First Oil

In March, the annual phenomenon “CERAWeek 2023 by S&P Global” took place in downtown Houston. Those of you who regularly visit our website, in addition to reading the monthly issues, will have noticed that we had considerable coverage of this gathering of high-level energy executives, politicos and analysts.  

However, we held back a couple of things from our extensive coverage, which we now bring you in this column. One of these is excerpts from the conversation between TotalEnergies Chairman and CEO Patrick Pouyanné and S&P Global Vice Chairman Dan Yergin, Fig. 1. In that conversation, Mr. Pouyanné seemed to be working hard to strike a balance between easing toward the energy transition and ensuring security of traditional supplies in the meantime. 

Fig. 1. TotalEnergies Chairman and CEO Patrick Pouyanné. Image: TotalEnergies.

“We are the industry scapegoat,” he said, pointing to public criticism of large energy companies. “But we also have a situation with Russia and Ukraine. [In terms of the energy market], things are worrying to me, like governments putting caps on [oil] prices. This can create a black market.” 

The TotalEnergies head said that he also must cope with different operating styles in varied parts of the world. “It’s interesting to be here, in the U.S., and see differences with the European market,” observed Pouyanné. “In the U.S., you have many natural resources, some that you can export. In Europe, we are importing energy.” 

Asked about the levels of investment for oil and gas across the globe, Pouyanné had a simple, direct answer. “At the end of the day, the capital will be spent where it is most efficient.” 

It was about at this point in Pouyanné’s conversation with Yergin, when a female protestor (dressed business-like to blend in with the crowd) jumped up on a chair at a table that was front and center of the stage, unfurled a sign, and began yelling things like “stop greenwashing,” “stop the lies,” and “stop big oil.” It took security personnel and event officials about a minute-and-a-half to work their way through the crowd, grab the protestor, and escort her out of the hall. Meanwhile, Pouyanné looked bemused, while Yergin appeared to be aggravated.  

Back to the issue of the energy transition. The chairman expressed his concern that the process is not easy, especially if one is trying to ensure security of supply at the same time. “If we were able to ban all the coal plants and replace them with natural gas, we would be on track,” said Pouyanné. “But this has become a form of religious discussion. But we also need energy security.” 

Pouyanné said that TotalEnergies is well-positioned to be a major player in further development of the global energy market. “We (TotalEnergies) manage 10% of the world’s energy; we are the number-three company. We also control 15% of the gas. Our integration means we play the entire value chain.” 

Nuggets of wisdom from Senator Sullivan. Meanwhile, also during CERAWeek, Alaska Senator Dan Sullivan (Rep., Fig. 2) chatted with Yergin, principally about the Willow field development project (which the Biden administration has since approved) but also about other issues. For instance, there is the problem of permitting, where the federal government takes forever to permit any kind of energy project, whether it be oil and gas or renewables. 

Fig. 2. Senator Dan Sullivan (R-Alaska). Image: Official portrait.

“We need permitting reform for everything; to build a bridge, to build a road, to build a mine, to build an oil rig, to build renewables,” declared Sullivan. “It's all of the above. We need it. And again, this administration, it's (permitting) frustrating with them. I agree with Senator Manchin (D-W.Va.), though. We needed to move that forward. The infrastructure bill, which I voted for, wasn't perfect, but it had some good permanent reform in it.  But the Administration four months later puts out new rules on permitting from the White House that were clearly targeting the oil and gas sector to make it harder to fight. You know, Mr. President, your biggest signature achievement, the infrastructure bill, just passed and now you're putting out regulations that make it harder to produce energy, which they clearly were.” 

Sullivan also commented on the national security implications of faulty energy policy. “I've been talking a lot about how the invasion of Ukraine reveals something a lot of us were already seeing,” said the senator. “But we've clearly entered a new era of authoritarian aggression led by Vladimir Putin, but also by Xi Jinping. They're working closely together. They are driven by historical reasons. They're paranoid about their democratic neighbors and they're willing to use aggressive action, including military force, against their neighbors.” 

Furthermore, elaborated Sullivan, the U.S. needs to recognize that we are in a new era that is going to be around for decades. “[We need to] face it, with strategic resolve and confidence,” he analyzed. “And because we have so many strategic advantages over these dictatorships that in many ways are presented here today, our network of allies, our very lethal and professional military, are dynamic economy, [and] our resources and energy power. And, of course, I think most important, our commitment to liberty and democracy.”   

Sullivan added that he thinks the U.S. needs “this American instrument of power called American energy—all of the above [sources]. And I think the invasion [of Ukraine] has revealed the folly of the administration's energy policies, which have been pretty much focused on shutting down the production of American energy, have made it harder to move energy, encouraging financiers to not invest in American energy. I think that's all coming home to roost, and people are recognizing that's been a strategic mistake.”  

Slight movement on the UK’s windfall tax? Earlier this month, Chancellor of the Exchequer Jeremy Hunt (Fig. 3) was said to be considering limiting the windfall tax on the profits of UK oil and gas companies to allay industry concerns. Under proposals being considered by the Treasury, the additional 35% levy would reportedly cease to apply if energy prices fall below a given level. Without a price floor, energy firms would have to pay the extra tax through to 2028, even if prices drop back to longer-term trends. 

Fig. 3. UK Chancellor of the Exchequer Jeremy Hunt. Image: Official portrait.

It was predicted that this policy change would not be included in Hunt’s annual budget, which was released on March 15. Sure enough, there was no mention of any such change  (although the budget does commit to invest £20 billion over the next two decades on low-carbon energy projects, with a focus on carbon capture and storage). However, Bloomberg reported that it was suggested by a senior official that a change to the windfall tax could yet be introduced at a future time. The next opportunity might be a statement from Hunt in the fall.  

For the Treasury to even consider amending the tax shows that the Conservative regime is worried about increasing investment and growing the economy, as well as reducing dependence on imports of foreign oil and gas. The UK’s industry has been calling for the windfall tax to be scrapped when prices fall back to “normal levels,” saying the 35% levy inhibits investment. 

Kudos to the NL provincial government. Just when it looked like virtually all governments are incapable of formulating sound energy policy, the provincial regime of Newfoundland and Labrador (NL) in East Canada has proven to be an exception. As articulated by the province’s primary association, Energy NL, the NL government released its budget on March 23, and the industry group said it “welcomes a number of the initiatives.” These include reinstatement of the offshore seismic program (which was halted during 2022), support for the renewable sector, continuation of the Offshore Exploration Initiative, and assessment of natural gas opportunities. The energy sector continues to be an economic driver, responsible for approximately 20% of provincial GDP and an approximatively $100 million contribution to the Future Fund. 

“Overall, I see Budget 2023 as positive for the energy sector,” said Energy NL CEO Charlene Johnson. “The return of the offshore seismic program is important to our industry. Seismic data is used to help determine where exploration should occur and has the best chance of being successful. Moreover, it is used to attract investment into the offshore through the land sale process. Seismic will also play an important role as we look for possible locations to store carbon.” 

More ridiculous Biden utterings. Sometimes, you just can’t make up this stuff. First, we had U.S. President Joe Biden stating during his State of the Union speech in February that “We’re going to need oil for at least another decade.” Of course, all of us know that Jabbering Joe was wrong by several decades. For him to say that is both ignorant and irresponsible. 

But, as bad as that statement might have been, Jabbering Joe outdid himself a month later. During a March 13 interview on “The Daily Show,” Biden declared, “If we don’t keep the temperature from going above 1.5 degrees Celsius raised, then we’re in real trouble. That whole generation (18 to 35 years old) is damned. I mean, that’s not hyperbole; really, truly in trouble.” 

This is just outrageous, irresponsible rhetoric from Biden. All it does is stoke fear in a particularly impressionable demographic group, many of whom are still inclined to take the President at his word, rather than analyze the situation independently. His comments also tend to sway people against the oil and gas industry. Maybe that was a motivation of Jabbering Joe and his advisors. What the U.S. needs is a calm, rational and analytical discussion of its energy and climate future—something akin to what Sens. Joe Manchin (D-W.Va.) and Lisa Murkowski (R-Alaska) have been calling for. But we’re not getting it from Biden’s crew. 

IN THIS ISSUE 

Special focus: Sustainability. In our lead theme, a Coretrax author talks about expanding EOR limits by deploying a rig-less expandable straddle and delivering efficient production optimization. Meanwhile, the UK’s TÜV SÜD National Engineering Laboratory discusses measurement of CO2 throughout the CCUS chain. Over at SLB, Chief Strategy and Sustainability Officer, Dr. Katarina Beumelburg, describes how digital adoption, collaboration and industry leadership will shape the future of energy operations and transition. ADC Energy says ensuring that rigs being reactivated still have the right specifications, and are fit for purpose, requires technical experience and expertise. Finally, combining sustainability with rig technology, a Caterpillar Oil & Gas manager explains how hybrid solutions enable natural gas power generation for reliable, on-demand performance of rigs. 

Driling technology: AI’s inherent value to well construction.  A pair of SLB authors explain that as ML applications become easier to access and use, they are setting the stage for rapid scaling across the E&P industry to assist the human decision-making process. A new ML-based drilling system recommender illustrates how this scaling is improving drilling performance and reducing energy extraction costs. 

Coiled tubing technology: How to plan a CTD campaign. AnTech’s global operations manager says that coiled tubing drilling can be very cost-effective in developing mature fields. Through careful planning, the benefits of underbalanced drilling—and the increased production it delivers—can be achieved for less than the cost of sidetracking existing wells, using a conventional drilling rig. 

About the Authors

Kurt Abraham

World Oil

Kurt Abraham kurt.abraham@worldoil.com