in general, investors are wary of building new refineries, one industry source told Jeremy, due to the changing energy market and pressures of the transition to greener energy.
That will pose a special challenge to fuel markets even if they are well supplied with crude oil, so long as there remains strong or growing demand for gasoline and diesel and existing refineries continue to shutter.
“No matter how much oil is on the global market, oil is only valuable to the extent you can actually chemically engineer it into usable products,” the person said. “That’s the issue we have right now is there’s not enough refining capacity to manufacture oil into those products given where demand is and logistical constraints.”
Greens challenge more refining: The construction or expansion of refineries also faces opposition from environmental groups, who have instead backed the imposition of export restrictions on US refined products as an immediate solution to high prices.
The Biden administration is waving export restrictions in front of the industry, too. And although Biden hasn’t committed to it yet, we couldn’t help but notice that he said yesterday if companies don’t increase capital expenditures, they’re going to “face other restrictions” beyond a prospective windfall profits tax.
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BP JOINS HIGH-EARNING OIL MAJORS WITH BIG Q3 PROFIT: BP recorded $8.2 in profit in the third quarter after overseeing what the British multinational oil major called “another quarter of disciplined execution.”
The profit, down slightly from Q2’s $8.5 billion, was down due to weaker refining margins and “an average oil trading result and lower liquids realizations,” BP said, although those measures were partly offset by stronger performance in its gas segment.
BP CEO Bernard Looney said the company is focused on helping to solve the “energy trilemma” of secure, affordable, and lower-carbon energy.
In separate remarks, Looney spoke to public scrutiny about oil majors’ profits, which Biden added to yesterday with his plea for more investment from oil companies and a windfall tax to boot.
“Our job is to pay our taxes; our job is to invest,” Looney said during a panel at a petroleum conference in UAE yesterday, name-dropping BP’s recently announced $4.1 billion acquisition of US-based renewable natural gas company Archaea Energy.
Bonus: Saudi Aramco, the largest oil company in the world, posted net earnings of $42.4 billion today, more than double the record profit Exxon recorded in Q3.
CONSTELLATION TO REQUEST 20-YEAR NRC LICENSE EXTENSIONS: Maryland-based utility Constellation Energy said it will ask the Nuclear Regulatory Commission to extend the operating licenses of its Clinton and Dresden nuclear power plants in Illinois by an additional 20 years.
If approved, Clinton could operate until 2047 and Dresden’s Unit 2 and Unit 3 could go until 2049 and 2051 respectively, aiding the state in its goal to get 100% of its energy from clean sources by 2050, Constellation said.
Joe Dominguez, president and CEO of Constellation, said the company credits state and congressional lawmakers who backed measures to keep the financially challenged plants online, including the Inflation Reduction Act’s nuclear production tax credit that will help support continued operation of the nation’s nuclear fleet for at at least nine years.
The bigger factor in saving the plants was a bill passed by the state legislature last September providing $700 million in subsidies over five years to save unprofitable nuclear plants.
BOEM FINALIZES WIND AREAS IN GULF OF MEXICO: The Biden administration finalized two wind energy areas for leasing in the Gulf of Mexico yesterday after Biden announced their advancement as draft WEAs this summer.
The first area, located off the coast of Galveston, Texas, totals 508,265 acres and has the potential to power 2.1 million homes. The second, located off the coast of Lake Charles, Louisiana, totals acres and has the potential to power over 740,000 homes.
Both areas are slightly smaller in total acreage than originally planned. They were reduced in response to concerns raised by the military about their effects on shipping, marine navigation, and military operations, BOEM said.
The areas would be the first to be leased by the Bureau of Ocean Energy Management in the Gulf, which in general have less productive wind resources than areas in the Atlantic and Pacific that have been prioritized for offshore wind leasing so far.
RIVIAN ELECTRIC TRUCK ROLLOUT IS DELAYED: Rivian told customers to expect delays in delivery for orders of the startup’s quad-motor electric truck, another setback for an EV sector that’s been struggling with supply chain challenges.
The delay affects Rivian’s R1T Max Pack model, which increases the truck’s range from 314 miles to over 400 miles, according to Inside EVs.
Screenshots of company notifications were shared on Twitter yesterday. Rivian recommended customers switch to a different powertrain, such as its “large pack,” to take delivery sooner.
US WATCHING UKRAINE GRID DAMAGE CLOSELY: OFFICIAL: A senior US military official said the barrage of Russian strikes across Ukraine has had a “widespread impact” on the power grid after new strikes were leveled yesterday, the Washington Examiner’s Mike Brest reports.
The official, who spoke anonymously, said the issue of repairing Ukraine’s critical infrastructure is something officials are “talking a lot about inside of the US government.” Infrastructure impacted by the grid damage includes water supply systems and water treatment, the official said.
Recent attacks on the country’s energy infrastructure have destroyed more than 30% of its power generation capacity, Ukrainian energy minister Herman Halushchenko told S&P Global last week.
EUROPE’S BLESSEDLY MILD AUTUMN CONTINUES: Europe is in the throes of a late-autumn heat wave, with many countries reporting high temperatures ranging from the 70s and 80s this past weekend—more like summer than the end of October, and a welcome respite for the EU as it braces for its first winter without Russian fossil fuels.
Though Europe has seen milder-than-average temperatures for much of October, the late-autumn heat wave peaked this weekend, bringing temperatures as high as 35 degrees above normal to parts of the continent.
In France, Saturday was the hottest day ever measured after Oct. 20, according to French meteorologist Etienne Kapikian. Belgium also saw “unprecedented” high temperatures this weekend of roughly 77 degrees.
Temperatures are expected to remain milder than usual for the start of November, too: Long-range outlooks from forecasters Maxar Technologies and Marex do not show any cold spells on the horizon for Europe in November, Bloomberg reported—a welcome sign, given the bloc’s deep dependence on Russian gas and race to fill its gas storage tanks ahead of winter.
Maxar reports “strong above-normal” temperatures expected through early November, with mild weather for the rest of the month. Other forecasts suggest temperatures could return to normal for the second half of the month.
European gas prices have fallen due to the mild temperatures, with benchmark futures for Dutch TTF dropping today by as much as 5.5%.
Gas storage tanks in Europe are roughly 95% full heading into the winter season. And Germany, which previously relied on Russia for roughly half its natural gas imports, has filled its storage tanks to 99% capacity.
US AND UAE LAUNCH PARTNERSHIP TO SPUR $100 BILLION IN CLEAN ENERGY INVESTMENTS BY 2035: The UAE and US have signed a partnership to spur $100 billion in clean energy projects and add 100 GW of clean energy by 2035, according to state news agency WAM.
“Together, we will spur large-scale investment in new energy technologies, in our own countries, around the world and in emerging economies,” Amos Hochstein, the top US international energy envoy, said in a statement.
According to Hochstein, the partnership will “assemble and stimulate” both public and private sector funding and support for clean energy innovation, carbon management and methane management projects, advanced reactors, and industrial and transport decarbonization.
The UAE and the US will work together to “prioritize commercial projects in developing and low-income countries as well as provide them technical and financial assistance,” the White House said in a fact sheet.
The Rundown
New York Times 2 minute showers and a flotilla of gas shipments: Europe braces for winter
Washington Post This UFO-like structure could help Europe transform its energy
Calendar
THURSDAY | NOVEMBER 3
11:00 am The National Science Foundation holds a meeting of the Advisory Committee for Geosciences. Learn more and register here.
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