U.S. Secretary of Energy Jennifer Granholm told a crowd of energy executives on Wednesday that even as the Biden administration targets a nationwide, carbon-neutral country by 2050, oil and natural gas is going to remain a part of the energy mix for years to come.
“We know that even the boldest projections for clean energy deployments suggest that in the middle of the century, we are going to be using abated fossil fuels,” Granholm told the audience at CERAWeek by S&P Global. “We know that oil and gas is going to remain a part of our energy mix for years to come.”
As such, Granholm pinned carbon capture management and storage as key to unlocking energy security while reducing emissions.
“We need to enhance the technologies for abating fossil emissions, and we need to advance the technology for clean sources,” Granholm said.. “We need both traditional and new energy. As this transition progresses, we do know that our energy mix and the globe’s energy mix is going to change, and that means that we all have to play a part to ensure that the transition is a managed transition; a transition that keeps us ready and able to meet consumer demands, while growing into more diverse sources for tomorrow.”
Continuing her rhetoric from last year, Granholm said that the world is shifting from Russian oil and natural gas supplies. The European Union (EU) has been “without major outages and shortages, and that is thanks, in no small part, to many in this room. You’re producing and exporting and working with the U.S. allies.
“The U.S. has become, in this year, an indispensable energy partner to our allies and a global energy powerhouse,” she told the audience.
The EU has been “very grateful that our LNG exporters really stepped up in our community in the United States. But they very strongly are celebrating their ability to have their own LNG terminals.”
The EU’s “immediate need” for building liquefied natural gas terminals “is coupled with their immediate need to diversify their energy supply. They did not want to have to go back and switch back to coal and switch to more carbon intensive forms of energy.
“They feel like our LNG is cleaner and they feel like we are a trustworthy partner,” Granholm said.
The former Michigan governor was also “so grateful that we have seen an increase in production, oil and gas at record levels.” This year is expected to be another year of record production.
Granholm noted that in the U.S. Energy Information Administration’s latest Short-Term Energy Outlook, average oil production in 2024 will be 12.6 million b/d. Dry natural gas production is forecast to reach more than 102.4 Bcf/d by the end of 2024.
“Those are all records,” she said. “That has helped our allies and it’s helped at home, making sure that we don’t see the volatility at the pump. I still have some concerns, obviously, because I don’t know that much around the edges” of the effect on prices, “given the volatility of what’s happening globally…”
One concern is China’s demand after the country imposed a lockdown because of the pandemic. The lockdown is being lifted and demand is rising.
“We can’t know how quickly or how hard China’s coming back in,” Granholm said. “We don’t know what’s going to happen with respect to slowing down of…inactivity or speeding up across the world.
“We don’t know what’s going to happen, even with respect to OPEC…So we were concerned about it, but we’re glad that we made it through this winter. We’ve been a bit lucky weather-wise in Europe and here, but we can’t count on that.”
Clean Energy Is ‘Greatest Peace Plan’
The Biden administration, said the Energy Secretary, is “grateful that there has been that increase to help stabilize the world.” She also lauded the energy sector’s efforts to build out renewable technologies.
“A year ago, it was an open question as to what would actually come to the energy markets, whether the resulting supply disruptions would actually push countries away from clean energy ambitions. And today, the answer actually is insightful, because thanks again to many in this room, global investments in clean energy have matched those in fossil fuel production for the very first time.
“In 2022, for the first time these new clean energy installations reached a record, as the EU has added more wind and solar capacity than any year prior. And in spite of – and partially because of the geopolitics of the day – it is clear that the clean energy transition is underway,” Granholm said.
Several countries in the EU and in Eastern Europe, Granholm noted, have shown greater interest in “home-grown resources” that would bolster energy security.
“Many of these countries have just seen what has happened in Europe and Ukraine and are really determined not to rely upon countries who don’t share their values for energy supply. They want to be able to produce their own energy resources. Obviously, clean energy is very amenable to that, but if they are importing energy, they want to import it from a diverse array of sources and from countries that are not afraid will weaponize energy.
Granholm said her Irish counterpart, Minister Eamon Ryan, “often says that being able to be energy secure is by accessing your own clean energy. No country has ever weaponized access to the sun, no country has ever weaponized access to the wind and perhaps that energy security with allies and with our own clean energy would be the greatest peace plan the world has ever known.”
IRA ‘Indispensable’
The Energy Secretary also applauded the investments that have taken off since President Biden signed the Infrastructure Investment and Jobs Act of 2021, aka the Bipartisan Infrastructure Law, and, more notably, last year’s Inflation Reduction Act (IRA).
“The level of investments that is happening, it’s gonna unlock technological leaps forward. It’s going to lead to lower costs. It’s going to lead to faster deployment. And I don’t mean lower costs in the United States…Worldwide, from Europe, Australia, Asia, Africa, all across the Americas…, innovation anywhere leads to progress everywhere.
“You’ll see that the Biden administration has made the United States the most attractive investment landscape for new energy and decarbonization technologies. The U.S. is an indispensable nation. Our companies are producing irresistible products. This administration…passed the policies…secured the resources and worked around the clock…But government is only a part of the equation here,” Granholm said.
“To make this all work, we need the private sector stepping up. We often say these investments are private sector-led, government-enabled. We need the energy sector stepping up, and that certainly includes the oil and gas industry.”
The oil and gas industry possesses the “skillsets and the knowledge to build some of these critical technologies at scale. Your expertise, for example, in offshore drilling gives you a leg up on offsets and your breakthroughs in fracking gives you a massive advantage in geothermal. Your practices around natural gas transport and infrastructure development could lend themselves to clean hydrogen.
“But, of course, you are better positioned to crack open cost-effective carbon management. And we know many of you are already moving in these directions. We’ve heard your plans on your earnings calls. But we also know that some others are still hesitant, citing uncertainty…”
Granholm said the IRA provided “10 years” of “carrots that you can take to the bank. That’s certainty. There’s never been a better time right now to invest in the future. Invest in that great, necessary solution of energy diversity and security than right now.
“We are in the middle of this great geopolitical realignment around energy. The tectonic plates are moving, the world looks so different than it didn’t just one year ago. Leaders in traditional energy are going to be leaders in new energy. Businesses in fossil energy will have enlarged their territory in clean energy.
“What courageous visionaries in this room will be shaping this chapter?” Granholm noted it is “not going to be…the ones who covered their eyes and fears and hunkered down in the defensive.”
Spurring ‘Friendly Competition’
The investment opportunities unleashed by the IRA and IIJA not only captured the attention of the energy industry, but also the criticism of the EU, Granholm noted.
“I think a little friendly competition,” she said of anybody envious of the initiatives. “But if you ask them honestly, they say, No. 1, ‘we’re so glad the United States has made us rethink this,’ and, No. 2,, ‘we are going to have to look under our policy hood and enhance our tools.’
“We will work with our allies. We don’t want to stoke trade wars or anything like that. We are serious about bringing back supply chains into this country that we, for so long, just crossed our arms and said, ‘we’ll let global free trade take away all of those.’
Permitting Roadblocks
Industries have increasingly called out the regulatory blockages clogging the pipeline to build out physical infrastructure. The administration is “still hopeful that Congress will be able to come forward with a permitting bill that respects…protecting the natural environment. We all want that. But we also know that we have the tools to be able to do this much more quickly.
“So we have to accelerate permitting, and the president is committed to it and I think that majorities in Congress are committed to it as well,” Granholm said.
Source: https://www.naturalgasintel.com/