.The Texas Energy Report

By Alex Mills

This week had a variety of energy news including OPEC+ decides to maintain current oil production level, Saudi Aramco sells $12 billion in stock, and ConocoPhillips and Marathon (two long-standing U.S. oil companies) agreed to a merger.

Saudi Arabia, the largest producer, worked to reach an agreement that delays roughly 2 million barrels per day of cuts, which were set to expire at the end of June. The curbs will continue in full in the third quarter then be gradually phased out over the following 12 months.

United Arab Emirates has pushed to increase in its production quotas for several years, and it was granted a 300,000 barrel per day increase at the meeting.

Iraq, Kazakhstan and Russia also wanted to increase production, but finally agreed to maintain current levels.

*  * *

Saudi Aramco’s $12 billion share sale sold out shortly after the deal opened on June 1.

The government had demand for all shares on offer in a few hours after books opened. Books were covered within the price range of 26.70 riyals to 29 riyals.

The extent of foreign participation will be closely watched as an indicator of interest in Saudi assets. During Aramco’s 2019 initial public offering, overseas investors had largely balked at valuation expectations and left the government reliant on local buyers. The $29.4 billion listing drew orders worth $106 billion, and about 23% of shares were allocated to foreign buyers.

A top selling point of the latest offer is the chance to reap one of the world’s biggest dividends. Investors would cash in on a $124 billion annual payout that Bloomberg Intelligence estimates will give the company a dividend yield of…
 

June 2, 2024 — Despite some rancor among members, OPEC+ is extending production cuts through the US presidential election and beyond.

Insiders spoke of disagreements among representatives resulting in scheduled virtual meetings turning to in-person gatherings in Riyadh.

OPEC+ has agreed to keep the curbs through 2025, continuing “longstanding official reductions of 3.66 million barrels a day.”

“Eight top producers in the group also agreed to continue voluntary cuts separately into 2025,” with voluntary cuts (about 2.2 million BPD) easing next…
 

May 30, 2024 — Leaders at The Texas A&M University System announced plans Wednesday to bring the latest nuclear reactors to Texas A&M-RELLIS.

Texas A&M System Chancellor John Sharp said the System seeks to provide a platform for companies to test the latest reactors and technologies. It also will address the pressing need for increased power supply.

“As Texas continues to grow, it is critical that we add more reliable, dispatchable power for all Texans,” said Gov. Greg Abbott.

“Texas A&M’s announcement to bring advanced nuclear technologies to its RELLIS campus is essential for Texas to expand our nuclear power capabilities that will help bolster our electric grid.

“Nuclear energy will continue to play an integral role in Texas so we can continue to meet the energy needs of our great state for generations to come.”

The next generation of nuclear reactors, with a potential power capacity ranging from 10 MW to 1 GW, have the potential to revolutionize power generation and meet the vast energy requirements of Texas.

The new generation of reactors also could provide vital power sources for artificial intelligence companies, Sharp said.

“We at the Texas A&M University System understand …
 

By Alex Mills

The demand for energy continues to rise across the United States, especially in Texas, creating new opportunities for energy producers and investors.

The U.S. Energy Information Administration (EIA) predicts energy consumption will increase as much as 15% through 2050 and electricity plays an increasingly large role.

Electric Reliability Council of Texas (ERCOT) President and CEO Pablo Vegas unveiled a “New Era of Planning” initiative recently predicting tremendous electric demand growth in the next 5-7 years. In addition to utilizing the tools from the last two Texas legislative sessions, ERCOT is focused on changing transmission planning processes to adapt to the changing grid and exploring new opportunities to stay ahead of the growth curve.

Utility stocks, which declined 13% in 2023, have become a leading sector by investors since January.

“The climb in shares of power companies is in part a rebound from a bleak 2023,” the Wall Street Journal reported. “But their move upward also reflects the growing belief that the U.S. economy can power through higher interest rates and turn the hype around artificial intelligence into reality.”

“Data in recent weeks has shown job growth cooling and inflation resuming its gradual slowdown without any alarming deterioration in economic…
 

May 21, 2024 — Engineering and construction company Zachry Holdings filed for Ch. 11 bankruptcy in Houston Tuesday, along with 20 subsidiaries.

One of the subsidiaries has been chief contractor (in a joint venture along with Chiyoda and McDermott) for Exxon‘s and QatarEnergy‘s $10 billion…
 

May 17, 2024 — A check with Houston-area refineries indicates none of them lost power for any significant period during powerful storms that swept through the area Wednesday evening, leaving hundreds of thousands without power.

By Alex Mills

Implementation of additional weatherization of natural gas resources in Texas following the record winter storm in 2021 apparently paid dividends in January of this year as electric generation by natural gas set a new record, according the Energy Information Administration (EIA).

Natural gas is the largest source of electricity generation in Texas and the U.S.

“The electric power grid managed by the Electric Reliability Council of Texas (ERCOT) recorded an all-time high for winter natural gas-fired electricity generation for an hour in January, according to our Hourly Electric Grid Monitor, when a three-day cold snap increased electricity demand,” EIA stated.

“Hourly natural gas-fired electricity generation increased to 49.4 gigawatts (GW) for the hour starting at 7:00 p.m. central time on January 16, 2024, 1% more than the previous winter record of 48.8 GW set on December 23, 2022, and within 4% of the summer hourly high of 51.2 GW set between 7:00 p.m. and 8:00 p.m. on August 25, 2023.”

EIA said electricity demand typically peaks in Texas in the summer during heat waves and in the winter during cold snaps. During peaks in electricity demand, grid operators must have dispatchable electricity generation sources available.

“On a daily basis, natural gas-fired…
 

Updated 5 am Friday

May 17, 2024 (5:00 am) — CenterPoint Energy estimates Friday morning that more than 700,000 customers (about 36%) are without power in Harris County (the Houston area) — or approaching 800,000 in Southeast Texas as a whole — after severe storms moved through late Thursday afternoon, causing severe damage to electrical infrastructure in some areas.

The number of CenterPoint customers without power is down from Thursday night’s estimate of more than 800,000 in Harris County after all-night work by the transmission provider and workers from outside areas.

There is no estimate yet on when electricity might be restored to many customers, and there are reports of at least two high-tension power line towers down in Northwest Harris County.

A number of roads in the county have been impassible; workers were clearing them all night and continued into the dawn hours.

CenterPoint and multiple county officials said late Thursday that they will be making assessments of damage and expected repair times on Friday morning.

Houston Mayor John Whitmire said at 9:45 pm Thursday that “damage is widespread,” calling for city residents to stay home on Friday, especially those who work in the Downtown Houston area, where there has been a widespread loss of windows in skyscrapers.

Portions of the central business district are to be closed on Friday as streets are littered with glass shards from high-rise windows.

Witnesses in Downtown Houston say a number of windows were blown out at the CenterPoint Energy Plaza building.

Windows were blown out at the TotalEnergies building, according to witnesses on social media.

Authorities as of 9:20 pm estimated four people have been killed as a result of the storms.

Some people in the Cypress area of NW Harris County have shared video of a tornado that touched down nearby.

Winds in excess of 80 mph are estimated to have blown through certain areas of Houston, according to the latest Wednesday night estimates. (The National Weather Service says the estimate will likely go higher after reports are filed.)

A portion of the roof at the downtown Hyatt Regency hotel was blown off by strong winds, one witness said, and some rain has been pouring into the lobby, social media video showed.

By Alex Mills

The prices for crude oil, natural gas and other petroleum products were steady during the week of May 1-8.

The U.S. crude oil price for West Texas Intermediate closed on the New York Mercantile Exchange at $79 per barrel on May 8, which is a 9% increase from a year ago.

Retail gasoline prices across the U.S.  averaged $3.643, which is down $0.01 for the week but up $0.11 year over year, according to the Energy Information Administration (EIA).

Other petroleum products, such as diesel and home heating oil, were fairly constant. Diesel averaged $3.894 per gallon on May 6, which is down $0.053 from the previous week and down $0.028 from the same period in 2023, according to EIA.

Crude oil inventories decline 1.4 million barrels last week to 459.5 million barrels, and gasoline inventories rose 0.9 million barrels to 228 million barrels.

International oil traders are concerned about the conflicts in Gaza and Ukraine might have an impact on crude oil supplies.

Natural gas prices at the wellhead have been around $2 per million British thermal units (mmBtu) for most of 2024 on trading on…
 

May 9, 2024 — Draft documents drawn up by an influential corporate climate action group suggest that, based on “empirical and observational evidence…some or most emission reduction credits are ineffective in delivering emissions reductions.”

That wording appears on document pages in a news story Thursday morning.

The staff documents, from the Science-based Targets initiative (SBTi), a “UN-backed nonprofit that audits the emission reduction plans of companies,” are based on a review of evidence in scientific papers and other submissions by interested …
 

By Alex Mills

Demand for energy continues to increase from coast to coast, and record production continues to grow from a variety of sources.

Crude oil and natural gas, which account for 80% of the nation’s energy, almost set a new record for monthly production in February, according to data released by the Energy Information Administration this week. U.S. oil production was 13.2 million barrels per day (b/d) in February just short of 13.3 million b/d record set in December 2023. Natural gas production totaled 128,058 million cubic feet per day (mmcf/d) in February also just short of the December 2023 record of 128,883 mmcf/d.

The increase in production has helped the bottom line of many companies, too. The two largest integrated petroleum companies based in the U.S., ExxonMobil and Chevron, reported healthy financials this week. ExxonMobil reported $8.2 billion in net profit, and Chevron said it had a net profit of $5.5 billion during the first quarter (January-March).

Oil prices averaged $80 per barrel, but natural gas has been fighting a large oversupply and unusually low prices just below $2 mmcf. EIA estimated natural gas consumption in February 2024 was 102.4 Bcf/d  a 2.8% decrease compared with February 2023 (105.3 Bcf/d). It was the lowest daily rate of natural gas consumption for the month since 2018, according to EIA.

U.S. electricity generation from wind turbines decreased for the first time since the mid-1990s in 2023 despite the addition of 6.2 gigawatts (GW) of new wind capacity last year, according to EIA. U.S, wind generation in 2023 totaled 425,235 gigawatthours (GWh), 2.1% less than the 434,297 GWh generated in 2022.

U.S. wind capacity increased steadily over the last several years, more than tripling from 47.0 GW in 2010 to 147.5 GW at the end of 2023, EIA said.

“The 2023 decline in wind generation…
 

May 6, 2024 — After analyzing seven years of earthquake data from the Midland Basin, a team of scientists at The University of Texas at Austin has found that seismic activity is probably on the move northeast toward the community of Big Spring.

Although most past quakes happened in the southwest region near Odessa and Midland, the researchers identified a seismicity trend moving along a newly identified and extensive seismogenic fault zone stretching toward the northeast edge of the basin.

“The fault zone has been activated, and it has the capability to trigger additional earthquakes that can be felt by humans, especially because it’s so close to major cities along Interstate 20,” said Dino Huang, a research assistant professor at the Jackson School of Geosciences who led the research.

The results were published in the journal Seismological Research Letters.

The study is based on data collected by TexNet, a statewide seismic monitoring network operated by the Bureau of Economic Geology, a research unit of the Jackson School. From January 2017 to November 2023, TexNet recorded 1,305 earthquakes in the area, the vast majority of them very…
 

April 30, 2024 — An estimated 168 billion gallons of wastewater — or produced water — is generated annually by the Permian Basin fracking industry, according to a 2022 report by the Texas Produced Water Consortium. The major waste stream has proved both difficult and costly to treat because of the chemical complexity of the water.

In a new study published in the journal Water, researchers at The University of Texas at El Paso have identified a novel means of treating the wastewater generated by oil and gas production: bacteriophages.

Ramón Antonio Sánchez, a doctoral candidate within UTEP’s chemistry program, is the first author on the publication, detailing how bacteriophages, viruses that are often highly specific and lethal to a single species of bacteria, can be used as a rapid and cost-effective method to treat produced water on an industrial scale.

Sánchez said if the work is successful, it would give the oil and gas industry a means of treating, reusing and recycling produced water, rather than the…
 

By Alex Mills

Sometimes events happen over time that are hard to explain and understand.

Take, for example, President Biden’s war against America’s oil and gas industry yet last year American producers set records for both crude oil and natural gas production becoming the largest producing country in history.

How can that happen?

Well, Mr. Biden has tried, but his attempts have failed, so far.

Biden and his team of bureaucrats have proposed, proclaimed, stated, and issued some 200 actions that will have a negative impact on the oil and gas industry in the U.S., according to a report issued by the Institute for Energy Research.

On his first day in office, Jan. 20, 2021, he canceled the Keystone XL pipeline, issued a moratorium on all oil and natural gas leasing activities in the Arctic National Wildlife Refuge, and revoked Trump administration executive orders that decreased regulations in order to expand domestic production.

For the next three years, his administration has proposed $150 billion in additional taxes on the industry, strenuous environmental regulations, and even tried to manipulate the price of oil by releasing some 180 million barrels from the nation’s Strategic Petroleum Reserve.

U.S. Sen. John Barrasso, R-Wyo., led a coalition of 24 senators expressing “grave concern” about Biden’s “continued hostility towards American energy production.”

A few weeks ago the U.S. House of Representatives focused on a number of energy issues to increase access to America’s oil and natural gas resources and strengthen energy infrastructure. Rep. August Pfluger (R-TX) said: “One of the only promises that President Biden has followed through on is his campaign vow to ‘end fossil fuels.’”

But instead of driving the industry out of business, oil and gas production is at an all-time high. U.S. oil production has increase 19.8% since January…
 

April 18, 2024 — Most people do not give the U.S. electric grid a second thought — we flip a switch and the lights come on. Behind the scenes are thousands of power plants and utilities linked by millions of miles of transmission lines. And to make raw electricity useful, grid transformers convert high voltage to lower voltage that millions of households can plug into.

Transformers are aging and approaching an average of being 30 to 40 years old. Plus, they face more stress than ever before brought on by factors such as renewable energy and by extreme weather events such as hurricanes, heat waves, and winter storms.  Case in point — the 2021 event in Texas that left millions powerless.

That is when University of Texas at Austin (UT Austin) researchers decided to look inside grid transformers to see if they could make them better. Grid transformers are filled with copper windings, other metallic components, and cellulose-based electrical insulation like kraft paper. The cellulose insulation is a great electrical insulator essential in the process of ‘stepping down’ voltage, but it also traps heat, which can lead to overheating.

“We’ve researched a new class of nanomaterials where we take conventional cellulose-based paper and dope it with high thermal conductivity nanometer and micrometer-sized particles,” said Vaibhav Bahadur, an associate professor in the Cockrell School of Engineering, UT Austin. Bahadur is the corresponding author of a study that modeled the impact of high thermal conductivity paper on the performance and life of grid transformers published March 2024 in Cell Press journal Heliyon. This is the first study that predicts the extent to which tuning the thermal conductivity of paper can enhance transformer life.

Simulations on the Stampede2 supercomputer of the Texas Advanced Computing Center (TACC) helped Bahadur and his collaborators engineer solutions to overheat of grid transformers — a critical component of the electric grid.

Collaborators at the University of Maryland and the USDA Forest Products Laboratory fabricated the high thermal conductivity paper using nanoparticles of boron nitride. Bahadur’s lab built a 3D model of the transformer to mimic an actual grid transformer taken apart and studied by study co-author Robert Hebner, also in the Cockrell School of Engineering.

“The experimental part of the study was critical in testing whether to invest in improving the transformer installation,” Hebner said. “We had a transformer donated to The Center for Electromechanics, which was powered by UT Austin’s one megawatt micro grid. We could connect it and run the temperatures up and down, and we could measure how the transformer behaved. The model and the measurements meshed very well,” Hebner said.

“Our results indicate that if the thermal conductivity is increased by a few times using the engineered paper, the hotspot temperature inside a transformer can be…
 

In the US Energy Information Administration’s recently released Short-Term Energy Outlook (STEO), we forecast that U.S. liquefied natural gas (LNG) exports will continue to lead growth in U.S. natural gas trade as three LNG export projects currently under construction start operations and ramp up to full production by the end of 2025. We also forecast increased natural gas exports by pipeline, mainly to Mexico. In our STEO forecast, net exports of U.S. natural gas (exports minus imports) grow 6% to 13.6 billion cubic feet per day (Bcf/d) in 2024 compared with 2023. In 2025, net exports increase another 20% to 16.4 Bcf/d.

We forecast that U.S. LNG exports increase 2% in 2024 to average 12.2 Bcf/d. In 2025, we forecast that LNG exports grow by an additional 18% (2.1 Bcf/d). We forecast U.S. natural gas exports by pipeline to grow by 3% (0.3 Bcf/d) in 2024 and by 4% in 2025. We expect pipeline imports to decline by 0.4 Bcf/d in 2024 and then increase slightly (0.1 Bcf/d) in 2025.

In 2024–25, we forecast that existing U.S. LNG export facilities will run at similar utilization rates as in 2023. Annual maintenance typically occurs in the spring and fall, when global LNG demand is lower and temperatures are mild. In April and May 2024, we expect LNG exports to decline while two of the three trains at the Freeport LNG export facility undergo annual maintenance. Later in 2024, we expect that Plaquemines LNG Phase I and Corpus Christi Stage 3 will begin…
 

By Alex Mills

Energy production in the U.S. set records in 2023 and 2024 looks even better.

The U.S. produced more crude oil than in any country in history at 13 million barrels per day (b/d). Natural gas, wind and solar had a record-setting year, too.

Investors are taking notice.

Oil company stocks, which were dismal mid-year 2023, began to reverse in January.  The stock of both of the U.S. based intergraded oil companies have increased. ExxonMobil opened at $100 in January and closed at $119 April 2, and Chevron is up 7% from $149 to $159.

Many independent exploration-and-production (E&P) companies also have increased stock values this year. Marathon Oil Corp. and Diamondback Energy are leading the group jumping 39% and 29%, respectively. Marathon opened the year at $152 per share and rose to $211 on April 2. Diamondback went from $155 to $200.

Other E&P companies showing double-digit increases are Pioneer Natural Resources at 17%, Devon 13%, ConocoPhillips 12%, and…
 

April 3, 2024 — Twelve of 13 refineries operated by San Antonio-based Valero Energy were part of a World War Two effort by the Roosevelt administration to produce fuel for the military effort, but as a side effect hazardous wastes were produced that have since leaked into the surrounding environments.

In the years since, a number of Valero affiliates have gone to court to ask that the federal government shoulder at least some of the financial burden for cleaning up the waste, because the government effectively operated those refineries as part of their extensive oversight at the time — and now the issue is before the US Supreme Court.

A Michigan federal district court agreed with Valero that the feds should hold some responsibility, including payouts of up to $50 million per refinery for cleanup, but as an analysis…
 

By Alex Mills

Crude oil prices in the U.S. and internationally moved upward as fighting in the Middle East increased uncertainty about oil supplies.

Brent crude oil traded on the international exchange reached $86 per barrel and West Texas Intermediate (WTI) rose to $81 on March 27.

“While demand uncertainty persists, geopolitics risk, a weakening dollar, and OPEC+ supply cuts have moved prices higher,” OilPrice.com reported.

Ukraine drone strikes on Russian refineries and the fighting in the Middle East have resulted in hedge funds increasing long positions held on the New York Mercantile Exchange WTI rise by 50 million barrels and ICE Brent net longs increased by almost 55 million barrels, the biggest positioning move of the year so far, according to OilPrice.com.

The Federal Reserve Bank of Dallas released its quarterly survey of oil company executives this week and a majority expects WTI oil price to average $80 at year-end 2024.

Activity in the oil and gas sector was relatively unchanged in the first quarter of 2024, according to oil and gas executives responding to the Dallas Fed Energy Survey.

“The business activity index, the survey’s broadest measure of conditions energy firms in the Eleventh District face, was 2.0 in the first quarter, suggesting little to no growth…
 

The collapse of the Francis Scott Key Bridge into the Patapsco River on March 26 has temporarily halted all shipping traffic from the Port of Baltimore. In this article for the US Energy Information Administration, we examine implications for energy-related trade.

The port is the second-largest exporting hub for coal in the United States, accounting for 28% of total coal exports in 2023, according to Census Bureau data. It is second only to Norfolk, Virginia, also known as Hampton Roads.

How much coal moves through the Port of Baltimore?

In three of the past five years, annual coal exports from the Port of Baltimore totaled around 20 million short tons, with the only exception occurring in 2020 when the reaction to the COVID-19 pandemic dampened coal demand worldwide.

Exports from Baltimore surged to 28 million short tons in 2023, mainly because of growing demand for U.S. coal in Asia. Even before the port’s closure, we were expecting much slower growth in total U.S. coal exports…