Tag Archives: oil industry

Loving Oil in Any Way, Shape or Form — Damn Climate Change!

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Many oil assets are ending up in the hands of private-equity (PE) firms. In the past two years alone these bought $60bn-worth of oil, gas and coal assets, through 500 transactions… Some have been multibillion-dollar deals, with giants such as Blackstone, Carlyle and KKR carving out huge oilfields, coal-fired power plants or gas grids from energy groups, miners and utilities. Many other deals, sealed by smaller rivals, get little publicity. This sits uncomfortably with the credo of many pension funds, universities and other investors in private funds, 1,485 of which, representing $39trn in assets, have pledged to divest fossil fuels. But few seem ready to leave juicy returns on the table.

As demand for oil and gas persists while dwindling investment in production limits supply, prices are rising again, boosting producers’ profits….And discounts imposed on “brown” assets by the stock market, linked to sustainability factors rather than financial… create even more pockets of opportunity…The Economist has looked at 8 PE firms that have closed fossil-fuel deals in 2020-2021 The investors in some of their latest energy-flavored vehicles include 53 pension funds, 23 universities and 32 foundations. Many are from America, such as Teacher Retirement System of Texas, the University of San Francisco and the Pritzker Traubert Foundation, but that is partly because more institutions based there disclose pe commitments. The list also features Britain’s West Yorkshire Pension Fund and China Life. Over time, some investors may decide to opt out of funding their portion of fossil-fuel deals.

But a third, yet more opaque class stands ready to step in: state-owned firms and sovereign funds operating in the shadows. Last month Saudi Aramco, the Kingdom’s national oil company, acquired a 30% stake in a refinery in Poland, and Somoil, an Angolan group, bought offshore oil assets from France’s Total. In 2020 Singapore’s GIC was part of the group that paid $10bn for a stake in an Emirati pipeline.

Excerpts from Who buys the dirty energy assets public companies no longer want?, Economist, Feb. 12, 2022

The Toxic Shadow of Abandoned Oil Infrastructure

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Wearing blue hard hats, white hazmat suits and respirator masks, workers carted away bags of debris on a recent morning from a sprawling and now-defunct oil refinery once operated by Philadelphia Energy Solutions (PES). Other laborers ripped asbestos from the guts of an old boiler house, part of a massive demolition and redevelopment of the plant, which closed in 2019 after a series of explosions at the facility.

Plans call for the nearly 1,400-acre site to be transformed into a new commercial hub with warehousing and offices. All it will take is a decade, hundreds of millions of dollars, and confronting 150 years’ worth of industrial pollution, including buried rail cars and a poisonous stew of waste fuels poured onto the ground. A U.S. refinery cleanup of this size and scope has no known precedent, remediation experts said. It’s a glimpse of what lies ahead if the United States hopes to wean itself off fossil fuels and clean up the toxic legacy of oil, gas and coal.

President Joe Biden wants to bring the United States to net-zero greenhouse gas emissions by 2050 to fight climate change through a shift to clean-energy technologies, while reducing pollution in low-income and minority neighborhoods near industrial facilities. It’s a transition fraught with challenges. Among the biggest is what to do with the detritus left behind. The old PES plant is just one of approximately 135 oil refineries nationwide, to say nothing of the country’s countless gas stations, pipelines, storage hubs, drill pads and other graying energy infrastructure.

In Philadelphia, a private-sector company is taking the lead. Hilco Redevelopment Partners, a real estate firm that specializes in renovating old industrial properties, bought the PES refinery out of bankruptcy for $225.5 million in June…The full extent of the pollution won’t be understood for years. Also uncertain is the ability of the refinery’s previous owners to pay their share of the cleanup. The facility has had multiple owners over its lifetime and responsibility has been divided between them through business agreements and legal settlements.
Oil refining at the Philadelphia site began in 1870, 100 years before the creation of the U.S. Environmental Protection Agency (EPA). Gasoline, once a worthless byproduct of heating oil, was routinely dumped by the refinery into the soil, according to historians and researchers. Leaks and accidents spewed more toxins. The June 2019 blasts alone released 676,000 pounds of hydrocarbons, PES said at the time. The Philadelphia site is not unique. About half of America’s 450,000 polluted former industrial and commercial sites are contaminated with petroleum, according to the EPA.

Cleanup in Philadelphia will be painstaking. After asbestos abatement comes the demolition and removal of 3,000 tanks and vessels, along with more than 100 buildings and other infrastructure, the company said. Then comes the ground itself. Hilco’s Perez said dirt quality varies widely on the site and will have to be handled differently depending on contamination levels. Clearing toxins like lead must be done with chemical rinses or other technologies…The site also has polluted groundwater and giant benzene pools lurking underneath, according to environmental reports Sunoco filed over the years with the federal and state governments.

Excerpts from Laila Kearney, 150 years of spills: Philadelphia refinery cleanup highlights toxic legacy of fossil fuels, Reuters, Feb. 16, 2021
 

540 Katrina Oil Spills Equal an Exxon Valdez Disaster

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The federal agency overseeing oil and gas operations in the Gulf of Mexico after hurricane Katrina reported that more than 400 pipelines and 100 drilling platforms were damaged. The U.S. Coast Guard, the first responder for oil spills, received 540 separate reports of spills into Louisiana waters. Officials estimated that, taken together, those leaks released the same amount of oil that the highly publicized 1989 Exxon Valdez disaster spilled into Alaska’s Prince William Sound — about 10.8 million gallons…

While hurricanes gain speed due to the effects of climate change, the push for oil leasing in the Gulf of Mexico shows no sign of slowing down. In 2014, the Obama administration opened up 40 million new acres in the Gulf for oil and gas development. Four years later, the Trump administration announced plans to open up most of the rest, in what would be the largest expansion of offshore oil and gas drilling in U.S. history. Many of these 76 million acres are to be offered at reduced royalty rates to encourage additional near-shore drilling in Louisiana waters…

“In the Gulf, storms are predicted to be less frequent but more intense when they do come,” said Sunshine Van Bael, an ecologist at Tulane University who evaluated damage to marsh ecosystems from the BP oil spill. “One thing that storms do is, if oil has been buried underneath the marsh because it wasn’t rehabilitated, a storm could come along and whip that back up to the surface. So, the aftereffects of the oil spills might be greater [with climate change] since the storms are predicted to be more intense.”…

In 2009, a class-action lawsuit against Murphy Oil Corp. ended in a settlement requiring the company to pay $330 million to 6,200 claimants, including owners of about 1,800 homes in St. Bernard Parish. The damage occurred when one of Murphy’s storage tanks floated off its foundation during Katrina and dumped over a million gallons of crude oil into a square-mile segment of Meraux and Chalmette….

To date, more than $19 million has been paid out from the federal Oil Spill Liability Trust Fund to reimburse at least two oil companies for costs they incurred cleaning up oil they spilled during Katrina…

“We don’t normally penalize [companies] for act of God events,” Greg Langley of the Department of Environmental Quality said. “We just get right to remediation.”

Excerpts from Joan Meiners, How Oil Companies Avoided Environmental Accountability After 10.8 Million Gallons Spill, ProPublica, Dec. 27, 2019

How Companies Buy Social License: the ExxonMobil Example

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The Mobil Foundation sought to use its tax-exempt grants to shape American laws and regulations on issues ranging from the climate crisis to toxic chemicals – with the explicit goal of benefiting Mobil, documents obtained by the Guardian newspaper show.  Recipients of Mobil Foundation grants included Ivy League universities, branches of the National Academies and well-known civic organizations and environmental researchers.  Benefits for Mobil included – in the foundation’s words – funding “a counterpoint to so-called ‘public interest’ groups”, helping Mobil obtain “early access” to scientific research, and offering the oil giant’s executives a forum to “challenge the US Environmental Protection Agency (EPA) behind-the-scenes”….

A third page reveals Mobil Foundation’s efforts to expand its audience inside environmental circles via a grant for the Environmental Law Institute, a half-century-old organization offering environmental law research and education to lawyers and judges.  “Institute publications are widely read in the environmental community and are helpful in communicating industry’s concerns to such organizations,” the entry says. “Mobil Foundation grants will enhance environmental organizations’ views of Mobil, enable us to reach through ELI activities many groups that we do not communicate with, and enable Mobil to participate in their dialogue groups.”

The documents also show Mobil Foundation closely examining the work of individual researchers at dozens of colleges and universities as they made their funding decisions, listing ways that foundation grants would help shape research interests to benefit Mobil, help the company recruit future employees, or help combat environmental and safety regulations that Mobil considered costly.  “It should be a wake-up call for university leaders, because what it says is that fossil fuel funding is not free,” said Geoffrey Supran, a postdoctoral researcher at Harvard and MIT.  “When you take it, you pay with your university’s social license,” Supran said. “You pay by helping facilitate these companies’ political and public relations tactics.”

In some cases, the foundation described how volunteer-staffed not-for-profits had saved Mobil money by doing work that would have otherwise been performed by Mobil’s paid staff, like cleaning birds coated in oil following a Mobil spill.  In 1987, the International Bird Rescue Research Center’s “rapid response and assistance to Mobil’s West Coast pipeline at a spill in Lebec, CA not only defused a potential public relations problem”, Mobil Foundation said, “but saved substantial costs by not requiring our department to fly cross country to respond”.d of trustees at the Woods Hole Oceanographic Institution (recipient of listed donations totalling over $200,000 from Mobil) and a part of UN efforts to study climate change.

Wise ultimately co-authored two UN Intergovernmental Panel on Climate Change reports, serving as a lead author on one. One report chapter Wise co-authored prominently recommended, among other things, burning natural gas (an ExxonMobil product) instead of coal as a way to combat climate change.

Excerpts from How Mobil pushed its oil agenda through ‘charitable giving’, Guardian, June 12, 2019

The Unquenchable Thirst for Oil

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Demand for oil is rising and the energy industry, in America and globally, is planning multi-trillion-dollar investments to satisfy it. No firm embodies this strategy better than ExxonMobil, the giant that rivals admire and green activists love to hate. As our briefing explains, it plans to pump 25% more oil and gas in 2025 than in 2017. If the rest of the industry pursues even modest growth, the consequence for the climate could be disastrous.

To date politicians, particularly in America, have been reluctant to legislate for bold restrictions on carbon. That is in part thanks to ExxonMobil’s attempts to obstruct efforts to mitigate climate change. …ExxonMobil’s policies on climate change remain marred by inconsistencies. In October the company said it was giving $1m, spread over two years, to a group advocating a carbon tax. ExxonMobil maintains that a carbon tax is a transparent and fair way to limit emissions. But the sum is less than a tenth of its federal lobbying spending in 2018. Moreover, the carbon tax it favours would include protection for oil companies from climate lawsuits.

The firm is also working to reduce leaks of methane, a powerful greenhouse gas, from its wells, pipelines and refineries. However the American Petroleum Institute  (API) has been a main force urging Mr Trump’s administration to ease regulations on methane emissions. The API’s other efforts include lobbying against incentives for electric cars.  ExxonMobil is not alone in trying to sway the climate debate in its direction either. Shell, Total and BP are all members of the API. Marathon Petroleum, a refiner, reportedly campaigned to ease Barack Obama’s fuel-economy standards. BP spent $13m to help block a proposal for a carbon tax in Washington state in November. The Western States Petroleum Association, whose membership includes ExxonMobil and Shell, also lobbied to defeat that tax.

While oil companies plan to grow, trends in cleaner energy are moving in the wrong direction. Investments in renewables fell as a share of the total in 2017 for the first time in three years, as spending on oil and gas climbed. In 2018 carbon emissions in America grew by 3.4% as economic activity picked up, even as coal fell out of favour. Mr Woods maintains that any change to the energy supply will be gradual. “I don’t think people can readily understand just how large the energy system is, and the size of that energy system will take time to evolve,” he argues… Out at sea, ExxonMobil is working to increase production. By next year an underwater web of pipes will connect wells on the seabed to a vast vessel. From there the oil will be transferred to smaller tankers, then to the vast infrastructure that can refine and transport it until it reaches consumers in the form of fertiliser, plastic bottles, polyester or, most likely, petrol. From beneath the ocean floor to your car’s tank, for about the price of a gallon of milk.

Excerpts from  Crude Awakening, Economist,  Feb. 9, 2019; Bigger Oil, Economist,  Feb. 9, 2019

Global Oil Chokepoints and War in Yemen

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Fighters from Yemen’s Houthi militia entered  on March 31, 2015 a coastal military base overlooking the Red Sea’s strategic Bab el-Mandeb strait, local officials told Reuters.  Soldiers of the 17th Armored Division in the Dabab district in Yemen’s southwestern Taiz province opened the gates to the Houthis, whose military advance has been challenged by six days of Saudi-led air strikes. This means that Houthi rebels have a foothold along one of the world’s crucial oil chokepoints.    According to the US Energy Information Administration’s (EIA) fact-sheet on global oil chokepoints, 3.8 million barrels of oil and “refined petroleum products” passed through the Bab el-Mandeb each day on its way to Europe, Asia, and the US, making it the world’s fourth-busiest chokepoint.  The strait controls access to multiple oil terminals and to a oil pipeline co-owned by state companies from Egypt, Saudi Arabia, the United Arab Emirates and Qatar that transits oil between the Red Sea and the Mediterranean Sea, called the Suez-Mediterranean or SUMED pipeline.  The Bab el-Mandeb is 18 miles wide at its narrowest point, “limiting tanker traffic to two 2-mile-wide channels for inbound and outbound shipments,” according to the Energy Information Administration.

“Closure of the Bab el-Mandeb could keep tankers from the Persian Gulf from reaching the Suez Canal or SUMED Pipeline, diverting them around the southern tip of Africa, adding to transit time and cost,” the EIA fact-sheet explains. “In addition, European and North African southbound oil flows could no longer take the most direct route to Asian markets via the Suez Canal and Bab el-Mandeb.”

Recent events in Yemen, where a Saudi-led Arab military coalition is fighting to restore president Abd Rabbu Mansur Hadi against an Iranian-backed insurgent movement, have already jolted global oil prices.

Excerpt from ARMIN ROSEN,  Iran-backed Houthi militants in Yemen just captured a military base along one of the world’s major oil lanes, Reuters, Mar. 31, 2015

More from wikipedia: On February 22, 2008, it was revealed that a company owned by Tarek bin Laden is planning to build a bridge  across the Bab el-Mandeb strait, linking Yemen with Djibouti.  Middle East Development LLC, a Dubai company owned by Tarek bin Laden, would build the bridge. The project has been assigned to engineering company COWI in collaboration with architect studio Dissing+Weitling, both from Denmark.

Oil Shale: Costs and Benefits

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[A] second shale revolution is in prospect, in which cleaner and more efficient ways are being found to squeeze the oil and gas out of the stone. The Jordanian government said on June 12th that it had reached agreement with Enefit, an Estonian company, and its partners on a $2.1 billion contract to build a 540MW shale-fuelled power station. Frustratingly for Jordan, as it eyes its rich, oil-drenched Gulf neighbours, the country sits on the world’s fifth-largest oil-shale reserves but has to import 97% of its energy needs.

In Australia, Queensland Energy Resources, another oil-shale company, has just applied for permission to upgrade its demonstration plant to a commercial scale. Production is expected to start in 2018. Questerre Energy, a Canadian company, also said recently that it would start work on a commercial demonstration project, in Utah in the United States.

In all these projects, the shale is “cooked” cheaply, cleanly and productively in oxygen-free retorts to separate much of the oil and gas. In Enefit’s process the remaining solid is burned to raise steam, which drives a generator. So the process produces electricity, natural gas (a big plus in Estonia, a country otherwise dependent on Russian supplies) and synthetic crude, which can be used to make diesel and aviation fuel. The leftover ash can be used to make cement. Enefit’s chief executive, Sandor Liive, says his plants, the first of which started production in December 2012, should be profitable so long as oil prices stay above $75 a barrel (North Sea Brent oil was around $113 this week).

Although the new methods of exploiting the rock are cleaner than old ones, environmentalists still have plenty to worry about. Oil shale varies hugely in quality. Estonia’s is clean, Jordan’s has a high sulphur content, Utah’s is laden with arsenic. Like opencast coal mining, digging up oil shale scars the landscape. Enefit has solved that in green-minded Estonia, by landscaping and replacing the topsoil. Other countries may be less choosy.

Some of the world’s biggest energy firms have also experimented with mining and processing oil shale, only to give up, after finding that it took so much energy that the sums did not add up. However, Shell says it is making progress with a new method it is trying, also in Jordan, in which the shale is heated underground with an electric current to extract the oil.

These rival technologies have yet to prove their reliability at large scale—and they are far from cheap. Mr Liive reckons it will cost $100m to get a pilot project going in Utah (where his firm has bought a disused oil-shale mine), and another $300m to reach a commercial scale. A fall in the oil price could doom the industry, as happened in the 1980s when a lot of shale mines went out of business…America this week loosened its ban on crude exports. If the second shale revolution succeeds, it will have a lot more oil to sell.

Oil shale: Flaming rocks, Economist, June  28, 2014, at 58

Loans-for-Oil: China and Latin America

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China’s demand for commodities has entrenched Latin America’s position as a supplier of raw materials. The country guzzles oil from Venezuela and Ecuador, copper from Chile, soyabeans from Argentina, and iron ore from Brazil—with which it signed a corn-import deal on April 8th.   Chinese lending to the region also has a strong flavour of natural resources. Data are patchy, but according to new figures from the China-Latin America Finance Database, a joint effort between the Inter-American Dialogue, a think-tank, and Boston University, China committed almost $100 billion to Latin America between 2005 and 2013 (see chart). The biggest dollops by far have come from the China Development Bank (CDB). These sums are meaningful. Chinese lenders committed some $15 billion last year; the World Bank $5.2 billion in fiscal year 2013; foreign commercial banks lent an estimated $17 billion.

More than half of China’s lending to Latin America has been swallowed by Venezuela, which pays much of the loan back from the proceeds of long-term oil sales to China. Ecuador has struck similar deals, as has Petrobras, Brazil’s state-controlled oil firm, which negotiated a $10 billion credit line from CDB in 2009.

Such loan-for-oil arrangements suit the Chinese, and not simply because they help secure long-term energy supplies. They also reduce the risk of lending to less creditworthy countries like Venezuela and Argentina. Money from oil sales is deposited in the oil firm’s Chinese account, from where payments can be directly siphoned.  It is no surprise that Chinese money is welcome in places where financial markets are wary. Ecuador, which defaulted on its debts in 2008, has used Chinese loans both to fill in holes in its budget and to re-establish a record of repayment in advance of trying to tap bond markets again.

But Chinese credit has its attractions in other economies, too. It often makes sense for countries to diversify sources of lending. Loans can open the door to direct investment. And as Kevin Gallagher of Boston University points out, the Chinese banks operate in largely different sectors to the multilaterals. Of the money China has lent in the region since 2005, 85% has gone to infrastructure, energy and mining. Borrowers may have to spend a proportion of their loan on Chinese goods in return; some observers worry about the laxer environmental standards of Chinese banks. But the main thing is that money is available. Expect the loan figures to rise.

Chinese lending to Latin America: Flexible friends, Economist,  Apr. 12, 2014, at 27