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In the United States, electricity consumption is growing fastest in Texas, where the Electric Reliability Council of Texas (ERCOT) manages 90% of the load on the state’s power grid. One of the main sources of growing demand for power is large-scale computing facilities such as data centers and cryptocurrency mining operations, although their future demands are uncertain. In our latest Short-Term Energy Outlook (STEO), we expect electricity demand from customers identified by ERCOT as large flexible load (LFL) will total 54 billion kilowatthours (kWh) in 2025, up almost 60% from expected demand in 2024. This expected demand from LFL customers would represent about 10% of total forecast electricity consumption on the ERCOT grid next year.

These facilities consume large amounts of electricity, both to run their computing equipment and to keep them cool. Some of the larger facilities can consume as much electricity as a medium-sized power plant. In mid-2022, ERCOT developed a program for approving proposed LFL customers (those with an expected peak demand capacity of 75 megawatts [MW] or greater) to ensure grid reliability. The LFL Task Force publishes periodic status updates that indicate how much capacity has been approved and is expected in upcoming years.

Certain large-load facilities, primarily cryptocurrency mining facilities but also data centers and some industrial factories, have entered into voluntary curtailment agreements with ERCOT to temporarily reduce their power consumption during periods of particularly high system demand or low generator availability. As part of the program, LFL facilities can participate in ERCOT’s energy and ancillary service markets. This flexibility in large-load operations can help mitigate some of the effects that strong growth in electricity demand is having on the ERCOT system.

We use the information from ERCOT about current and future LFL demand in developing our STEO forecasts of regional electric load. We assume that by the end of 2025 ERCOT will have approved operations of 9,500 MW of LFL demand capacity, which would be 73% more than is currently approved (5,479 MW of which 1,570 MW was approved over the past 12 months).

Historically, LFL customers have consumed about 65% of their total approved capacity. In the STEO, we assume that LFL demand is constant throughout the day at this percentage, so the expected 2025 capacity and its utilization translate to an assumed total LFL of 54 billion kWh next year. This new electricity consumption from large computing and industrial facilities contributes to our forecast that ERCOT’s load across all customers will grow by 5% between 2024 and 2025.

Uncertainty about future levels of large-load demand

Although much planned capacity for large-load customers is awaiting approval from ERCOT, when or if the capacity will be brought online remains uncertain. ERCOT’s status update from early September indicates that projects representing about 26,500 MW of LFL capacity have applied to become operational by the end of 2025. This amount includes about 2,000 MW of capacity for projects that have not yet submitted plans and more than 12,000 MW of capacity for projects that currently have plans under review by ERCOT. Given the typical approval timeline, these projects are unlikely to come online by the end of next year.

To analyze the potential effects of different levels of future large-load electricity demand on power generation and wholesale prices in ERCOT, we modeled two scenarios with different assumptions about 2025 LFL capacity and compared the results with the September STEO forecast as a base case. In all three cases, we assume that LFL facilities will be demand-responsive, cutting back part of their electricity consumption during hours when potential wholesale power prices exceed $100 per megawatthour (MWh). The actual level of curtailment observed could vary greatly from these assumptions depending on whether the large-load customer believes the incentives are worthwhile.

Delays in the large-load approval process or in developers’ plans could reduce new large-load power demand next year. In our low-growth scenario, we assume that no additional LFL capacity comes online next year beyond what we expect to be operational at the end of 2024 (6,500 MW). This assumption would translate into about 37 billion kWh of LFL electricity consumption in 2025 (32% lower than the baseline forecast of 54 billion kWh).

Conversely, it’s possible that ERCOT could quickly begin approving projects in the LFL queue at a faster pace. Our high-growth scenario assumes that about 14,200 MW of LFL capacity will be operational by the end of next year, leading to a forecasted 81 billion kWh of electricity consumption from LFL customers in 2025 (50% higher than the baseline STEO assumption).

In our baseline September STEO, we forecast that ERCOT’s electricity load across all types of customers will grow by 5% from 464 billion kWh in 2024 to 487 billion kWh in 2025. In contrast, in our low-growth scenario, overall ERCOT load would grow by only 1% next year, and in our high-growth scenario, ERCOT load would grow by 10%. For both the low- and high-growth scenarios, we assume all other factors (such as generator fuel costs and non-LFL) remain the same as in the baseline forecast.

How growing demand from large flexible load sources could affect power generation

The largest source of electricity generation in ERCOT is natural gas, accounting for 45% of that region’s generation in 2023. We assume that existing and planned generating capacity is the same across the three scenarios, and our different assumptions about future electricity demand have the most effect on natural gas generation. In reality, the electric power sector could respond to the expected level of future demand by expanding the capacity available from other sources of generation.

In our September STEO, we forecast that annual natural gas-fired generation in ERCOT will fall by 5% between 2024 and 2025 to an annual total of 198 billion kWh in response to increased generation from renewable energy sources, particularly solar. Our scenario with stronger growth in large-load demand results in 8% more natural gas-fired generation in 2025 than the baseline forecast, at 213 billion kWh. Our low-growth scenario forecasts 12% less natural gas-fired generation than the baseline.

The fastest-growing source of new electric generating capacity in the United States is solar power, with growth concentrated in Texas. Our base case STEO forecasts that solar generation in ERCOT by the electric power sector will grow by 54% in 2025 to 67 billion kWh. Solar power is generally dispatched as generation whenever it’s available because it does not have operating costs like fossil-fuel generators. It can also be curtailed to avoid grid congestion or if electricity demand is low at a particular time. In 2023, about 3% of solar output in ERCOT was curtailed. In our high-growth scenario, we forecast 2% more solar generation than in the base case in 2025 because less output would need to be curtailed.

The other major source of power generation that could change under different assumptions about electricity demand trends would be coal, which accounted for 14% of ERCOT generation in 2023. Like natural gas, coal has more flexible generation patterns than renewables, and so changes in demand are more likely to raise or lower coal-fired generation. In our low-growth scenario, we forecast 5% less ERCOT coal-fired generation in 2025 than the STEO base case forecast of 62 billion kWh and 12% more in the high-growth scenario.

Impact of uncertain large-load demand on wholesale power prices

The effect of uncertain future electricity consumption is most evident in wholesale power prices, which reflect how well generating supply can meet electricity demand. As a representative wholesale price for ERCOT, the STEO uses average settlement point prices (SPP) during peak hours at the North zone hub, which includes the Dallas-Fort Worth metropolitan area. The base case STEO forecasts ERCOT wholesale power prices in 2025 will average about $27/MWh, which would be 22% lower than our expected wholesale price for 2024. Lower prices are a result of expected lower fuels costs for natural gas along with increased penetration of solar generation.

The scenario with less-than-expected growth in large-load demand reduces forecasted 2025 wholesale power by 11% from the base case STEO forecast, while the high-growth scenario increases prices by 17% from the base case. In both scenarios the largest differences from the base case scenario occur in the summer months. LFL demand was curtailed only during 10 hours of the high-growth and base case scenarios, averaging 23% of LFL in the high-growth scenario and 13% of LFL in the base case during those hours.

ERCOT set up its LFL program for large-load customers to help manage the impact of potentially strong growth in demand. By requiring approval of the projects and encouraging curtailment of demand when needed, the LFL process intends to minimize the risk of wholesale power prices spiking to levels of $1,000/MWh or more. Texas is pursuing other avenues to accommodate the expected increase in power demand from large computing facilities such as the Texas Energy Fund, which is designed to encourage development of new dispatchable generating capacity.

Principal contributor: Tyler Hodge

Source: Eia.gov

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This article was originally published by the New Jersey Monitor.

After a scorching summer that saw electricity bills soar, experts told lawmakers Wednesday that they should eschew costly utility mandates, invest in technology like carbon capture, and avoid shutting down power plants before replacement power sources are up and running.

Wednesday’s hearing of the Assembly’s utilities committee was called to address complaints from South Jersey residents about dramatic electric bill spikes, and it came in the midst of New Jersey’s push for broader electrification that could push power demand yet higher.

Jason Stanek, executive director of government services for PJM Interconnection, the grid operator for New Jersey and 12 other states, said New Jersey should not advance policies that shut down power sources unless they have replacements that are operating.

The state’s last two coal-fired power plants closed in 2022, and wind projects meant to boost its generation capacity have faced cost and other hurdles.

“To minimize rate impacts, we would respectfully request avoiding any policies that are designed to push resources off the system before we have an equal and equivalent amount of replacement resources,” Stanek said.

Swings in energy supply and demand can put pressure on rates, especially when supply falls as demand rises.

Stanek noted electricity prices at its annual July capacity auction surged nearly nine times higher than the previous year. Utilities procure electricity through the auction and sell it to ratepayers at cost but can generate a profit from transmission, among other things.

Rate Counsel Brian Lipman said the higher auction prices would add between $12 and $15 to customers’ monthly electricity bills beginning in June.

Improvements to energy efficiency had helped tamp down on demand for more electricity generation in recent decades, though that trend has since reversed, Board of Public Utilities President Christine Guhl-Sadovy told the committee.

Growing electrification, increased uptake in electric vehicles and their charges, and surging demand for data centers spurred by a boom in artificial intelligence are set to push New Jersey’s energy needs up significantly, said Assemblyman Wayne DeAngelo (D-Mercer), the committee’s chairman.

“If you have a quick charging station, they use 100 amps. That’s the amount of power that’s in a small residential house,” said DeAngelo, an electrician by trade. “As we’re moving New Jersey across and increasing our bandwidth and the need for data — be mindful as AI is coming into the picture and becoming more prominent — one data center that they’re talking about building is going to need 800 (megawatts).”

That data center alone would consume nearly a quarter of the electricity produced by three nuclear power plants in South Jersey that, according to the U.S. Energy Information Administration, accounted for 43.5% of the state’s energy generation in 2022. Combined, the plants produce 3,457 megawatts of electricity.

Some suggested New Jersey’s ambitious renewable energy goals, which call for the state to draw 100% of its power from renewable sources by 2035, wouldn’t help the state meet electricity demand in the short run.

“We need to be moving towards that clean energy future, but we also need to be investing in some of the technologies of where we are today. There are technologies that can help out the use of natural gas, like carbon capture,” said Rich Henning, president and CEO of the New Jersey Utility Association.

Others suggested regulatory changes would push power prices down.

Lipman, the rate counsel, said changes to federal rules that would include more electric capacity in PJM auctions would push down rates, and he urged an end to legislative mandates that forced utilities to invest in infrastructure or raise other costs passed along to ratepayers, like a $300 million annual subsidy to the state’s nuclear plants that is due to lapse on June 1.

In New Jersey, most utilities can earn 9.6 cents for every dollar invested in addition to recouping their expenses. Those costs are typically borne by ratepayers.

“We’re forcing them to invest, and they’re not doing that for free. They’re coming back and they’re seeking their money,” Lipman said, adding new oversight of transmission could also control costs.

Source: Energynews.us

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Trouble Deepens for North Sea Oil and Gas

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Video Transcription edited for grammar. We disavow any errors unless they make us look better or smarter.

Stuart Tiurley: [00:00:10] Hello, everybody. I’m the Energy News Beat daily stand up. My name’s Stu Turley. President of the Sandstone Group. Today is September 25th. Buckle up. It is a crazy ride out there. Trouble deepens for North Sea oil and gas. Next story Goldman sees upside for oil prices amid supply concerns. Here we go with the next three Biden-Harris stories. As demand drops, automakers Reverse ATV target Despite Billions in Harris Biden Subsidies Infrastructure Bill. Big budget projects a complete failure despite billions spent. U.S. LNG permit freeze Sparks Export boom in Canada and Mexico. Holy smokes. It is just crazy out there. [00:01:03][52.7]

Stuart Tiurley: [00:01:03] But let’s go ahead and get started with our first story here. Trouble deepens for North Sea oil and gas. North Sea oil and gas operators are not just facing the prospect of higher windfall taxes. They are also now finding it more difficult to get loans from UK banks. This is critical because right now, just to meet normal decline curves, the world needs trillions in investment in oil and gas. So we’re at $75 a barrel right now. If we’re not investing in oil in order to get the next wells dug, we will be having some higher prices. According to data from the Norwegian Investment Bank. Spare Bank One markets a reserve based lending to oil and gas operators in the UK’s North Sea had fallen by 40 to 50% since introduction of the windfall profit tax. The UK green policies are absolutely destroying their oil and gas environment and some of the most horrific energy policies that you can possibly see in the world are going on in the UK right now. So watch what’s going on in the UK and vote for Kamala Harris if you want high energy prices and green policies. They will cause deindustrialization. The rest of the story is just as brutal as this is. Here’s a direct quote The North Sea oil and gas industry, particularly in Scotland, is being starved of finance. One in Energy Insider told the Financial Times. This financial strain extends beyond traditional banks because even insurance companies are beginning to withdraw support, which threatens the viability of many businesses. David Larson, CEO of Prosor, which provides offshore operators with subsea control systems. This is a huge story and wants to be industrialized like Germany is doing, and the UK is going to take out their biggest asset, which is the North Sea. They’re going to hit bottom fast and hard. [00:03:20][137.2]

Stuart Tiurley: [00:03:21] Let’s throw it in the next story. Goldman sees Upside for oil Prices Amid Supply Concerns. Goldman Sachs is saying in the article Expect Brant crude oil prices to see some upside in the fourth quarter, potentially reaching $77 per barrel. The bank’s outlook is driven by several key factors, including a recent interest rate cut by the Federal Reserve alongside U.S. strong economic data. Additionally, Hurricane Helen’s information reminds markets that hurricanes still have the power to disrupt oil supply. I’ll tell you, I kind of agree with them a little bit, but I still think oil I’m almost a permeable. Because without the money being invested in it, we will see higher prices. So maybe we will see it that 70 to $80 range between now and the end of the year. I think we’re just one little accident away from higher prices. [00:04:19][57.9]

Stuart Tiurley: [00:04:20] So let’s go to the next story here. As demand drops, automakers reverse EV targets despite billions in Biden-Harris subsidies. This is actually abysmal when you consider that the Harris Biden administration had tried to force the United States into EVs. And some of the EV numbers are pretty amazing when you sit back and take a look at from a global perspective, how many of these are on the road and how much they’ve saved in climate change, quote unquote. Not much, if at all. Any. And so in fact, nothing. Because by the time you add the extra wear and tear on the tires, they go through the tires twice as much by the time you add the diesel you have. And all of the things it takes to make in the car. There’s been a negligible effect on the environment. In fact, it’s about to be a negative impact on the environment when you consider the batteries for all of them that are coming out of service and are going to need to be recycled. And the recycling market for those batteries is nonexistent right now for a wide array of automakers have abandoned the EV goal since February with Volvo, Ford and Mercedes-Benz all dialing back electric quotas or dropping previously planned product lines. This is huge. The auto industry’s change in direction is despite billions in subsidies doled out to the industry via the 2021 bipartisan Infrastructure bill and the 2020 Inflation Reduction Act. Both of those should be called the Particulars Bill Bundle, with the White House offering a 7500 federal tax credit for certain EVs. See, this is where they really did not do any any favors because only the folks need a $7,500 tax deduction or break can get it. But then it didn’t even work on all of the cars. Like only one. The Ford Mustangs would even qualify and then all of the other. So the regulations designed to phase out internal combustion engines, including tailpipe emissions rules, would effectively require 67% of light duty vehicles sold after model year 30, 20, 32 to be electric or hybrids. It ain’t going to happen. And Toyota is leading the charge on the hybrids and the rest of the market is behind. So Ford even canceled plans to produce three row electric mule vehicle SUV in August and reduced output of its Ford F-150 lightning pickup in January. Ford lost $4.7 billion in 2023, equating to nearly $65,000 per EV it sold. We’re not going to launch vehicles unless they are going to be profitable within 12 months of launch. That’s pretty strong. Hats off to them. They’ve got to stay in business and government needs to stay out of the way of business. [00:07:34][193.8]

Stuart Tiurley: [00:07:34] Let’s go to the infrastructure. Big bills, big budget projects, a complete failure despite billions spent, you know, a multibillion dollar effort to build thousands of electric vehicle charging stations across the country has so far yielded a handful of stations. I think seven. This is absolutely nuts. The 1.2 trillion in spending on what the White House called a once in a generation investment in our nation’s infrastructure and competitiveness was a complete failure. Number one, is the Biden administration absolutely determined to apply as many different left wing mandates as it can dream? In fact, President Biden actually said maybe we should have called it what it actually was. I would vote for the poor keyless bill, as Dan Bongino would say. Well, let’s take a look at this last story here. [00:08:25][50.6]

Stuart Tiurley: [00:08:25] The last story is U.S. LNG permit freeze sparked export boom in Canada and Mexico. This absolutely is critical during this election season right now because the Biden administration pause on new LNG export permits has created a market opportunity for Canada and Mexico and Argentina to increase their LNG exports to Asia. They are just absolutely taking market share and putting in long term contracts. Who’s the loser? The U.S. energy market is the user and the U.S. consumer, and it’s all because of bad information from bad policies, from bad policy leaders. This is critical when you take a look at Canada and Mexico are rushing left and right in there. He would pause the approvals on licenses on January 26th. Then the Chevron deference got rolled out from the Supreme Court. They lost in court and then they’ve turned around and they refiled again. So as you’re looking at, Vice President Kamala Harris is saying, I am not going to ban fracking. Okay. Watch my lips, read my lips, whatever you want to say it is. She will not ban fracking, but she’s going to go lawfare and take everything to court and go through legislation, through regulatory actions to ban fracking. So you have to be careful during this election cycle. It is absolutely abysmal what the Harris Biden ad. Ministration is doing to the U.S. energy markets right now. [00:10:13][108.0]

Stuart Tiurley: [00:10:14] So I do want to give a shout out to Michael and our team. And if you are a investor and you’re looking to put your money where you’re not sure if it’s in the stock market and you’re needing tax deductions, please reach out to us. We have partnered with Rey Trevino of Pecos Operating and it is an outstanding investment. We look at deals all the time and we only pick 1 or 2 to take a look at. And absolutely I’m invested in it and it is a very good investment. I’m making about 32% on it. If you like tax deductions and money, give us a call anyway with that. Have a great day. Like subscribe, read this to your pets. And we really appreciate everybody out there that’s listening to this channel. Have an absolutely fantastic day talk to you all soon. [00:10:14][0.0][600.3]

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The UK government is cracking down on a London-based entity, Nest Wise Trading Ltd, linked to Iranian oil tycoon Hossein Shamkhani.
The action is part of a broader effort by the UK and US to target entities suspected of sidestepping oil-trading restrictions.
Nest Wise Trading Ltd faces dissolution for failing to provide sufficient information to regulators about its ultimate beneficial owner.

The British government has targeted a London-based entity of Iranian oil trading empire led by Hossein Shamkhani, as it steps up efforts to stop those sidestepping oil-trading restrictions.

Last month, Bloomberg revealed Shamkhani’s role in Iranian and Russian oil trading.

Shamkhani’s father, Ali, served as a naval commander for the Islamic Revolutionary Guard Corps, as defence minister and then as Secretary of Iran’s Supreme National Security Council.

The publication has highlighted that London-based Nest Wise is a prominent entity within the Shamkhani network.

Today, it was reported that Companies House gave notice that Nest Wise Trading Ltd to be struck off and dissolved within months if it doesn’t take requisite steps, as the publication quoted people familiar with the matter.

It was revealed that the action is due to the entity’s failure to provide sufficient information to regulators, who’ve concluded its ultimate beneficial owner is Shamkhani, as reported by Bloomberg.

Records show that Nest Wise’s business includes the sale of petroleum and petroleum products, fuels, ores, metals, and industrial chemicals. The filings also show that during the London entity’s incorporation, Dubai-based Nest Wise Petroleum LLC was the sole shareholder listed.

The report outlined how the British government and Washington have been working for weeks to target entities that they suspect have been sidestepping oil-trading restrictions.

The US has already sanctioned ships believed to be controlled by the Iranian businessman. His father was sanctioned by the US in early 2020.

Shamkhani denied most details in the Bloomberg report, including owning any oil company, controlling a trading network or having a firm involved in commodities deals with Iran or Russia.

Source: Oilprice.com

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Goldman Sachs expects Brent crude oil prices to see some upside in the fourth quarter, potentially reaching $77 per barrel. The bank’s outlook is driven by several key factors, including a recent interest rate cut by the Federal Reserve and strong U.S. economic data. Additionally, Hurricane Helene’s formation reminds markets that hurricanes still have the power to disrupt oil supply.

Despite Brent crude rallying 4% last week due to escalating conflict in the Middle East, the market experienced a selloff on Monday following more peaceful signals from Iran’s president. As of Tuesday morning, Brent was trading around $74.35 per barrel for December delivery.

Goldman’s analysis suggests a global supply dip of about 500,000 barrels per day (bpd), with lower output from Canada, Russia, and U.S. shale regions. Meanwhile, global demand is ticking upward, particularly in the OECD countries and China, with the possibility of further Chinese policy easing contributing to demand growth.

While much of the recent price recovery happened in long-dated oil contracts, Goldman believes the spread between one-month and 36-month Brent prices should be $8 higher than it currently is. They also noted that Brent’s implied volatility is low, sitting in the 17th percentile.

Goldman reiterated its earlier trade recommendation for European distillate, though it acknowledged this strategy has underperformed. Since March, a gasoil/Brent crack spread trade they advised has lost nearly $8 per barrel.

Overall, Goldman sees potential for oil prices to rise in the near term, but market volatility and geopolitical events will likely keep traders on their toes.

Separately this week, Russia is apparently planning for lower oil revenues in its 3-year budget as its plans on depressed prices and a relaxed tax regime sapping oil revenues by 14% over the timeframe.

By Julianne Geiger for Oilprice.com

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A fire involving a container carrying lithium-ion batteries at the Port of Montreal triggered a temporary stay-at-home order for nearby residents on Monday.

The incident occurred in a container at one of the port’s terminals.

“Our Port Prevention and Security teams have been at work since the beginning of the incident, which resulted in no injuries,” said the Port of Montreal. “The emergency response plan was immediately activated, and we are working closely with the Montreal Fire Department, which is in charge of the situation.”

The precautionary stay-at-home order affected the Mercier-Hochelaga-Maisonneuve borough located adjacent too the port. However, the city later announced that the order had been lifted. “The preventive containment notice was issued due to a fire that is now under control,” the update said.

Authorities reassured the public about safety concerns. “Although firefighters may need a few more hours to finish their work, tests have confirmed that any danger to public health and safety has been ruled out,” the city said.

Source: Gcaptain.com

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CHEYENNE, Wyo. — In a new release, the Bureau of Land Management announced that it will be leasing a total of 4,641.95 acres of land over eight separate parcels for oil and gas production beginning with a sale Dec. 3.

Scoping on these eight parcels, spread all throughout eastern and southern Wyoming, was completed by the BLM in May this year. A subsequent public comment period was open until August regarding potential deferrals, environmental concerns and analysis and the parcels themselves, according to the BLM.

This process refined the total list of parcels from 14 to eight, with some being deferred and others being completely deleted. The total proposed acreage also went from 6,762.47 acres to the final 4,641.

(Screenshot from BLM website)

Environmental concerns are especially relevant as a federal court last week blocked the BLM and the U.S. Department of the Interior from issuing permits to companies who had already purchased stakes in a separate energy field the size of Delaware in the Powder River Basin on the grounds that the BLM overestimated the amount of necessary groundwater required for drilling. Those companies had already purchased their leases in the area and were looking for permits to drill.

While the public comment period has ended, responses issued by the BLM to comments the department received can be viewed at this link or in the attached file below.

Relevant public comments include concerns over wildlife management on the leased lands, what happens once drilling has concluded and climatic concerns.

Following the sale of the leases in December, leasing companies must go through a series of steps to actually begin drilling. Operators must submit a permit that the BLM will process and publish for public review. The department would also conduct an environmental analysis and coordinate with the vested corporate and state entities.

In concordance with the Fluid Minerals Leasing and Leasing Process Rule, a 16.67% royalty rate will be included in the upcoming lease sales that, according to the BLM, ensures the public taxpayer receives a fair return on corporate leasing of public lands.

Including the file addressing public comment, also included below is the full environmental assessment conducted by the BLM. This report describes potential environmental consequences relating to air quality, water resources, wildlife habitat and more. For more information on the BLM and its leasing operations, see the organization’s website.

2024-12.20240916.1031.WSO_.921.Response-to-Public-Comment

2024-12.20240916.0959.WSO_.921.Draft-EA

Source: Oilcity.news

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North Sea oil and gas operators are not just facing the prospect of higher windfall taxes, they are now also finding it more difficult to get loans from UK banks.
The windfall profit tax was imposed on the energy industry in 2022 amid record profits resulting from the supply uncertainty in oil and gas following the incursion of Russian troops into Ukraine.
According to data from Norwegian investment bank SpareBank 1 Markets, reserve-based lending to oil and gas operators in the UK’s North Sea had fallen by some 40-50% since the introduction of the windfall profit tax.

When the Labour Party came into power, it vowed to tax the oil and gas industry more. Warnings this might backfire fell on deaf years. Now, banks are refusing to lend to North Sea operators. It may well end with energy shortages.

“To deliver our clean power mission, Labour will work with the private sector to double onshore wind, triple solar power, and quadruple offshore wind by 2030,” Labour said in a manifesto ahead of the elections. In contrast, their plan for oil and gas was an increased squeeze through taxation and regulation.

Indeed, once the Keir Starmer government formed, the squeeze on oil and gas increased. The windfall tax that the previous Tory government had put in place was left in place, with an investment incentive that the Tories had implemented to prevent the industry from upping and leaving getting axed. Labour clearly wanted to have a transition, have it fast, and finance it with oil and gas tax money.

Yet this tax caused a reaction among the industry, and it now appears in the banking sector, too. For starters, North Sea operators warned they may be forced to relocate in order to survive. “The UK is now fiscally more unstable than almost anywhere else on the planet,” the CEO of Serica Energy, one of the biggest regional oil and gas producers, said last month. “That means we are looking for new places to invest our money. And Norway is a place where potentially we could recreate our business model.”

Now, it seems like banks are going to motivate even more energy companies to leave the UK because they have reduced the amount of money they are willing to lend to the industry—because of the windfall profit tax. That’s the same windfall profit tax that the Labour government wants to use as a cash cow for the energy transition, one of whose ultimate aims is to kill the oil and gas industry quite literally.

“The North Sea oil and gas industry, particularly in Scotland, is being starved of financing,” one energy industry insider told the Financial Times last week. “This financial strain extends beyond traditional banks because even insurance companies are beginning to withdraw support, which threatens the viability of many businesses,” David Larssen, CEO of Proserv, which provides offshore operators with subsea control systems, said.

The windfall profit tax was imposed on the energy industry in 2022 amid record profits resulting from the supply uncertainty in oil and gas following the incursion of Russian troops into Ukraine. Originally, the size of that additional levy was 25%, only to be raised next year to 35%. That put oil and gas companies’ total tax burden at a quite sizable 75%.

Yet the Tory government allowed for an exemption from the windfall profit tax in case the company reinvested its profits in more supply. Labour removed that exemption option. It also raised the windfall profit tax to 38%. Now, the state budget stands to lose tens of billions of pounds—and the country stands to lose energy supply security.

According to data from Norwegian investment bank SpareBank 1 Markets, reserve-based lending to oil and gas operators in the UK’s North Sea had fallen by some 40-50% since the introduction of the windfall profit tax. That’s a sort of asset-backed lending, where oil companies get money based on future cash flows, the FT explains. But with future cash flows extremely uncertain, it was only to be expected that such financing would dry up.

“We have recently found it very difficult because people who provide capital are very uncertain about whether they are going to get their money back because of changes in policy,” Robert Fisher, chairman of Ping Petroleum, told the FT.

The ultimate problem with this situation is that when there is no money, energy companies will not work to expand or even maintain production. This means, on the one hand, lower income for the state coffers and, on the other, less supply of oil and gas—while they are still very much needed.

“If the government implements the kind of windfall taxes they are talking about, then you end up with a cliff edge in UK energy production because the industry will be taxed into uncompetitiveness,” Stifel analyst Chris Wheaton told the Financial Times back in August. “That is going to cause a very dramatic decline in investment and therefore production and jobs, and a big hit to energy security.”

It will also cause a dramatic decline in tax revenues from the energy industry, which last year almost hit 10 billion pounds, or $13.3 billion. That’s about to drop precipitously to just about 2 billion pounds in four years if the current tax policies remain in place. Those 2 billion pounds won’t go a very long way in funding a transition, while at the same time, they would make the UK more heavily reliant on energy imports, which is never a good idea when you have your own oil and gas. In that, the UK may be a unique case worth studying by future generations.

By Irina Slav for Oilprice.com

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The post Trouble Deepens for North Sea Oil and Gas appeared first on Energy News Beat.

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Oil production in North Dakota fell 18,000 barrels per day (bpd) to 1.168 million bpd in July, monthly data from the state Industrial Commission showed on Monday.

Wells permitted jumped to 107 in July and 100 in August, versus 78 in June. The state needs to permit roughly 100 wells in a month to keep production growing at 1% to 2%, the regulator said.

North Dakota is the third largest oil producing state in the U.S., behind Texas and New Mexico.

Prices for North Dakota light sweet crude rose slightly in July to $73.12 a barrel, up from $71.75 a barrel the month prior, according to the state’s oil regulator.

Source: Boereport.com

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The post North Dakota oil production down 18,000 bpd in July vs June to 1,168,000 bpd – state regulator appeared first on Energy News Beat.

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Tummel Bridge Power Station in Perthshire has been officially reopened by Scotland’s First Minister, John Swinney, following a £50 million upgrade by SSE Renewables.

The refurbishment involved installing new hydro-electric turbines, which will extend the station’s operation by at least 40 years and increase its generation capacity from 34 to 40 megawatts.

The power station, part of the Tummel Valley Hydro Scheme, plays a key role in generating renewable energy and moving water to other hydro stations in the system.

The modernisation project is one of SSE’s largest investments in its hydro fleet.

First Minister of Scotland John Swinney said: “The modernisation of this historic site demonstrates how Scotland’s natural resources can be harnessed to support our transition to net zero, while also preserving an important part of our industrial heritage.”

Martin Pibworth, Chief Commercial Officer, SSE said: “Tummel Bridge has been a part of the energy landscape for generations and this investment will ensure this iconic and historic site continues to play a crucial role in Scotland’s energy mix for decades to come.”

The post Major investment extends Scottish power station’s life by 40 years appeared first on Energy Live News.

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The post Major investment extends Scottish power station’s life by 40 years appeared first on Energy News Beat.