UK cuts energy price cap, targets more oil, gas
The UK government will fix the energy retail price cap at £2,500/yr ($2,870/yr) for a 'typical' home for two years and will seek to accelerate domestic supply by launching a new North Sea oil and gas licensing round and lifting a moratorium on hydraulic fracturing (fracking), prime minister Liz Truss said today.
She set a target for the UK to be a net energy exporter by 2040, and said new energy minister Jacob Rees-Mogg will set out a plan to achieve this.
The energy price cap will apply from 1 October, superseding one of £3,549/yr set by energy regulator Ofgem on 26 August. Businesses, charities and public sector bodies will receive equivalent support for six months and there will be a separate fund to support households that use heating oil and heating networks, Truss said.
Emergency legislation will be brought forward to ensure the policy is delivered and finance minister Kwasi Kwarteng will set out the costs "later this month," Truss said. There will be a temporary suspension of so-called green levies on bills, she said.
But Truss did not sway from her position on a windfall tax on producers, having consistently emphasised her opposition to them in recent weeks. A windfall tax "would undermine the national interest," she said.
"There will be a cost to this intervention," Truss said, but in the longer term, energy supply must be increased.
New licensing round, fracking moratorium lifted
Truss expects the new offshore licensing round to lead to more than 100 new licenses. A moratorium on shale gas extraction, or fracking, will end "where there is local support for it." No details were given on how this support would be assessed, but this is in line with her pledges during the Conservative party leadership contest.
Rees-Mogg is more firmly supportive of fracking, but backing within Truss' party has been lacklustre, including from new finance minister Kwarteng, who was previously energy minister. The process would be too slow and output too low to offer much relief to tight supply and high prices, former energy and clean growth minister Greg Hands said in March.
New North Sea licences may not mean new supply comes on stream in the near future. Industry body Offshore Energies UK (OEUK) noted that if all projects currently awaiting approval from the UK government go ahead, they would add around 10pc extra to current oil and gas supply, but production from those developments would not peak until 2027. Opposition Labour party leader Keir Starmer said today that "doubling down on fossil fuels is a ludicrous answer to a fossil fuel crisis".
Truss also pledged to "speed up our deployment of all clean and renewable technologies," including hydrogen, solar, wind and carbon capture and storage, and will establish an energy supply task force to negotiate long-term contracts with domestic and international suppliers. This will be led by Madelaine McTernan, who led the UK's vaccines response during the Covid-19 pandemic.
Truss promised a review of energy regulation, to form a "new approach that will address supply and affordability for the long term," and one to map out how the UK will reach its legally binding net-zero emissions by 2050 target.
Related news posts
US Fed signals rates likely to stay high for longer
US Fed signals rates likely to stay high for longer
Houston, 1 May (Argus) — Federal Reserve policymakers signaled they are likely to hold rates higher for longer until they are confident inflation is slowing "sustainably" towards the 2pc target. The Federal Open Market Committee (FOMC) held the federal funds target rate unchanged at a 23-year high of 5.25-5.5pc, for the sixth consecutive meeting. This followed 11 rate increases from March 2022 through July 2023 that amounted to the most aggressive hiking campaign in four decades. "We don't think it would be appropriate to dial back our restrictive policy stance until we've gained greater confidence that inflation is moving down sustainably," Fed chair Jerome Powell told a press conference after the meeting. "It appears it'll take longer to reach the point of confidence that rate cuts will be in scope." In a statement the FOMC cited a lack of further progress towards the committee's 2pc inflation objective in recent months as part of the decision to hold the rate steady. Despite this, the FOMC said the risks to achieving its employment and inflation goals "have moved toward better balance over the past year," shifting prior language that said the goals "are moving into better balance." The decision to keep rates steady was widely expected. CME's FedWatch tool, which tracks fed funds futures trading, had assigned a 99pc probability to the Fed holding rates steady today while giving 58pc odds of rate declines beginning at the 7 November meeting. In March, Fed policymakers had signaled they believed three quarter points cuts were likely this year. Inflation has ticked up lately after falling from four-decade highs in mid-2022. The consumer price index inched back up to an annual 3.5pc in March after reaching a recent low of 3pc in June 2023. The employment cost index edged up in the first quarter to the highest in a year. At the same time, job growth, wages and demand have remained resilient. The Fed also said it would begin slowing the pace of reducing its balance sheet of Treasuries and other notes in June, partly to avoid stress in money markets. By Bob Willis Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
FERC OK’s Virginia Transco gasline expansion
FERC OK’s Virginia Transco gasline expansion
New York, 1 May (Argus) — The US Federal Energy Regulatory Commission (FERC) today gave Williams the green light to expand natural gas capacity to Virginia by 101mn cf/d (2.9mn m3/d) on its Transco pipeline. The project, called the Commonwealth Energy Connector, involves the construction of 6.3 miles of new pipeline within Transco's existing right-of-way in southeast Virginia, near the border with North Carolina. The project also includes adding horsepower at compressor station 168, west of the new pipeline segment. Williams plans to begin construction this winter and put the project into service by the end of 2025. Environmental advocacy group Sierra Club opposed the project, arguing FERC failed to assess its potential greenhouse gas emissions, rendering its National Environmental Policy Act analysis moot. FERC disagreed, conceding that although the project's final Environmental Impact Statement demonstrated it would contribute to greenhouse gas emissions, the effects of those emissions on the environment could not be measured because FERC lacks the methodology to do so. The US south-Atlantic gas market has become more volatile in recent years as gas and power demand have soared, outpacing pipeline capacity expansions in the region. The combined gas consumption of Virginia and North and South Carolina in 2022 averaged 4.7 Bcf/d, up by 69pc from a decade earlier, US Energy Information Administration data show. Regional gas and power consumption is widely expected to continue climbing through the end of the decade on a massive build-out of data centers , especially in Virginia. By Julian Hast Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Cenovus boosts oil sands output by 4pc in 1Q
Cenovus boosts oil sands output by 4pc in 1Q
Calgary, 1 May (Argus) — Canadian integrated Cenovus Energy increased its oil sands production by 4pc in the first quarter, led by gains at Lloydminster Thermal and Foster Creek heavy crude assets, and the company plans to boost output further to supply the newly opened Trans Mountain Expansion (TMX) pipeline. Cenovus pumped out 613,000 b/d of crude from its oil sands projects in Alberta, up from 588,000 b/d in the same quarter last year, the Calgary-based company reported on Wednesday. This was one of the highest producing quarters for Cenovus' oil sands assets since acquiring Husky in early 2021, second only to the 625,000 b/d produced in the fourth quarter that year. Cenovus has a commitment of about 144,000 b/d on the newly completed 590,000 b/d TMX pipeline, which was placed into service on Wednesday , and the company has plans to push upstream output higher over the next several years across its portfolio to meet its commitment. The pipeline nearly triples the amount of Canadian crude that can reach the Pacific coast without first having to go through the US. First-quarter production from the Lloydminster Thermal segment rose to 114,000 b/d, up from 99,000 b/d a year earlier, because of higher reliability, according to Cenovus. Cenovus' Foster Creek production rose to 196,000 b/d of bitumen, up from 190,000 b/d in first quarter 2023. The company plans to bring another 30,000 b/d online at the steam-assisted gravity drainage (SAGD) asset by the end of 2027 through optimization projects. To the north, Christina Lake's first-quarter bitumen output of 237,000 b/d was steady with previous quarters. The asset is expected to get a significant boost by the end of 2025 when a pipeline connecting the project to output from the neighbouring Narrows Lake asset is completed. The 17 kilometer (11 mile) Narrows Lake tie-back will add 20,000-30,000 b/d of bitumen to Christina Lake, which already ranks as the industry's largest SAGD project. The pipeline is 67pc complete and should be placed into service in early 2025, Cenovus executives said Wednesday on an earnings call. Northeast of Fort McMurray, Alberta, new well pads are planned at Sunrise in 2025, where Cenovus also plans to push production higher by 20,000 b/d. Sunrise produced an average of 49,000 b/d in the first quarter this year, up from 45,000 b/d in the same quarter 2023. Cenovus' output company-wide rose to 801,000 b/d of oil equivalent (boe/d) in the first quarter, up from 779,000 boe/d a year earlier. This includes oil sands, natural gas liquids, natural gas, conventional and offshore assets. Cenovus posted a profit of C$1.2bn ($871mn) in the quarter, up from a C$636mn profit during the same quarter of 2023. By Brett Holmes Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
US gas industry pins hopes on AI power demand
US gas industry pins hopes on AI power demand
New York, 1 May (Argus) — US natural gas producers and pipelines have pivoted almost in unison this year to talking up what they see as one of the strongest bullish cases for gas this decade: surging electricity demand from yet-to-be-built data centers to power artificial intelligence software. EQT, the largest US gas producer by volume, in an investor presentation last week called growing data center demand the "cornerstone" to the "natural gas bull case." Combining its own research with data from the US Energy Information Administration, the gas giant forecast an increase in gas demand of 10 Bcf/d (283mn m3/d) by 2030 to generate electricity, mostly to run data centers. Its more aggressive data center build-out scenario envisions a whopping 18 Bcf/d increase in gas demand through 2030. Total US gas production is currently about 100 Bcf/d. Kinder Morgan, one of the largest US gas pipeline operators, this month forecast 20pc of US power being gobbled up by data centers in 2030, up from a 2.5pc share in 2022. Cobbling together projections from several consultancies and financial advisories, the company said the electricity needed to run artificial intelligence software alone will comprise 15pc of US power demand by 2030. If just 40pc of that demand is met by gas, that would represent an increase in gas demand of 7-10 Bcf/d, it said. This is roughly in line with the high end of US bank Tudor Pickering Holt's forecast for gas demand to power data centers through 2030 (1.3-8.5 Bcf/d) and well above Goldman Sachs' and consultancy Enverus' projections of 3.3 Bcf/d and 2 Bcf/d, respectively. New tech, old problems Separating the wide ranges of these projections is the highly speculative nature of forecasting demand years into the future for competing energy sources to power next-generation technology. But the major upside and downside risks, analysts say, concern the more humdrum challenges of permitting and building out energy infrastructure. Goldman Sachs expects 28GW, or 60pc, of the generation capacity needed to power new data centers through 2030 will come from natural gas — 9GW from combined cycle gas turbines and 19GW from gas peaker plants. But with an average lag of four years from the time a gas transmission project is announced to the time it enters service, to say nothing of the high probability of litigation being brought by environmentalists and landowners, construction and permitting timelines are "the most top of mind constraint for natural gas," the bank said. Indeed, litigation and opposition from state regulators have ultimately led developers to call off several interstate pipeline projects in the eastern US in recent years. The exception to the rule, Equitrans' 2 Bcf/d Mountain Valley Pipeline is moving forward only because congressional action allowed it to bypass federal permitting hurdles. This is a particular problem for the gas industry's hopes of exploiting the data center boom, as a large share of future data centers are slated to be built in the southeast US, far from the major US gas fields. New data centers representing 2 Bcf/d of gas demand in Georgia probably requires a new pipeline into the southeast, FactSet senior energy analyst Connor McLean said. Southeast premium A significant data-center buildout in the southeast without new pipelines could put upward pressure on regional gas prices, McLean said. This could exacerbate the effects of what has become perhaps the most prominent bullish case for US gas: a massive build-out of LNG export terminals along the US Gulf coast. With new export terminals pulling increasing volumes of gas south along the Transcontinental gas pipeline to super-chill and ship overseas in the coming years, the build-out in data centers will likely produce "an even bigger deficit in that southeast (gas) market," EQT chief financial officer Jeremy Knop told investors last week. "We think that market really, in time, becomes the most premium market in the country," he said. By Julian Hast Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Business intelligence reports
Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.
Learn more