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The U.S. hasn’t constructed a major petroleum refinery since 1977 even as fuel demand and domestic oil production have surged in recent decades.

Major refinery operators have largely opted to upgrade facilities rather than construct new greenfield plants because of the projected fuel demand decline in coming years and lengthy regulatory process required for such projects, according to industry experts. There have been 14 small refineries, each processing 4,100–46,250 barrels of oil a day, constructed since Marathon Oil opened its 200,000-barrel-per-day facility in Garyville, Louisiana, in 1977.

“The COVID pandemic really drove down gasoline and diesel demand which accelerated some things that were already happening,” Geoff Moody, the vice president of government relations at the American Fuel & Petrochemical Manufacturers (AFPM), told The Daily Caller News Foundation in an interview.

“There was already some contraction happening in the industry as a result of projected declines in U.S. gasoline demand into the future and companies just deciding that the assets were better used as other projects or shut down completely,” Moody continued. “Some of it [has] been very policy-driven and companies decided that it wasn’t worth it to keep operating those assets.”

The U.S. and other western nations have accelerated plans for a global green transition away from fossil fuels even as prices have skyrocketed to record levels this year. AFPM and other industry groups have urged the Biden administration to focus on long-term solutions, like boosting domestic oil production and shoring up refining capacity, amid the current energy crisis.

Global refining, which is vital for producing fuels like gasoline and diesel, decreased by 1.4 million barrels a day between 2019 and the first quarter of 2022, according to the International Energy Agency. Most of the refinery closures occurred in western countries, the data showed.

In the U.S., refineries processing a total of more than 800,000 barrels a day have closed since 2019 leaving the nation with a total operating refinery capacity of 17.7 million barrels a day, its lowest level since 2013. In addition, there are five idle U.S. refineries — the highest number since 2012 — which have a total capacity of 408,000 barrels a day, an issue the White House is reportedly considering addressing.

“Some refineries just shut down because of lack of demand, and they’re not coming back on,” Hugh Daigle, a professor of petroleum engineering at the University of Texas at Austin, told Minnesota Public Radio.

Moody, from the AFPM, added that companies have chosen to grow the footprint and throughput of existing refineries rather than make risky investments in new facilities. Refinery capacity has grown by about 3.3 million barrels per day as the number of refineries has fallen from 199 to 124 since 1985.

Dan Kish, a senior fellow at the Institute for Energy Research, blamed the decreased refinery capacity and lack of new greenfield projects on the growing number of environmental regulations and required permits.

“We’ve gone from many smaller refineries to refineries operating more efficiently and more economically,” Kish told TheDCNF in an interview. “Just like everything else, it’s very difficult to build anything or to keep anything operating in the United States where we have the strictest environmental laws in the world.”

“They keep squeezing emissions through Clean Air Act, through [the National Environmental Policy Act],” he continued. “They just throw lots of red tape at these folks and it makes it harder and harder to stay afloat.”

Since 2000, the Environmental Protection Agency (EPA) has entered into 37 settlements covering 112 refineries across 32 states with companies that control more than 95% of total U.S. refining capacity, according to a database of EPA enforcement actions. In March, Chevron Phillips Chemical Company agreed to make facility upgrades worth $118 million and pay a $3.4 million penalty over alleged Clean Air Act violations.

Meanwhile, a refinery being built in North Dakota, the largest greenfield refinery since the 1977 Marathon plant, began its permitting process in 2013 and isn’t expected to be completed until 2023, Forbes reported in 2020.

Another greenfield project located in Utah appears to have stalled since receiving a permit from the state’s Department of Air Quality (DAQ) eight years ago. The plant remains permitted but still hasn’t been constructed, Utah DAQ spokesperson Ashley Sumner confirmed in an email to TheDCNF.

The STREAM by Thomas Catenacci, June 1, 2022

The Port of Rotterdam could supply 4.6 million mt/year of hydrogen to Europe by 2030 from local production and imports, it said May 10.

That would be a substantial share of the 20 million mt/year of European production and imports the EU targeted by 2030 under its recent REPowerEU package.

The figure was based on “specific projects and realistic plans” that companies and exporting countries are working on, the Port of Rotterdam Authority said.

The hydrogen production could cut CO2 emissions by 46 million mt/year and increase Europe’s energy independence, it said.

“Hydrogen made in Latin America or Australia for instance, can be shipped to Rotterdam efficiently and on a large scale, processed here, and then be transported to the hinterland,” the Port of Rotterdam said.

The cost of producing renewable hydrogen via alkaline electrolysis in Europe was assessed by Platts at Eur10.89/kg ($11.48/kg) May 9 (Netherlands, including capex), compared with $2.91/kg in Western Australia, according to S&P Global Commodity Insights data.

The proposal from the port and a group of 70 companies and exporting countries was heavily focused on imports.

Around 600,000 mt/year of low-carbon hydrogen is planned to come on stream in the Rotterdam region by 2030, with imports amounting to 4 million mt/year, the port authority said.

Import agreements

There was scope for all carriers of hydrogen to offer varied solutions to consumers in different industries and geographies in the future, Nico Van Dooren, Head of Business Development at Port of Rotterdam Authority, told delegates at the World Hydrogen 2022 Summit and Exhibition May 9.

Van Dooren said the port was looking to develop a full value chain for hydrogen and infrastructure to handle all forms of the energy carrier.

The port has signed a series of outline import agreements in recent months, including with Australia, Brazil, Canada, Chile, Morocco, Oman and Portugal.

In early April, Africa-focused energy company Chariot signed a memorandum of understanding to import renewable hydrogen to the Dutch port, from its planned 10-GW green hydrogen project in Mauritania.

The Port of Rotterdam has also carried out a feasibility study to import hydrogen from Iceland by 2030. And separately, Gasunie, HES International and Vopak are to develop a green ammonia import terminal at Maasvlakte to start operations from 2026.

There are also hydrogen pipeline plans to link the port to other regions, and to potentially take hydrogen inland to industrial centers in Germany and elsewhere.

The port authority cited several companies working on electrolytic hydrogen projects between 2024 and 2026, backed by offshore North Sea wind power. These amount to 2.5 GW of electrolysis capacity by 2030, producing 250,000 mt/year of renewable hydrogen, it said.

A large-scale project is also underway to produce low-carbon hydrogen from refinery gas, it said.

The Port of Rotterdam said two preconditions were needed to boost Europe’s hydrogen economy.

First, a hydrogen certification system was needed to prove the renewable credentials of potential imports. And second, a mechanism was required to “close the financial gap between the use of renewable and low-carbon hydrogen and its derivatives compared to their current CO2-emitting alternatives,” it said.

Practical pathways

In an April report on the potential for global hydrogen trade, the International Renewable Energy Agency said a mass liquid hydrogen market was viable.

The size of current facilities limited scaling up, but solutions existed, such as changes in compressor size, IRENA said.

That could be improved by moving from piston to centrifugal compressors.

For turbines, developers could look to designs for nitrogen and hydrocarbon turboexpanders, already available for larger plant applications. They could also look to use dynamic gas bearings instead of oil bearings.

“These solutions still need to be engineered, derisked and implemented for liquid hydrogen,” IRENA said, comparing LNG as a reference for the nascent hydrogen transportation market.

“The potential for liquefaction to play a role in global hydrogen trade relies upon the possibility of cost reductions both by global learning-by-doing and by scaling up the average plant size to achieve economies of scale,” it said.

Existing liquefaction plants consumed 30%-36% of the energy contained in the hydrogen. This could be reduced to 15% with further research, engineering and scaling up, the agency said.

Hydrogen storage, meanwhile, was already deployed at scale, IRENA said.

The largest sphere in operation was NASA’s 3,200 cu m store, with construction of a 4,700 cu m sphere heading for operation later this year.

Kawasaki Heavy Industries meanwhile has completed a basic design for a 11,200 cu m spherical tank with a boil-off ratio of less than 0.1% per day.

S&P Global by James Burgess, May 30, 2022

The federal government is seeking to get the oil industry to restart idled refineries, Bloomberg has reported, citing an unnamed source.

According to the source, officials, including members of the National Economic Council, have been contacting industry players to inquire about the possibility of restarting refineries previously shut down in the latest attempt to rein in retail fuel prices.

Regular gasoline prices hit a high of $4.60 per gallon yesterday, up from $4.589 per gallon a week ago and $3.035 per gallon a year ago.

Since the start of the pandemic two years ago, refineries with a combined capacity of over 1 million bpd have been shuttered, Bloomberg reported. Globally, some 2.13 million bpd in refining capacity has been shut down since 2020.

In addition to the shutdown of refineries, at least two are set to be converted to biofuel production facilities, further shrinking the refining capacity available in the world’s largest oil consumer.

The refining capacity shortage has emerged as one of the reasons, besides high crude oil prices, for the current fuel price crunch that has sent the Biden administration scrambling for solutions months before the mid-term elections.

Among the steps taken so far were a 50-million-barrel oil release from the strategic petroleum reserve last November and the announcement of another, massive one of 180 million barrels, to take place over six months.

In addition, the Energy Department has reached out to the industry to ask companies to boost oil production. But while production is indeed growing, it is growing much more slowly than it must to offset supply tightness. Exports are growing, too, contributing to domestic supply tightness, especially in middle distillates.

This has prompted fears of shortages due to consistently strong demand as the economy and consumer spending recovered after the pandemic.

Oilprice.com by Irina Slav, May 27, 2022

The redeveloper is eyeing warehousing allowed in the plan

Bayonne has adopted a redevelopment plan for 140 acres of industrial area in Constable Hook, including the former Exxon site off New Hook Road, clearing the way for potential warehouses. The area is currently characterized by tank farms, marine terminals, and industrial uses related to its location along the Kill Van Kull.

The Planning Board adopted the redevelopment plan at its April meeting. The plan was presented by City Planner Suzanne Mack.

Industrial redevelopment plan

According to Mack, the redevelopment area not only includes the Exxon site, but also the International Matex Tank Terminal (IMTT) site to the north. In total, the area encompasses 140 acres of land in Bayonne, with 90 acres being the Exxon site, 40 acres being the IMTT site, and the other 10 acres being a Conrail property for a rail line that separates the two sites.

The area has been industrial in nature for decades prior to Exxon closing shop. And Mack said the new zoning overlay present in the redevelopment plan preserves that heavy industry. According to Mack, this was to allow IMTT, which is an active heavy industrial site, to remain that way if it so chooses.

“There are three developers here,” Mack said. “One is Conrail, which remains in place. IMTT and Exxon are two other separate developers. It’s unclear at this time whether IMTT’s portion will be developed at the same rate and with the same uses as Exxon. So by allowing them to do an overlay, we would use the redevelopment agreement to determine whether or not they stay and just use the underlying I-H [heavy industrial] zoning.”

What is permitted under the plan

Mack said there were high design standards for industrial buildings nowadays that the city was requiring in the plan.

“Many industrial buildings that are being developed now have very nice buildings and we’ve included that,” Mack said.

According to Mack, another newer regulation incorporated into the plan requires that garbage and recycling be handled privately.

“This is a new regulation we’re including,” Mack said. “All refuse and recycling should be handled and disposed by private entities. They will not rely on the municipality for handling of disposal. That’s a new suggestion that’s going to be put in all of our redevelopment plans in order to not have the city have the burden of trash pickup.”

Since it is along the waterfront, although in an industrial area, a walkway does not need to be constructed but the redeveloper must pay for the construction of an offsite walkway. And the site’s waterfront will be developed as a water dependent use or will remain undeveloped and reserved for said uses in the future.

In response to general questions, Michael Miceli, the attorney for the site redeveloper Duke Realty, LLC, said that the redeveloper was contemplating warehouses for the site that would employ approximately 100 people per building. However, it is not clear how many warehouses would be constructed at the time, but Miceli estimated anywhere between three and six.

“It’ll depend on the scope,” Miceli said. “It could be anywhere from 300 to 600 depending on the scope of the actual buildings that are approved.”

Commissioner concerns addressed

Commissioner Sharon Ashe-Nadrowski, the city council’s designee on the planning board who is also City Council President and a mayoral candidate, was concerned about the new truck traffic the redevelopment would bring to the area. In response, Mack noted there is $5.5 million in grants the city was receiving to address the roadways in the area.

“We’re doing a whole new layout of new utilities and roadway connections that will service the site,” Mack said. “We did that prior to the development of the site.”

However, Mack asked the city council to extend the grant to be awarded by March of next year. The council approved the request at its April meeting, combining the grant with another to provide for the roadway overhaul. Mack added that the site is going to have a lot of large truck traffic.

“It’s going to be a warehouse facility,” Mack said. “So there will not be large trucks.”

Trucks that are heading to the site will use Route 440 to get to the site, not local roads.

“They will come down Route 440 and turn onto New Hook Road,” Mack said.

Ashe-Nadrowski was still concerned about traffic, noting the industrial sites in the area that are looking to expand. Mack said there was a parking study done that she didn’t have on hand but can be presented to the board.

Neighboring properties object

An attorney representing neighboring applicants addressed the board, calling for the rejection of the plan.

Attorney Johnathan Guldin of Clark Guldin said he represented a number of neighboring properties, including: 7 Hook Road, LLC; Atlantic Cement Realty, owner of LaFarage Terminal; Duraport Realty 4, LLC; 160 East 22nd Street Realty Urban Renewal LLC; and 140 East 22nd Street Urban Renewal LLC, owner of the Kenrich Petrochemicals redevelopment site.

“My clients represent a handful of approximately 15 or 20 property owners in this area,” Guldin said. “They are either adjacent to or in close proximity to this particular site. They object to this redevelopment plan. No one has consulted them on this plan.”

Guldin said that one of the lots was not noticed on the agenda and this was a procedural defect. He added that traffic was an issue in the area.

“The Exxon site has been vacant for over a decade, but historically were serviced by either marine vessel or rail,” Guldin said. “The warehousing uses that we’re talking about or are being contemplated on the redevelopment plan contemplates three to six buildings. Hundreds of thousands of square feet of warehousing will obviously have significant impacts on local, county, and state roadways and circulation in that Constable Hook area. It is already in very poor condition…. It’s a maze and this plan would introduce significant industrial traffic from the farthest east property near the Kill van Kull up until Route 440. It would have a dramatic impact on not just traffic but infrastructure because there are no sidewalks. The roads are in poor condition. There is no sanitary sewer, there is no water. There’s no real plan other than we’re going to address it later on.”

Gulden asked the board to table the plan until the property owners’ input is heard or until further considered by city professionals.

Redeveloper responds

Following that, Miceli took the podium to defend the project. He said the aforementioned lot was in fact noticed and it was typographical error on the agenda. He added there does not need to be a notice when requesting the board to look at a site to determine if it is an area in need of redevelopment or when approving redevelopment plans.

When it came to concerns about traffic, Miceli noted there was a traffic study with the plan.

“It was reviewed by the City Planner and City Engineer,” Miceli said. “They had over a month and a half to review it. If there were any concerns, they could have put them in the redevelopment plan, but they did not.”

According to Miceli, the redeveloper will construct roads that will benefit the area.

“Drive down there now,” Miceli said. “There are no roads. This will lay out a road network. We will need to show you that road network works.”

And the traffic generated by the warehouse is not going to impact the area, according to Miceli.

“Based on our studies, it’s not going to be a significant impact one way or the other between the two,” Miceli said. “So the traffic improvements will be addressed. We will pay our fair share. This is, I hope, going to be a big project and we will significantly upgrade a decaying infrastructure that’s been sitting there for how many years? How long do we have to wait before we clean this up and erase Exxon’s environmental liability down there.”

Cleaning up a Brownfield site and using union labor

Miceli said this cleans up a Brownfield site, best defined as a former industrial site which is now vacant and contaminated.

“Can you think of a dirtier site in Bayonne?,” Miceli said. “Maybe one or two. But this is one of the most contaminated sites in the state that we’re cleaning up. Duke is doing that. We met with officials to hash out what our remediation plan is going to be… Over the next several months, there will be toxic things carted out of our city and that legacy is going to be erased step by step… We are doing remediation, this promotes economic activity.”

Miceli said this plan would allow redevelopment that would bring back jobs lost when the Exxon site closed in the city.

“I’m sure we all know someone who lost their job or was forced into retirement when Exxon closed,” Miceli said. “Nothing’s happened down there for years. It’s a whole other city. You can’t see from one end of the site to the other. It’s time to do this.”

Patrick Kelleher, president of the Hudson County Building and Construction Trades Council, said he favored union labor for the project and spoke to the attorney to the redeveloper about it.

“I represent all those union people here that are looking to go to work on this project with Duke,” Kelleher said. “We want to make sure union labor is on all of these jobs in Bayonne. It’s all about giving our Bayonne residents an opportunity. Because they all pay taxes in their town and they want to go to work in this town.”

Ultimately, the board voted unanimously to adopt the plan, with Ashe-Nadrowski adding: “I think it’s great we’re getting rid of this Brownfield and bringing this back to being a productive site.”

At the April meeting of the Bayonne City Council, the plan was also introduced by the council with a hearing and vote set for its May meeting. After that, Duke Realty, LLC will have to go before the planning board again for final site plan review before construction can begin.

Hudson Reporter by Daniel Israel, May 20, 2022

Europe’s largest port is poised to become a key hub of a new “hydrogen economy” with numerous projects now underway along its 42-kilometer length. The Port Authority and many port-based companies are now preparing to build the infrastructure required for a complete system of local and international supply and demand converging on Rotterdam.

Their confidence became apparent earlier this month, when the city, the Port Authority, and South Holland Province signed a joint statement with nearly 70 port-based operators and business partners in (potentially) exporting countries.

They affirmed their ability to supply Europe with at least 4.6 Mt of hydrogen annually by 2030. It was their ‘offer’ to European Commission executive vice-president Frans Timmermans, now actively advocating for the new REPowerEU strategy. Europe suddenly raised its goal for green hydrogen production and import to 20 Mt/yr by 2030. The Rotterdam signers are saying they can provide more than 20% of the European Commission’s target.

Among the signers were a wide array of ports and industrial groups with hydrogen ambitions. Their commitment occurred during the World Hydrogen Summit & Exhibition organized by the UK-based Sustainable Energy Council, which put Rotterdam’s wide-ranging hydrogen ambitions on full display.

Rotterdam’s wide-ranging initiatives anticipate both supply and demand of hydrogen and hydrogen-based fuels. They should find support from the Dutch government, which announced its intention last month to invest €338 million in green hydrogen production and distribution.

Electrolysis engine

The Rotterdam Port Authority and major industry players are anticipating the rise of demand in Europe. Their bold initiative to build large electrolysis units on reclaimed land near the mouth of the Maas River – the Maasvlakte – is taking shape. New offshore wind turbines now under development will power them.

The Netherlands has approximately 2GW offshore wind capacity, which is an initial outlay of the country’s plan to fill large swathes of its North Sea waters with wind towers, creating 21GW of offshore wind power by 2030. About half of this is currently tendered.

Wind energy for green hydrogen production on Maasvlakte will come with guarantees of origin from the 2GW Hollandse Kust Noord Wind Farm offshore site, now being developed by the CrossWind consortium of Shell and the Dutch renewable energy developer Eneco. The consortium intends to have the 69-turbine wind farm operational by the end of next year.

The site itself, approximately 25 hectares of filled-in land, is planned for an initial 1GW conversion park, consisting of four electrolysis units of 200-300MW each. Shell, bp, and Air Liquide are among the groups now proposing to build the electrolysis factories, to be operational by 2026. Part of the site is dedicated to electricity connection and waste heat re-use.

Shell is taking the lead with plans for its 200MW Hydrogen Holland I project, now subject to investment decision later this year. It will supply green hydrogen to Shell’s Energy and Chemicals Park which operates some 30 kilometers further east of the port. ThyssenKrupp Uhde Chlorine Engineers will develop the plant with its large-scale 20MW alkaline water electrolysis units.

The conversion park’s next project in line is H2-Fifty, a bp joint venture with the Dutch consortium HyCC. This 250MW electrolysis facility will supply green hydrogen to BP RR – the largest oil refinery in Europe – and other port industries. Now in conceptual phase, the project anticipates FID by end of next year.

Continued development of electrolysis should gain momentum from EU mandates, which will require the port’s industries to achieve net-0 carbon emissions by 2035. The Port Authority anticipates to eventually expand to 20GW capacity, making it by far the largest electrolysis production site in Europe. New locations within the port will be made available, with a ramp up of tendering anticipated after 2026.

Pipeline connectors

Rotterdam wants local production and import of both green and blue hydrogen. The port aims to import hydrogen in the form of ammonia and LOHC, and to transfer this to a portfolio of hydrogen and hydrogen-based fuels. These will need to move easily within the port and far beyond.

An open access underground pipeline will serve the new electrolysis park while connecting to port-based industries and the ten independent import terminals located along the port’s 42-km length.

There are two hydrogen pipeline systems now in development. HyTransPort, the port’s dedicated hydrogen pipeline, is a joint venture of the Port of Rotterdam and the Dutch natural gas utility Gasunie. Construction is anticipated to start early next year.

HyTransPort will connect to an expansive pipeline system serving northwest Europe, linking the Port of Rotterdam to the rest of the Netherlands, Port of Antwerp, and the industrial Rhine-Ruhr region in Germany. Called the Delta Corridor, this 4-pipeline system will transport hydrogen, hydrogen-based fuels and other industrial gasses.

To be operational in 2026, the consortium behind the project includes the Port of Rotterdam, Shell, bp, thyssenkrupp, the Essen, Germany-based power developer RWE, and several other industrial groups.

The Delta Corridor will also work the other way, carrying captured CO2 from industries to depleted gas wells undersea. It will facilitate the Portos project, the most advanced of three large carbon capture and storage schemes being planned in The Netherlands (each named after one of the Three Musketeers!).

Portos will repurpose an offshore natural gas platform, to store approximately 2.5 Mt of CO2 per year, taking it to the depleted gas wells more than 2 km deep. It will carry away CO2 from port-based industries including Shell, ExxonMobil, Air Liquide, and Air Products, according to a contract signed last year, and eventually from industries in Germany.

The €500m project is being developed by a three-member public consortium including the Port Authority, Gasunie, and the Dutch natural gas utility EBN. FID is expected this year, with operations to begin in 2025.

Anticipating imports

Europe’s new requirement of 20 Mt/yr of hydrogen by 2030 will far exceed its capacity to produce such quantities. It will require imports, opening enormous opportunities for producers of blue and green hydrogen worldwide. The Port Authority and its partners are positioning for this.

The Rotterdam Port Authority is already studying some 100 supply opportunities around the globe, in the US, South America, the Middle East, Africa, Australia and everywhere. It has been in exploratory studies with more than ten countries, including Iceland, Portugal, Morocco, Oman, South Africa, Uruguay, Chile, Brazil, Australia and Canada, looking specifically at opportunities for strategic cooperation to establish export chains.

A key piece of infrastructure for imports is now in the design stage. The ACE terminal, to be built on the Maasvlakte, will serve as an import storage terminal for green and blue ammonia. It is subject of an initial agreement among Gasunie, Dutch terminal operator HES International, and the port-based storage firm Vopak. Gasunie will connect pipeline to the site, which may eventually include an ammonia cracker facility.

Oilprice.com by Alan Mammoser, May 27, 2022

U.S. crude prices appear on track for the third consecutive weekly rise as investors looked past the Energy Information Administration’s (“EIA”) report showing a surprise build in stockpiles and turned their attention to the strained market fundamentals.

On the New York Mercantile Exchange, WTI crude futures increased 1.8% to settle at $110.24 a barrel yesterday after climbing $6.47 on Wednesday.

Before going into the other factors, let’s dig deep into the EIA’s Weekly Petroleum Status Report for the week ending May 6.

Analyzing the Latest EIA Report

Crude Oil: The federal government’s EIA report revealed that crude inventories rose 8.5 million barrels compared to analyst expectations of a 300,000-barrel decrease. A sharp drop in exports primarily accounted for the unexpected stockpile build with the world’s biggest oil consumer even as refinery crude runs rose and production declined. Total domestic stocks now stand at 424.2 million barrels — 12.5% less than the year-ago figure and 13% lower than the five-year average.

On a somewhat bullish note, the latest report showed that supplies at the Cushing terminal (the key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange) decreased 587,000 barrels to 25.9 million barrels.

Meanwhile, the crude supply cover was up from 26.7 days in the previous week to 27.1 days. In the year-ago period, the supply cover was 32.3 days.

Let’s turn to the products now.

Gasoline: Gasoline supplies decreased for the sixth week in succession. The 3.6-million-barrel drop was attributable to strong demand and exports, as well as lower imports. Analysts had forecast that gasoline inventories would fall by 1.7 million barrels. At 225 million barrels, the current stock of the most widely used petroleum product is 4.7% less than the year-earlier level and 5% below the five-year average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) logged its fifth weekly fall in a row. The 913,000-barrel decline primarily reflected higher exports. Current inventories — at 104 million barrels — are 22.6% below the year-ago level and 23% lower than the five-year average.

Refinery Rates: Refinery utilization, at 90%, rose 1.6% from the prior week.

Final Words

Oil prices ended above $110 yesterday, primarily reflecting concerns about supplies from Russia, which is one of the world’s largest producers of the commodity. Raising the prospect of a dramatic fall in crude flows, speculation has it that the European Union could shortly follow the United States in blocking imports of Russian energy to protest Moscow’s invasion of Ukraine.

While there are jitters over soaring inflation, a strong greenback, stuttering economic growth and the coronavirus lockdowns in China (the world’s second-biggest oil consumer), these have been more than offset by the pending European embargo that could lead to an acute supply squeeze.

As it is, the Oil/Energy market continues to enjoy support from geopolitical uncertainty amid Russia’s military operations in Ukraine. In March, crude prices surged to multi-year highs of $130-a-barrel.

Even the fundamentals point to a tightening of the market. Per the latest government report discussed above, U.S. commercial stockpiles have been down more than 12% in a year, prompted by the demand spike owing to the reopening of economies and a rebound in activity.

As a matter of fact, the Energy Select Sector SPDR — an assortment of the largest U.S. companies thronging the space — has risen 40.7% year to date against a 17.5% loss for the broader S&P 500 benchmark.

Consequently, the top three gainers of the S&P 500 this year are all energy-related names: Occidental Petroleum OXY, Valero Energy VLO and Coterra Energy CTRA.

Occidental Petroleum: OXY, carrying a Zacks Rank of #2 (Buy), is the top-performing S&P 500 stock in 2022 with a gain of 104.3%. Occidental Petroleum’s expected EPS growth rate for three to five years is currently 32.8%, which compares favorably with the industry’s growth rate of 22.1%.

OXY has a projected earnings growth rate of 264.3% for this year. The Zacks Consensus Estimate for Occidental Petroleum’s 2022 earnings has been revised 88.4% upward over the past 60 days.

Valero Energy: This Zacks Rank #2 (Buy) stock has jumped 60.3% year to date. VLO beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 84.3%.

Valero Energy is valued at around $49.1 billion. VLO has a projected earnings growth rate of 353.7% for this year.

Corterra Energy: This Zacks Rank #1 (Strong Buy) stock was the third-best performer in the S&P 500 Index, with shares appreciating 57.9% so far in 2022. CTRA has a projected earnings growth rate of 81.8% for this year.

Yahoo! Finance by Nilanjan Choudhury, May 23, 2022

The Australian upstream industry meet this week for its key annual gathering, with discussions dominated by attempts to remain relevant in a world aiming to undergo an energy transition to achieve net zero greenhouse gas (GHG) emissions by 2050.

Delegates spent more time than usual at the Australian Petroleum Production and Exploration Association (Appea) 2022 conference in Brisbane, Queensland discussing topics such as producing hydrogen from gas and adding carbon capture, utilisation and storage (CCUS) capacity to future oil, gas and hydrogen projects, while still largely focused on discussing new oil and gas projects.

The industry body that represents Australian oil and gas producers has appointed a new chief executive Samantha McCulloch who heads the IEA’s CCUS unit, signalling Australia’s upstream sector is going to have to be more serious about reducing its GHG emissions.

“Samantha is an internationally acclaimed expert in carbon capture, utilisation and storage, a technology that is critical to the world achieve its climate goals,” Appea board chairman Ian Davies said in his closing speech of the Appea conference on 19 May.

Future government policy will be dictated by the outcome of Australia’s federal election on 21 May. The main opposition Labor party has a deeper GHG emissions cut of 43pc by 2030 from 2005 levels compared with the current Liberal-National coalition government’s target of 26-28pc over the same period.

Deeper emissions cuts will affect the energy sector, which accounts for more than 75pc of Australia’s total emissions through burning coal and gas for producing electricity, consuming oil products in transportation, fugitive emissions associated with coal and gas extraction and the energy used in the manufacturing process, as well as the heating of homes and businesses.

“Meeting Australia’s and the world’s demand for energy, affordably and reliably must occur at the same time as we invest in the huge task of decarbonising our energy system to net zero emissions by 2050,” Davies said.

The role the oil and gas industry plays in 2022 will look different by 2050, he said. As the sector will play a much greater firming role in the electricity grid to back up renewable energy, provide feedstock to hydrogen producers and deliver low-emissions energy with CCUS.

Another obstacle to the sector is access to finance, as banks and other lenders come under pressure to reduce their financing of fossil fuel production to meet GHG emissions targets and environmental, social and corporate governance (ESG) mandates.

Upstream firms are facing tighter lending requirements from banks because of ESG, MST Marquee senior research analyst Mark Samter told Appea, citing the 80,000 b/d Pikka oil project in Alaska that is operated by Australian independent Santos. Banks no longer want to be associated with lending to an oil project located in an environmentally-sensitive area.

“Ten years ago Santos would have had no problem getting finance for a project like Pikka, but that is not the case today,” Samter said.

Argus by Kevin Morrison, 20 May, 2022