Cooperation between government, oil industry essential, NPC told

Dec. 10, 2018
Cooperation between the federal government and the US oil and gas industry that helped move the nation from reliance on imports to leadership in exports will remain essential to compete with the Organization of Petroleum Exporting Countries and Russia in the years ahead, US Energy Sec. Rick Perry and Interior Sec. Ryan K. Zinke separately told the National Petroleum Council at its Dec. 4 meeting.

Cooperation between the federal government and the US oil and gas industry that helped move the nation from reliance on imports to leadership in exports will remain essential to compete with the Organization of Petroleum Exporting Countries and Russia in the years ahead, US Energy Sec. Rick Perry and Interior Sec. Ryan K. Zinke separately told the National Petroleum Council at its Dec. 4 meeting.

“Visionaries in the federal government and the private sector found a way to work together to find ways to develop our resources and benefit this country,” Perry said. “We have chosen to produce our energy in abundance, and capable men and women in our national laboratories are continuing to find ways to produce more abundant and cleaner energy than some felt was possible.”

Zinke said, “We’re willing to be partners with industry because we need to understand best technology and practices to do things right and show other nations how good governance works.” The Trump administration’s recent environmental assessment, which examined both peacetime and crisis scenarios, found that US carbon dioxide emissions came down in recent years as natural gas production rose dramatically, Zinke noted.

“Some groups ignored this and emphasized the report’s dire predictions,” Zinke said. “There are legitimate concerns we’ll need to address, but I believe we need to be better at emphasizing the case that fossil fuels production is economically good for this country. It’s hard to be a good environmental steward if you’re broke.”

Perry said, “We’re producing more and emitting less. Between 2005 and 2017, the US led the world by cutting emissions by 25% during that period. There are several Central European countries which understand that costs are only one energy factor. Diverse supplies and adequate transportation systems are equally important.”

One of three interest areas

Improving US oil and gas systems, in fact, is one of three areas NPC committees are examining at Perry’s request for reports that are due to be released in 2019. Arctic oil and gas potential and more carbon capture, use, and storage implementation are the other two.

Zinke forecasts that in the next 2-5 years, the US will need to increase pipeline capacity as production rises to more than 14 bcf/year from 11.6 bcf/year. “It’s particularly essential to get more gas to Pacific Coast and Alaska ports to be exported as LNG,” Zinke said. “Prices will need to be high enough to justify the investments. I think $60/bbl would be a pretty good range for crude oil.”

Perry noted, “We’ve done good work developing the Permian basin and the Gulf of Mexico, but there are places in the US where we can do even better. I’m drawn to the Appalachian basin, particularly the Marcellus and Utica shales, where there’s so much wet gas that can be developed if there’s decent transportation.” DOE issued a report earlier that morning outlining the benefits of developing an ethane storage hub in Appalachia to attract more petrochemical projects, he noted (OGJ Online, Dec. 4, 2018).

Williams Cos. Inc. Pres. Alan S. Armstrong, who chairs the committee preparing the report, said, “We have a very broad topic. Keeping the scope focused is a major challenge. The essential question is whether we will achieve enough pipeline capacity to get supplies to markets, he said. “Having Russian LNG come into Boston last winter indicates how much work we have to do,” he said.

The committee began by analyzing the existing national oil and gas transportation system to help identify future needs, including the role that market structure plays in project development decisions. It also is studying critical infrastructure characteristics including age, miles traversed, and capacity as well as other infrastructure elements such as processing plants, refineries, storage facilities, LNG terminals, waterways, ports, railroads, and highways.

Governments working together

A permitting, siting, and social license to operate task group is considering how federal, state, and local governments can create a predictable and efficient regulatory environment to facilitate energy infrastructure development in the next decade at appropriate sites to support reliable, economic, efficient, environmentally response, and safe energy supplies for the future, Armstrong said.

Improving stakeholder involvement will be essential, he added, noting that the committee already has had three listening sessions with nongovernment organizations and communities. “Getting gas from the Susquehanna Valley in Pennsylvania, one of the lowest-cost production areas in the US, into New England is a serious challenge,” Armstrong said.

Operators are doing good work to improve their systems’ integrity, which responds to the social license question, Armstrong said. “Trying to predict what climate change impacts from building a pipeline is difficult because it’s the customer who determines demand,” he said. The report is scheduled to be finished in October 2019.

A second NPC report that is being prepared will deal with carbon capture and underground storage (CCUS). In his request, Perry asked:

• What the US and global future energy demand outlooks are, and the environmental benefits that will come from applying CCUS technologies.

• What research and development, technology, infrastructure, and economic barriers need to be overcome to deploy CCUS at scale.

• How success should be defined.

• What steps can be taken to establish a framework that guides public policy and stimulates private sector investment to advance CCUS deployment.

• What regulatory, legal, liability, or other issues need to be addressed.

The committee’s chairman, former BP America Chairman and Pres. John Minge, told the council, “There have been a lot of reports and discussions, but not many projects have been built despite the growing consensus that CCUS is important. Today, about 16 projects abate about 29 million tonnes/year of carbon in the US. That’s pretty small.”

Minge said the study wants to define pathways leading to US CCUS deployment at scale by:

• Evaluating the CCUS value chain from capture through use and storage across diverse industrial sectors and fuel types.

• Establishing the business case for CCUS in the US.

• Addressing a broad range of factors including technology, legal, regulations, and economics consistent with Perry’s request.

• Focusing primarily on accelerating CCUS deployment in the US while learning from and considering implications for the rest of the world.

• Delivering recommendations for short, medium, and long-term acceleration of CCUS deployment.

“There’s a growing consensus that CCUS will be important. At the same time, there’s also more demand for energy with fewer emissions,” said Minge. “If we don’t do this now, we’ll see we missed real opportunities 10 years down the road.”