👋 Welcome to the first edition of Well Read!

Every Wednesday, I'll share my thoughts on what’s happening in the upstream energy sector. It’s my hope that this newsletter will help keep you read-up on the latest happenings in energy business and also spark dialogue, so feel free to reach out to me at editorial@aapg.org.

Thank you for coming on this new journey with me, and I look forward to your participation in the coming weeks and months. Now, let’s dig in... 

Shangyou Nie

Editor, Well Read

CERAWeek Speakers Debate LNG Pause

Secretary Granholm speaks at CERAWeek, Courtesy of CERAWeek by S&P Global

Government and industry leaders hotly debated the White House’s pause on LNG exports during the recent Energy Summit at CERAWeek by S&P Global in Houston.

DOE Secretary Jennifer Granholm defended the White House’s decision against criticism from GOP senators and O&G leaders.

Catch up fast:

• In January, the Biden Administration paused the permit approval process for new LNG export applications.

• The pause is for countries without Free Trade Agreement. It will not impact projects that are in operation or under construction.

Granholm said:

• The pause would allow the DOE to review market balance and environmental impact. A similar study was done five years ago but is considered out of date.

• The pause would not impact LNG exports to Europe and U.S. allies.

• DOE did not initially give a timeline for the pause. At CERAWeek, Granholm said, “By this time next year, it will be well in the rearview mirror.”

Opposition said:

• Senators Dan Sullivan (R, Alaska) and Joe Manchin (D, West Virginia) criticized the decision to pause LNG export applications.

• Senator Sullivan and three other GOP senators released an open letter to John Podesta, senior climate advisor to the president, calling for an immediate reversal of the pause.

• Senator Manchin is leading negotiations on permitting reform and said, “I want to get it done before we go out on the August recess.”

Why it matters: Economic stakes are high in what’s currently estimated to become a $200 billion per year global LNG market.

• LNG trade reached a record 404 million tonnes in 2023. It could increase 50 percent by 2040, according to Shell’s LNG Outlook 2024.

• If the pause continues, potential LNG customers could choose to sign more long-term supply agreements with competitors such as Qatar and Australia.

• U.S. LNG exporters want to assure potential customers that the country is a stable and reliable supplier, especially in the wake of multiple lawsuits against Venture Global LNG last year.

• Investors need policy certainty before making multi-billion-dollar investments in LNG projects.

Impact on the O&G job market:

• Continuing to monetize gas reserves will be key for majors, many of which have more gas than oil in their portfolios.

• If the pause continues and doubt about LNG deepens, young geoscientists and engineers may wish to consider whether to pursue gas as a long-term career specialty.

Innovation opportunity: The biggest climate issue around LNG relates to methane leakage during gas production, liquification, and transport. Addressing this will be key to future sector success.

Dive deeper: For more background on US LNG export, read this.

Shell Announces New Targets in Sustainability Report

Shell CEO Wael Sawan speaks at CERAWeek, Courtesy of CERAWeek by S&P Global

Shell published its new Energy Transition Strategy in March, with a stated goal of “more value, less emissions.” But some say its new targets are backtracking on its climate commitment.

In the new report, Shell:

1. Cut its net carbon intensity target, also known as Scope 3 emissions, to a 15–20 percent reduction from 2016 to 2030. It had previously announced a 20 percent target for the same timeframe.

2. Announced plans to retire its previously stated 45 percent reduction target in Scope 3 emissions by 2035.

3. Reconfirmed its commitment to becoming a Net Zero company by 2050, as well as its belief that fossil fuels will continue to play a large role in the energy sector as developments of new energy accelerate.

4. Will exit some renewable and downstream positions that it feels do not provide a competitive advantage.

5. Will grow its industry-leading LNG capacity by 30 percent from now until 2030.

Critics are saying:

• Shell is backtracking on its climate target, similar to what BP did a year ago.

• Shell has misled investors by overstating its capital spending in its Renewables and Energy Solutions business (12 percent) by including LNG-related investments. Without LNG spending included, that investment is 1.5 percent.

By the numbers:

• Shell used to be on par financially with ExxonMobil. Now, Shell has a market cap of $216 billion, less than half of ExxonMobil’s $461 billion and below Chevron’s $293 billion.

• But, since CEO Wael Sawan took the helm in 2023, Shell’s stock price has increased 16.6 percent, outperforming its European and American peers.

• Price to Earnings ratios for Chevron and ExxonMobil are 13.9 and 13.1, respectively. Shell’s P/E is 11.8 as of March 29.

What to watch: Debate around Scope 3 emissions reductions tracking will continue until regulatory clarity is established.

• In some markets, Shell may sell its assets as buying opportunity for others.

• Shell shareholders will vote in May to establish targets some feel are more in line with the 2015 Paris agreement.

Dive deeper: Read Shell’s full report, here.

Will the USA Continue Easing Sanctions Against Venezuela?

Venezuela's opposition party leader María Corina Machado, Shuttershock

Venezuela’s opposition party was finally able to register a candidate in the country’s upcoming presidential election, perhaps paving the way for a democratic election in July. The Biden administration may continue to ease sanctions against Venezuela as a result.

Catch up fast: This is the third time the opposition party has tried to register a candidate to run against President Nicolás Maduro.

• In October 2023, the Biden Administration lifted some sanctions on Venezuela’s oil sector, after Maduro and the opposition party agreed to hold a democratic election in 2024.

• The Biden Administration said it would review the policy before 17 April 2024. Meanwhile, American and European companies resumed some operations in Venezuela.

• Main opposition leader María Corina Machado won a landslide victory in October 2023 to challenge Maduro in the 2024 presidential election. But she was barred from holding public office for 15 years by Venezuela’s Maduro-controlled Supreme Court.

• A second opposition candidate, Corina Yoris, was not able to register before the deadline.

• On 27 March, the third opposition party candidate, Edmundo González, was finally able to register.

Potential big prize: If Venezuela is again allowed to interact more freely with the global O&G market:

• Venezuela crude could impact global oil prices and help reduce inflation pressure worldwide. The country has the world’s largest oil reserve, though it’s mostly heavy crude that requires a large CO2 footprint to develop.

• The International Energy Agency and Energy Information Administration of the DOE projected Venezuelan production could grow to more than 1 mbd by year end 2024.

• Mid to long-term, Venezuela’s production could return to >2 million barrels per day if all U.S. sanctions are lifted.

For geoscientists and engineers, lifting sanctions could mean:

• Trading Venezuela crude would be legal, at least in the near-term.

• CCUS could be a big investment opportunity in Venezuela, as country leaders work to capture CO2 while increasing heavy oil production.

• Turning flared gas into LNG could also be a major investment opportunity in Venezuela and neighboring Trinidad and Tobago.

What’s next: On 18 April 2024, the Biden Administration will decide if it will continue easing sanctions. If Trump is elected in November, he could reimpose sanctions. 

Dive deeper: Read more about Venezuela’s new opposition party candidate here.

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