Biden win raises doubts on new US pipeline projects

  • Market: Crude oil, Natural gas, Oil products
  • 11/16/20

US pipeline projects will face greater obstacles under a Joe Biden presidency, and some could face the end of the road. But a clampdown on new lines may make existing ones more valuable, and some could be repurposed in an energy transition.

Biden's election win promises an abrupt shift in federal energy policy, including expanding renewables and rescinding preferential policies for the oil and gas sector. His victory over President Donald Trump could spell the end of a very long road for the totemic Keystone XL — an $8bn, 830,000 b/d project that has been on the books for more than a decade, seeking to move crude from western Canada to the US midcontinent (see map). Biden's campaign has pledged to withdraw the presidential permit needed for Keystone XL to operate, ringing a possible death knell for the pipeline.

Canadian firm TC Energy downplayed the Biden risk, banking on the appeal of its partnerships with five indigenous peoples groups as well as $1.6bn in labour agreements with US trade unions. But the company is facing legal headwinds after a key water permit was thrown out by US courts.

The new Democratic administration will be under pressure from environmental groups to take aggressive action on climate issues, and one of the biggest targets is US midstream firm Energy Transfer's Dakota Access pipeline. The 570,000 b/d line, in service since 2017, is facing a possible shutdown in December because of a court case surrounding its environmental permitting. Biden's running mate Kamala Harris was one of three dozen lawmakers who in May urged a federal court to shut the line while a new environmental review is pending. Energy Transfer says it is confident that Dakota Access will continue to operate as the case moves through the courts. But a Biden administration could intervene.

A Biden presidency will also bring a halt to an overhaul of infrastructure permitting rules that Trump finalised this year. Those revisions sought to fast-track the approval of natural gas pipelines and other infrastructure by removing the need for regulators to evaluate "remote" effects such as climate change. Biden has vowed to reverse the changes and apply greater scrutiny on how building new pipelines could increase or reduce emissions. His victory could also pose permitting obstacles for large projects under construction, such as the $6bn Mountain Valley gas pipeline. Environmentalists have asked regulators to revisit how construction could affect endangered species and water quality along the line's route.

Taking the high ground

While some projects face a tougher road ahead, US midstream operators are touting the value of pipelines already in the ground. A Biden government could lift the value of existing infrastructure and rekindle interest in a waning midstream corporate structure, US independent refiner Phillips 66's chief executive, Greg Garland, says. Higher corporate taxes favoured by Democrats could increase the value of master limited partnerships that proliferated under President Barack Obama but have consolidated under Trump. And a Democratic administration would support the spread of interest in climate programmes and accounting for the cost of carbon, he says.

US pipeline operator Kinder Morgan chairman Richard Kinder says the firm's vast pipeline infrastructure could be adapted to "play an important role in facilitating many of the changes being advocated to lessen global emissions". Kinder Morgan could modify lines to carry green hydrogen or renewable diesel, he says. Midstream firms' third-quarter earnings calls showed a clear pivot on climate change in the sector, with pipeline giant Enbridge going as far as to pledge net zero carbon emissions from its operations by 2050.

US and Canada pipelines

Sharelinkedin-sharetwitter-sharefacebook-shareemail-share

Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

News
02/22/24

Rising prices weigh on WAF gasoil imports

Rising prices weigh on WAF gasoil imports

London, 22 February (Argus) — Gasoil and diesel imports to west Africa are on track to slide to a 16-month low in February as rising prices weigh on demand. Vortexa data show 728,000t of gasoil and 10ppm diesel arrived in west Africa by sea on 1-21 February, equivalent to 34,700 t/d. This is 15,100 t/d lower than the daily average across the whole of January. Cameroon has not imported any at all so far this month after receiving 2,000 t/d in January. Imports to Ghana, Angola and Senegal are all down on a daily average basis. Market participants say buying interest in Ghana has been constrained by a weaker local currency, which has reduced access to US dollars. Currency depreciation is also affecting purchasing power in Nigeria, although gasoil imports to Nigeria have bucked the regional trend and are running 1,900 t/d higher so far this month than the January daily average. Market participants say traded volumes in the region have been below average this month. Higher prices are a key factor. The price of 10,000-20,000t high-sulphur gasoil cargoes delivered by ship-to-ship transfer at the regional offshore Lome trading hub in Togo were indicated at around $45/t above the front-month Ice gasoil futures contract on 22 February. For comparison, 30,000t cargoes of ultra low-sulphur diesel cif ARA were assessed at a much lower premium of $27.25/t to Ice gasoil on 21 February. Ice gasoil itself has rallied in recent weeks, hitting a more than three-month high of $918.25/t on 9 February as concerns over supply disruption in the Atlantic basin persist in the wake of attacks on commercial shipping by Yemen's Houthi rebels in and around the Red Sea, a key route for getting diesel and gasoil from east of Suez to northwest Europe. Inland shortfalls The drop in seaborne imports to west Africa is squeezing supply to inland countries in the landlocked Sahel region, which increasingly rely on volumes shipped to Togo. Gasoil and diesel imports to Togo have been on a downward trend since September last year and this is likely to continue this month, with only 27,500t arriving on 1-20 February, according to Vortexa. As a result, Togo and landlocked Burkina Faso, which relies entirely on overland deliveries, are currently experiencing a shortage of gasoil, market sources said. Another aggravating factor is landlocked Niger's inability to transport gasoil from its Soraz refinery by land to neighbouring Burkina Faso and Mali because of Islamist security threats along those countries' borders, one market participant said. The refinery has had to readjust run rates as it has built up ample gasoil stocks, the source added. Traders in Niger are exploring opportunities to export gasoil to neighbouring Chad instead. Chad is experiencing a shortage of gasoil after product from the country's 20,000 b/d Ndjamena refinery was sold to the Central African Republic at higher prices than domestic values, with traders taking advantage of the lack of Sudanese exports since the country's sole 100,000 b/d Khartoum refinery was bombed in November . The gasoil undersupply in the Sahel comes as Niger's president Abdourahamane Tiani, who took power in a coup in July last year, met with representatives from Togo, Burkina Faso, Mali and Chad on 17 February to discuss regional energy projects, with a view to reaching greater energy autonomy for the landlocked region. Tiani said in December last year that he wants an increase in domestic refining capacity , after a project to increase jet fuel yields at the Soraz refinery was delayed by July's coup. By George Maher-Bonnett Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Read More
News

Ship speeds on Red Sea rerouting to 'erode' GHG cuts


02/22/24
News
02/22/24

Ship speeds on Red Sea rerouting to 'erode' GHG cuts

Edinburgh, 22 February (Argus) — Ships increasing speed as they are forced to sail longer routes to avoid Houthi attacks in the Red Sea could "erode" environmental gains in shipping, the United Nations Conference on Trade and Development (UNCTAD) said today. The shipping sector has for over a decade reduced sailing speeds to cut fuel costs and reduce greenhouse gas (GHG) emissions, UNCTAD said. Speed optimisation is one of the solutions shipowners can consider to improve their rating under the International Maritime Organisation's (IMO) carbon intensity indicator (CII) measures which came into force in January 2023. Container ships' speeds for voyages around the Cape of Good Hope at the southern tip of Africa have increased since the Red Sea disruption started late last year. Container trade flows measured in tonnes account for over half of traffic through the Suez Canal, according to the Suez Canal Authority. Higher speeds are likely being used as a way of adhering to delivery schedules but also to manage fleet capacity, as longer routes mean vessels are employed for a longer period of time. UNCTAD said that these trends could erode environmental gains previously achieved by ships reducing speeds, or slow steaming. The organisation calculated that a ship increasing speed to 16 knots from 14 knots would increase bunker fuel consumption per mile by 31pc. "In this context, longer distances travelled due to rerouting away from the Suez [Canal] and through the Cape of Good Hope imply that greenhouse gas emissions for a round trip from Singapore to northern Europe would rise by over 70pc," it said. Ship tonnage entering the Gulf of Aden declined by over 70pc between the first half of December 2023 and the first half of February 2024, while ships passing the Cape of Good Hope increased by 60pc, UNCTAD noted. The security issues in the Red Sea have also affected insurance costs for shipowners, UNCTAD said. "By early February 2024, some reports indicate [risk] premiums rising to around 0.7pc to 1pc of a vessel's value, from under 0.1pc previously," UNCTAD said, citing a report by ratings agency Moody's. Ships avoiding the Suez Canal, particularly container vessels, also pose a risk to "global supply chains, potentially leading to delayed deliveries, heightened costs and inflation", it said. "The war in Ukraine had already shown the impact of longer distances and freight rates on food prices." UNCTAD estimates that about half of the increase in food prices observed in 2022 resulted from increased transport costs caused by longer distances and higher freight rates. By Caroline Varin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Indonesia’s PIS issues spot Suezmax freight tender


02/22/24
News
02/22/24

Indonesia’s PIS issues spot Suezmax freight tender

Singapore, 22 February (Argus) — Indonesia's Pertamina International Shipping (PIS) has issued a spot Suezmax vessel freight tender to move 1mn bl of crude oil for late-March loading. PIS — a wholly-owned subsidiary of Indonesian state-owned refiner Pertamina — is seeking a vessel loading from Girassol, Angola to two discharge ports in Indonesia's Balongan and Balikpapan, with 21-22 March loading dates. The tender will close at 6pm Singapore time (10am GMT) on 22 February with validity until 7.15pm. The shipment can have a maximum unavoidable transportation loss of up to 0.07pc, according to the tender. Suezmax shipment rates from west Africa towards India have fallen from this year's high. Argus- assessed lumpsum rates for 130,000t shipments from the west Africa region to the east coast of India fell to $4.5mn on 21 February, from $5.7mn on 10 January. Suezmaxes especially are choosing to stay in the Mediterranean and northwest Europe after discharging in Europe instead of going to west Africa or the US Gulf, where high vessel supply and limited activity continue to weigh on rates. By Sean Zhuang Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

India’s Gail seeks to add LNG tanker for US project


02/22/24
News
02/22/24

India’s Gail seeks to add LNG tanker for US project

Mumbai, 22 February (Argus) — Indian state-controlled gas distributor Gail plans to add an LNG tanker to ship cargoes from the US, two persons with knowledge of the matter told Argus . Gail is seeking delivery of the tanker between October 2024 and September 2025 for a minimum period of seven years, which can be extended by another two years, a source in a shipping firm said. The tanker would have a capacity of 159,000m³ to 181,000m³ to transport the fuel from the US. Gail has a term deal for 3.5mn t/yr of LNG from the US' Sabine Pass terminal and 2.3mn t/yr from Cove Point, valid till 2038. The firm currently has four LNG tankers to bring the super-chilled fuel from the US, which includes two-time charter agreements with Japan's Mitsui O.S.K Lines and the rest with NYK Line. The new tanker will help Gail bring more US LNG cargoes to the country instead of swapping cargoes. It will also provide more operational flexibility to the firm, keep its downstream consumers adequately supplied and at the same time reduce supply uncertainty stemming from geopolitical conflicts like the continuing Red Sea tensions. Gail has sold some LNG cargoes sourced from Cheniere Energy's terminal in the Gulf of Mexico to an unnamed highest bidder in Europe, Argus had reported quoting Gail's director of marketing Sanjay Kumar on the sidelines of the India Energy Week in Goa on 9 February. Gail used the proceeds from the sale to source spot cargoes from Gulf countries — shipments which do not have to transit through the Suez Canal to reach India. The firm is likely to issue more LNG tenders to swap US term cargoes with supplies closer to India as cargoes face difficulty in transiting the Suez Canal, Kumar added. The conflict in the Red Sea since December 2023 has disrupted shipping operations as tankers heading to India have been taking the longer route around the Cape of Good Hope. An inability to take the shorter Suez Canal route adds up to seven days in delays for Gail's US LNG shipments to reach the 17.5mn t/yr Dahej LNG import terminal on the west coast of India, Kumar said. Gail offered several LNG cargoes from the Cove Point LNG export terminal in 2017, in order to overcome the problem of a shortage of tankers that could deliver supplies to India. The swap deal resulted in shorter and more efficient deliveries as the swapped cargo ideally would come from a terminal closer to India as compared to the US, and the Cove Point cargo would go to a destination nearer to the US as compared to India. But swap tenders from the US have declined because of availability of four LNG tankers to bring cargoes to India. Gail originally planned to bring all its US cargoes into the country this year, but the conflict in the Red Sea prompted the firm to change tack and issue swap tenders instead, a source with knowledge of the matter said. By Rituparna Ghosh Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Australia’s Qantas flags higher 2023-24 jet fuel costs


02/22/24
News
02/22/24

Australia’s Qantas flags higher 2023-24 jet fuel costs

Sydney, 22 February (Argus) — Australian airline Qantas Airways still expects to incur a record fuel bill in the 2023-24 fiscal year to 30 June, according to its half-year results. Its fuel costs are expected to be A$5.4bn ($3.54bn) at current fuel prices, inclusive of hedging, with 2023-24 jet fuel consumption, including sustainable aviation fuel, predicted to be 81,000 b/d or 19pc higher than the 68,000 b/d recorded in 2022-23. Qantas group's fuel expenditure in 2022-23 was A$4.6bn. New Airbus A321LR aircraft delivered to its budget subsidiary Jetstar are resulting in a 20pc improvement in fuel burn per seat, Qantas said, contributing to a 12pc unit cost improvement compared with the older A320 aircraft they will replace. The airline said this is helping it reach an interim emissions reduction target of 25pc by 2030 . Qantas ordered a further eight A321XLRs for domestic flights for a total order of 28, with the first aircraft arriving in early 2025. Qantas' domestic group capacity guidance for 2023-24 was left unchanged at 103pc of its pre-Covid-19 pandemic figure. But international capacity guidance, excluding Jetstar Asia, was revised down to 94pc from a previous 95pc. Jetstar Asia capacity will reach 42pc of the pre-Covid figure, Qantas said, up from a previous guidance of 40pc. Qantas' July-December profit after tax was A$869mn, down from A$1bn in the previous corresponding period, while revenue of A$11.1bn was up on the 2022-23 first-half figure of A$9.9bn. By Tom Major Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.