Happy Oil Industry Sunset Day

Something remarkable happened today in the pages of the Wall Street Journal today. In the article Exxon and Chevron Earnings Fall Back to Earth, a rather stunning quote snuck in explaining why investors weren’t as keen on Exxon as might be expected. 

“There’s still a lingering concern for this sector, that it’s a sunset industry because of the energy transition,” said Biraj Borkhataria, an analyst at RBC Capital Markets.

Sunset industry. I think we should popularize this term. Why? As I’ve been arguing, this IS a sunset industry and if we want to get the money they owe us, we better do it before the sun goes down.

End of shale boom, too?

We are a third of the way through 2024 and U.S. crude oil production is below the level it started the year at despite high oil prices. It does appear that U.S. crude production has likely peaked. And as the WSJ article points out, investors are noticing. 

“Investors and analysts said they have only seen a modest uptick in Wall Street interest in the sector, and many are watching for an anticipated end to the American shale boom.”

Is the American shale boom ending just as Exxon is spending $60 billion to double down on shale?  It does seem that way. And while it may work out for Exxon's current executives, I’m sure they’d prefer a different reality. 

It’s good investors are finally catching on to what is happening. Wait until they learn about what the future of shale looks like without tier one inventory — the days of easy oil are over. 

But what about Simul-fracking!

There certainly is an effort to convince investors and the public that the shale industry has found new technology that will keep the good times going.  Have you heard of simul-fracking? This week Reuters touted that as the new tech solution in an article titled, “New technology helps US shale oil industry start to rebuild well productivity.” I wrote an article in February about the empty promise of new technology saving the fracking industry. They weren’t even touting simul-fracking then. I guess focus groups told them to try something else. 

Meanwhile in the article about how new technology will help the shale industry, they included these quotes.

Two decades of drilling wells relatively close together, resulting in hundreds of thousands of wells, have interfered with underground pressure and made getting oil out of the ground more difficult.

"Wells are getting worse and that is going to continue," said Dane Gregoris, managing director at Enverus Intelligence Research firm.

Their short term greed (drilling wells too close together) is coming back to bite them. I wrote about how this was happening in 2018. Simul-fracking is a fancy term but it can’t undrill all of those existing wells that are causing problems. Can you see any reason for optimism?

Methane Emissions, Satellites and Regulations

While the U.S. shale industry works hard to invent technology to save it from the inevitable, it continues to ignore technology that exists that could reduce methane emissions. There has been a lot of news about about the new methane regulations and satellites which suggest will be what reins in the U.S. oil and gas industry regarding its world leading methane emissions. I strongly caution any optimism about these developments. 

Why? The oil industry has had access to methane satellite data longer than anyone. A few years ago I was told by someone who regularly met with shale company CEOs that the CEOs knew the extent of the methane problem and were worried because “satellite data” was coming. They were worried about the data being available to the public because they already had it. Did it change their behavior? Nope.

Today the Financial Times published “The eyes in the sky fighting climate change, one methane leak at a time.”  There is a lot to unpack here. First, as I’ve explained, in the U.S. shale industry the leaks are not the real problem, it is actually all of the intentional flaring and venting of methane. So while methane satellites can identify actual large leaks, that doesn’t change industry behavior with the intentional emissions. 

The article focuses on the company GHGSat which sells its data to the oil and gas industry. And it is very likely they have the best data due to the large number of satellites and how long they have been doing this (since 2011). And its good business as GHGSat is "number 21 on the FT-Statista list of the 500 fastest-growing companies in the Americas."  GHGSat makes a good hopeful argument about what the data will accomplish. 

“It’s been a real eye-opener to realise how much of the problem in oil and gas could be readily addressed by different maintenance or operating practices,” he says. “It starts with best practices shared between companies. It absolutely is accelerated by government — regulations, enforcement, taxes, different mechanisms.”

If you’ve been paying attention, the real eye-opener happened years ago. I wrote this five years ago: The Fracking Industry's Methane Problem Is a Climate Problem. I guess my eyes were more open at the time than the oil CEOs who almost certainly had access to the best methane satellite data in the world but chose to continue underreporting industry methane emissions.

Does the article focus on the Permian oil field of Texas which leads the world in emissions? No. It mentions Turkmenistan. Watch for this in the press and from the companies. Lots of concerns about Turkmenistan and Kazakhstan, not much about Texas. Perhaps that is why the company is one of the fastest growing in the Americas?

We also are told that regulations and enforcement will be part of the solution. I will be writing more about this next week but you should expect to be disappointed about what the new regulations actually do and even more so about how they would ever be enforced. As one expert I interviewed this week told me, “Essentially it’s the honor system. We are relying on the oil industry to do the right thing.” 

So what is the oil industry doing about methane emissions?  Suing to stop the new methane regulations. We have to be realistic and understand that the oil and gas industry will not solve this problem and regulations and satellites won’t do it either. I understand the desire to be optimistic that regulations and satellites are a real solution. They aren't. We will need a different approach.

Housekeeping

Thanks to those of you who have paid subscriptions to Powering the Planet. I appreciate it. I had hoped to publish a piece about the many problems with the new methane regulations this week but my questions for regulators were not answered in time. I plan to begin to cover that issue next week. And then get back to my series on why we need to take a very different approach to how we are dealing with the U.S. oil and gas industry. Happy Sunset Day!