“Keystone pipeline: Obama’s unpleasant options” – Politico, 31 January 2014

It is still unknown whether Obama will approve the Keystone XL pipeline, but after the State Department’s January report on Keystone XL, it is safe to say that Obama will eventually authorize it. It is also safe to say that Obama’s choice will anger his liberal base—the pipeline involves an oil extraction process that expends more greenhouse gas emissions than any other means of production. Moreover, there is a big chance that the pipeline could break.

But advocation efforts by pipeline builder TransCanada—backed by the American Petroleum Institute—and conservatives are relentless, the former promoting the jobs the pipeline will creates, and the latter blaming Obama for US unemployment rates and high gas prices. There is no promise that the pipeline would help with either issue, or that these groups’ lobbying efforts are doing anything to sway Obama.

It’s easy to see why Obama is taking his time. If he outright rejects the proposal, he could face major backlash from the GOP for the remainder of his term. In order to take that extra anti-Obama talking point out of the conservatives’ arsenal, and to dodge any kind of disagreement with Canada, some moderate Senate Democrats are voicing their approval of the pipeline. This might not be a redeeming factor for Obama—the Senate Democrats’ approval or his own—when it comes to the GOP’s views on his energy and climate policies, namely the Climate Action Plan.

Ultimately, the choice is up to Obama; the Keystone Pipeline falls under Obama’s purview, as an executive order. While he gave a nod to natural gas and climate-altering policies during his SOTU speech, Obama didn’t comment on the pipeline. Stalling a decision has proved to be in Obama’s favor—the constant bickering between the GOP and environmentalists will allow the administration to follow up on other climate policy plans without the watchful eye of the public.

A little wait may be good, but we should not prolong the decision. All the major elements of this project—cost, jobs, environmental and strategic—are sensitive issues. It is time to approve the construction of the Keystone XL pipeline to bring the world’s third largest oil supply to US from friendly NAFTA country Canada, with whom we share the globe’s largest land border. Let us stop sending petrodollars to Middle East and Venezuela, but rather share the wealth within our own continent.

See also:
Pipeline Fight Lifts Environmental Movement

Developed and Written by Dr. Subodh Das and Tara Mahadevan

February 18, 2014

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“Marathon Oil to Spend More in US” – 12 December 2013, Wall Street Journal

US-based oil and natural gas company Marathon Oil is planning to sell its business in the North Sea and increase drilling in the US, which — along with a 13% boost in spending and $2.5 billion share-repurchase program in 2014 — will aid the company in growing both its production and shareholder returns. Besides the US, its main exploration activities are in Norway, Guinea, Poland, Angola and Iraqi Kurdistan.

Of the company’s capital spending for 2014 — an estimated $5.9 billion — $3.6 billion will be used for drilling in North America.

The company is set to spend billions in Oklahoma, Texas and North Dakota, the latter two housing some of the largest shale formations in the US. For Texas, Marathon is investing $2.3 billion in the Eagle Ford Shale Formation located in South Texas, which is expected to have at least 400 new wells drilled in the coming months. For North Dakota, the company is investing $1 billion in the Bakken Formation, and $236 million in the Woodford Basin in Oklahoma.

Other US energy companies are also moving their businesses back home. LA-based Occidental Petroleum Corp. is planning to sell some of its Middle East business and increase its presence in West Texas’ Permian Basin. Houston-based Apache Corp. sold some of its natural gas business in Egypt in order to concentrate on North America. Houston-based ConocoPhillips is looking to sell some of its Nigerian and Kazakhstan assets for a move back home, as well.

Around 70% of Marathon Oil’s profits originate from manufacturing oil and natural gas; the company projects that it’s oil and gas output will rise by 4% in 2014.

It is very positive for both the US economy and energy independence that US energy companies are now investing more in US oil and gas properties.

Developed and Written by Dr. Subodh Das and Tara Mahadevan

January 7, 2014

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“Shale-Oil Boom Puts Spotlight on Crude Export Ban” – 1 January 2014, Wall Street Journal

The flood of natural gas might have the US rethinking its ban on crude oil exports, which dates back to the 1970s.

The world’s biggest oil refinery is located in the US, along the Gulf Coast, and is pumping out an oversupply of crude. The abundance of oil is causing prices to crash, forcing producers to look at their other options — i.e. exporting. These last few months, the American Petroleum Institute (API) has been fighting to lift export restrictions, as is Exxon Mobil, the US’s largest energy company. US Energy Secretary Ernest Moniz has more or less agreed, noting that the bans were instituted during the period of an energy dearth, not an abundance.

Arguments on the ban pit environmentalists, producers, consumers and the government all against each other. Proponents contend that removing the ban will boost the US’s trade deficit; opponents want to retain supplies in the US so that we rely less on the Middle East; others worry about the negative effects of increased drilling on the environment and climate.

The US currently exports coal, electricity, gasoline, diesel and natural gas — everything, it seems, but crude. Crude production is on an upswing in the US, largely due to shale formations located in Texas and North Dakota. It’s predicted that these formations will generate around 7.7 million barrels/day in 2014, and, according to the Energy Information Administration (EIA), set to grow by 24% to 9.6 million barrels/day in 2019. The onslaught of oil could drive down prices, ultimately slowing the nation’s energy boom.

The only way Congress is likely to immediately act is if the ban induces layoffs of energy workers. Regardless, any revisions to the law won’t be immediate. But the new year might just be Exxon’s, and other major energy companies’, year.

We believe that US oil companies should be allowed to export crude oil as a tool lower trade deficit, and increase export-related high paying domestic jobs.

See also:
Exxon Presses for Exports

Developed and Written by Dr. Subodh Das and Tara Mahadevan

January 3, 2014

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“Shale Threatens Saudi Economy, Warns Prince Alwaleed” – Wall Street Journal, 29 July 2013

Signs that the US’s shale oil and gas boom are affecting competitors are already beginning to show: in May, Saudi Prince Alwaleed bin Talal cautioned Saudi Oil Minister Ali al-Naimi about the toll the US’s growing energy production could take on demand in the member countries of the Organization of the Petroleum Exporting Countries (OPEC). Oil Minister Naimi, and other oil officials in Riyadh, are downplaying the US’s impact.

An OPEC report in July exhibited that the organization’s 2012 oil export revenue achieved a record high of $1.26 trillion, profits that OPEC might not be able to maintain. Saudi Arabia is the largest global oil exporter; according to Prince Alwaleed, consumers are restricting their oil imports, causing the country to generate less than its capacity.

OPEC’s data proves that Nigeria and Algeria have also experienced a distinct decline in US exports. Algeria’s oil-export profits decreased by 6% since last year; the country recently announced that increased shale oil and gas production could require the country to reduce domestic spending. OPEC also found that Iran’s oil revenues also declined by 8% last year.

Due to increased production in countries that are not members of OPEC, OPEC predicts that its 2013 crude revenues will decrease to 29.6 million barrels per day, 600,000 barrels/day less than 2012. The group’s crude average price has been 4% less than 2012. The International Energy Agency (IEA) also predicts that OPEC’s demand will wane: in 2015 IEA expects OPEC’s crude to decrease to 29.2 million barrels/day, before beginning to slowly rise in subsequent years.

Once again technology-led revolution is happening — providing an opportunity to minimize oil imports — and helping the US with trade deficits, while also creating high-economic multipliers and high-paying domestic manufacturing jobs. More importantly, the US’s energy independence means less dependence on other countries not friendly to our national interests.

The question is — do we have the will and long-term perspective to capitalize on the opportunity?

Developed and Written by Dr. Subodh Das and Tara Mahadevan

August 29, 2013

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