Washington Post Business

Shell preparing for world economy that shifts away from oil

FILE – This Wednesday, Jan. 20, 2016, photo shows the Shell logo at a petrol station in London. Royal Dutch Shell is planning for the day when demand for oil starts fading as major economies move away from oil and increasingly turn to electric-powered cars. (Kirsty Wigglesworth, File/Associated Press)

The Associated Press    By Danica Kirka       July 28, 2017

LONDON — Royal Dutch Shell is planning for the day when demand for oil starts fading as major economies move away from oil and increasingly turn to electric-powered cars, Chief Executive Ben van Beurden said Thursday.

Van Beurden welcomed recent proposals to phase out passenger vehicles powered by fossil fuels in Britain and France, saying they are needed to combat global warming. Shell is looking at “very aggressive scenarios” as it makes plans to remain competitive in a world that gets more of its energy from renewable sources and less from crude oil, or “liquids,” he said.

“The most aggressive scenario – much more aggressive than what we are seeing at the moment, by the way – with maximum policy effect, with maximum innovation effect, can see us peaking in liquids consumption somewhere in the early thirties,” he said as Shell reported second-quarter earnings. “If there are a lot of biofuels in the mix, that may mean that oil will peak in the late twenties, but then everything has to work up.”

Van Beurden’s comments come amid increased focus on the future of the industry after the Paris climate agreement saw governments commit to tougher action on emissions and shareholders push for more long-term plans.

Britain this week pledged to ban the sale of new cars and vans using diesel and gasoline starting in 2040 as part of a sweeping plan to tackle air pollution. France announced a similar initiative earlier this month.

Car makers are also moving in this direction. Volvo says that by 2019 all of its cars will be powered by electricity or hybrid engines.

“It’s not a surprise that the international super-majors are starting to accept a future with the question of just how much oil and gas is needed,” said David Elmes, an energy industry expert at Warwick Business School. “They realize that is now in their planning horizons and therefore needs to be discussed with shareholders because it is influencing the decisions today, and one might argue that has been prompted by shareholder activism.”

Shell has already begun to respond to changing energy demand by increasing its focus on natural gas, van Beurden said. But the company also needs to get involved in electricity and renewable energy and expand its petrochemicals business, he said.

Van Beurden also stressed that while developed nations are moving away from gasoline- and diesel-powered passenger vehicles, the world will continue to depend on these fuels for many years.

Developing nations don’t yet have the money or electricity networks needed to shift away from fossil fuels, and aviation, shipping and trucking can’t easily shift to non-hydrocarbon energy sources, he said.

“As far as oil and gas are concerned, and certainly as far as oil is concerned, you have to bear in mind that if we have a peak and then go into decline, this doesn’t mean that it is game over straight away,” van Beurden said.

Shell’s discussion of the future came as it said second-quarter earnings more than tripled due to cost cuts and recovering oil prices.

The Anglo-Dutch energy giant said profit adjusted for changes in the value of inventories and excluding one-time items rose to $3.60 billion from $1.05 billion in the same period last year. Net income rose 31 percent to $1.55 billion.

The earnings reflect efforts to restructure the business to cope with lower oil prices and the purchase of natural gas producer BG Group. Shell’s oil price averaged $45.62 a barrel for the quarter, up 16 percent from a year earlier. Prices were above $100 a barrel as recently as 2014.

“The external price environment and energy sector developments mean we will remain very disciplined, with an absolute focus on the four levers within our control, namely capital efficiency, costs, new project delivery, and divestments,” van Beurden said.

Motley Fool

Energy Transfer Partners LP Pipeline Problems Are Getting Worse

Two of the pipeline builder’s largest projects hit roadblocks this week, which could spell more trouble down the road.

Matthew DiLallo        July 26, 2017  

Energy Transfer Partners‘ (NYSE:ETP) has had its share of difficulties over the past year. The headliner was the problems it faced in building the Dakota Access Pipeline, which endured several months of setbacks due to protests that caused a delay in getting a key permit. While that project finally entered service last month, the issues with that pipeline haven’t gone away.

Unfortunately, those nagging issues aren’t the only problems facing the company. Just this week, two more of its pipeline construction projects came to a halt. Not only could these new roadblocks delay the in-service date of these key projects, which would have an adverse impact on its cash flow as well as the operations of its customers, but it would further tarnish the company’s already sullied reputation. That could haunt Energy Transfer in the future unless it cleans up its act.

Image source: Getty Images.

Rover’s problems spread to West Virginia

The largest project Energy Transfer currently has under construction is the $4.2 billion Rover Pipeline that would move natural gas from the Marcellus and Utica shale plays of West Virginia, Pennsylvania, and Ohio to market centers in the Michigan and Ontario. The company initially expected an in-service date of the first phase in July, with full service anticipated by November.

That said, the company hit a roadblock this spring after 2 million gallons of drilling fluids used in horizontal drilling underneath roads and waterways spilled into wetlands in Ohio. Worse yet, regulators found that the fluids didn’t just contain the clay and water mixture that Energy Transfer disclosed, but also had trace amounts of diesel. Because of that, the company hasn’t been able to complete any new directional drilling on the project, which has delayed the in-service date of the first phase until late summer.

Meanwhile, this past week environmental regulators in West Virginia ordered the company to stop work on certain sections of the pipeline after finding that it violated state rules and a water pollution permit. As a result, the company must cease work on these sections in the state until it regains compliance with all the terms and conditions of its permits and local laws.

Mariner East 2 hits a road block

Another major project for the company is the $2.5 billion Mariner East 2 natural gas liquids (NGL) pipeline, which would move NGLs from the Marcellus and Utica to an export terminal near Philadelphia. However, this project has also come under intense opposition and scrutiny. Its latest setback came this past week when a judge in Pennsylvania halted construction of the pipeline in a town in the southwestern part of the state due to a dispute over the location of a valve and other equipment, which the town says is in violation of a 2015 agreement.

That said, this isn’t the first problem with this construction project. The company already had to halt directional drilling due to another inadvertent release of drilling fluids in the area. Further, the company was recently fined by Pennsylvania’s Department of Environmental Protection for a violation during construction that affected wetlands in another part of the state.

Image source: Getty Images.

Customers are counting on these projects

These delays represent more setbacks for investors given that Energy Transfer Partners is counting on these projects to fuel its distribution growth plans. That said, it’s not just Energy Transfer’s investors that will feel the impact if these projects don’t start service as expected because many of its customers are counting them to drive future growth. Antero Resources (NYSE:AR), for example, is an anchor shipper on the Rover Pipeline, which it’s counting on to help it deliver on its long-term production targets to increase its gas output by 20% to 22% through 2020. Without the project, there might not be enough regional pipeline capacity, which could force Antero to scale back its growth plans. Meanwhile, Antero Resources is also an anchor shipper on Mariner East 2, which the company expects will improve the prices it realizes for its NGL production because it will have the ability to export them to international markets.

Southwestern Energy (NYSE:SWN) and Eclipse Resources (NYSE:ECR) are also counting on Energy Transfer’s projects entering service. In Southwestern Energy’s case, it’s rapidly ramping up production in Southwest Appalachia due to its view that new pipeline projects like Rover will reduce the discount its gas fetches compared to market rates from $0.67 in 2017 to $0.21 by 2019. Meanwhile, Eclipse Resources is planning to increase its output by a 25% compound annual rate in the coming years due in part to the greater market access it sees in the forecast once Rover enters service.

The black eye to its reputation might start to hurt

Energy Transfer Partners has taken quite a hit to its reputation over the past year due to the issues it has had with constructing its major pipeline projects. Because of that, it could become harder for the company to move forward with new projects because customers might be reluctant to sign up for capacity given its prior issues. That could give competitors the upper hand in winning new projects, which might impact the company’s ability to grow in the coming years. That dimming growth outlook gives investors less incentive to stick with the company over the long term unless it can clean up its act.

Matt DiLallo has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

Esquire

Made in the USA, Baby

Scott Walker, Foxconn, what could go wrong?

By Charles P. Pierce       July 27, 2017

(Permanent Musical Accompaniment To This Post)

Being our semi-regular weekly survey of what’s goin’ down in the several states where, as we know, the real work of governmentin’ gets done, and where you look for work and money and you walk a ragged mile.

The big news of the week comes to us from Wisconsin, where Scott Walker, the goggle-eyed homunculus hired by Koch Industries to manage that particular Midwest subsidiary, is all puffed up because Foxconn has decided to make liquid crystal screens in his state. Not only that, but the president* and Vice President Galatians are puffed up, too. From the Journal Sentinel:

“This is a great day for American workers and manufacturers and everyone who believes in the concept and the label ‘Made in the USA,’ ” said an ebullient President Donald Trump at the White House announcement. As Republicans in Washington struggle to repeal Obamacare and advance bills on tax cuts and infrastructure, Trump seized on the announcement as a win in a key swing state, crowing that the deal wouldn’t have been done “if I didn’t get elected.” The agreement represents an opportunity as well as a risk for Wisconsin — state lawmakers must now consider a subsidy package nearly 50 times bigger than the state’s previous record.”

It will surprise approximately nobody that the plant likely will be built on the home turf of obvious anagram Reince Priebus and Speaker Paul Ryan, the famous zombie-eyed granny starver. And then, ah, yes. The “incentives.” Always interesting, always reasonable, at the start of the deal.

“At $3 billion for 13,000 jobs, the Wisconsin deal would cost $231,000 per job. The subsidies would total more than the combined yearly state funding used to operate the University of Wisconsin System and the state’s prison system. The company would have to meet certain job and investment targets up front to get the money, which would include up to $1.5 billion in state income tax credits for jobs created, up to $1.35 billion in credits for capital investment and up to $150 million in sales tax exemptions on construction materials. In addition, like other manufacturers in Wisconsin, Foxconn would pay no corporate taxes on profits from sales on products made here. The incentives would cost the state about $200 million a year, but Foxconn’s payroll in Wisconsin could reach $700 million a year, Walker’s office said.”

This next part sounds creepy and more than a little Hazzard Countyish.

The factory project would involve a virtual village, with housing, stores and service businesses spread over at least 1,000 acres, according to interviews. That acreage, a 1.5 square-mile area the size of Shorewood, could be assembled from parcels that initially aren’t contiguous, the source said.

If Wisconsin is very lucky, Foxconn will not run a de facto slave-labor camp the way it does in China. An epidemic of worker suicides in, say, Kenosha would not be good for anyone. From The Guardian:

“In 2010, Longhua assembly-line workers began killing themselves. Worker after worker threw themselves off the towering dorm buildings, sometimes in broad daylight, in tragic displays of desperation – and in protest at the work conditions inside. There were 18 reported suicide attempts that year alone and 14 confirmed deaths. Twenty more workers were talked down by Foxconn officials… The corporate response spurred further unease: Foxconn CEO, Terry Gou, had large nets installed outside many of the buildings to catch falling bodies. The company hired counsellors and workers were made to sign pledges stating they would not attempt to kill themselves.”

Of course, thanks to Walker, Wisconsin is a right to work state now, so who knows? Obviously, this is a massive trust-but-verify gamble by the state government, and I suspect there will be more trusting than verifying involved as the project goes forward. Walker has promised to call a special session of the state legislature to debate the deal. Of course, this probably depends on whether or not he and his legislature ever get their acts together to produce a budget.

Sliding on down to Texas, where there’s an actual special session of the state legislature happening, we find that body still functioning as a petri dish for very contagious and really bad ideas, and doing it at light speed. From the good folk at The Texas Tribune:

“In abortion cases where complications arise, reporting to the state is already required. Under state Rep. Giovanni Capriglione’s House Bill 13, those requirements would get more strict: Physicians would have to submit reports to the state health commission within three days that include detailed information like the patient’s year of birth, race, marital status, state and county of residence, and the date of her last menstrual cycle. Physicians and facilities that fail to comply with the reporting requirements would face a $500 fine for each day in violation. “What I’m trying to do with this law is validate and verify data,” said Capriglione, R-Southlake.”

Of course, why wouldn’t anyone buy that?

Democrats fought the measure, which reproductive rights groups say would violate the privacy rights of doctors and patients, and is an attempt to intimidate abortion providers. It was approved on a 97-46 vote.

And it wouldn’t be a petri dish for very contagious and really bad ideas if bathrooms weren’t involved. From The Waco Tribune-Herald:

“If anything, tensions are running even hotter. Now at stake for Republican Gov. Greg Abbott, who faces re-election in 2018 and has gone against the tide of GOP governors who have shied from following the lead of North Carolina, is whether his party will deliver after ordering them to finish the job in a special legislative session that ends in August. Big business and police —two usually important groups to Texas Republicans — have urged Abbott to drop it. Just as the bill came to floor inside the Senate, police chiefs and commanders from Texas’ largest cities stood outside on the Capitol steps and railed against the effort as a waste of time.”

You have to wonder, don’t you, Governor Greg Abbott? If the police chiefs in Texas think this is a waste of time, exactly how far off the beam has your legislature fallen?

And we conclude, as is our custom, in the great state of Oklahoma, where Blog Official Abandoned Drive-In Theater Monitor Friedman of the Plains brings us yet another tale of stuff being where stuff is not supposed to be. From readfrontier.org:

A little more than half — 52 percent — of the oil estimated by the Corporation Commission to have been released during that time was recovered by the operator or a remediation company, and about two-thirds of the wastewater released was recovered, according to the data. The data reflects releases of oil and wastewater at locations such as well sites and storage tanks, and does not include spills from interstate pipelines, which are regulated by the U.S. Department of Transportation. In many cases, the numbers are only estimates of how much oil or wastewater was spilled, said Matt Skinner, spokesman for the Oklahoma Corporation Commission, and in some cases an estimated amount spilled may not have been provided or noted in the data field by the inspector. “There’s no way of knowing how much higher it would be. Chances are, (actual total amounts) would be to the high side, rather than the low side, but there’s no way of knowing,” Skinner said. “It can be very difficult to gauge unless the operator has the records where we can get a better idea.”

A business-friendly state economy remains full of surprises. Trust, but verify.

This is your democracy, America. Cherish it.

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AEP to Spend $4.5 Billion on the Largest Wind Farm in the U.S.

By Chris Martin and Jim Polson     July 26, 2017

• Project to include a new 350-mile, high-voltage power line
• Would become the largest single-site wind farm in the U.S.

U.S. utility giant American Electric Power Co. is looking to invest $4.5 billion in a massive wind farm spread across Oklahoma’s panhandle and a new transmission line that will carry the power to customers.

AEP will seek the necessary approvals from Arkansas, Louisiana, Oklahoma and Texas to buy the 2,000-megawatt Wind Catcher farm from developer Invenergy LLC, the Columbus, Ohio-based utility owner said in a statement Wednesday. The company is expected to file plans with state regulators on July 31.

The deal marks AEP’s largest renewable energy project ever and underscores a dramatic shift in America’s power resources. Once the largest consumer of coal in the U.S., AEP is now shuttering money-losing coal plants and diversifying its power mix along with the rest of the utility sector as renewable energy becomes cheaper and coal units more costly to maintain. Wind Catcher is set to become the largest wind farm in the nation and the second-biggest in the world, according to Invenergy.

AEP said it’ll need a 350-mile (563-kilometer), high-voltage transmission line to deliver the wind farm’s power to customers of its Southwestern Electric Power Co. and Public Service Co. of Oklahoma utilities. The company said it expects the low cost of the wind power will save their customers $7 billion over 25 years.

Southwestern Electric will own 70 percent of the project and power supplies, and Public Service of Oklahoma will get the rest.

Construction on the wind farm began in 2016, and the plant is scheduled to go into service in mid-2020, Invenergy said in an email. The company is contracted to run the farm, which is using General Electric Co. turbines, for the first five years.

AEP’s announcement comes less than a month after Oklahoma ended a tax credit for wind production, more than three years ahead of schedule. Governor Mary Fallin had said the industry no longer needed incentives.

With assistance by Mark Chediak

McClatchy   DC Bureau

Energy lobbyists spent big but failed to win on fracking

The Associated Press      July 26, 2017 

Annapolis, Md. The oil and natural gas industry spent more than $1.4 million to influence Maryland lawmakers during this year’s General Assembly session. But lobbyists still lost their fight to allow fracking in Maryland.

The Baltimore Sun reported Tuesday that the American Petroleum Institute paid almost three times as much as the next-biggest spender on lobbying. The figures were recently released by the State Ethics Commission.

Republican Gov. Larry Hogan and the Democratic majority in the General Assembly still agreed to ban the method of extracting natural gas.

The Maryland Hospital Association was the next-highest spender on lobbying at almost $500,000. The Maryland State Education Association, which represents the state’s teachers, came in third at almost $475,000.

Read more here: http://www.mcclatchydc.com/news/politics-government/national-politics/article163658868.html#storylink=cpy