Axios Generate

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November 17, 2017

Good morning! A quick announcement for Washington-area readers: Securing America's Future Energy is hosting a timely discussion on Tuesday, Nov. 28, called "Oil's Coming Decade of Disorder."

It will explore how underinvestment in new supply, geopolitical risk and other forces affect market stability. Oh, and I'm moderating! You can register here.

Ok, let's head for the weekend . . .

Coal’s technology problem, and vice versa

Here's the latest dispatch from my Axios colleague Amy Harder, who spent several days at the UN climate talks in Bonn, Germany...

The future of coal in a carbon-constrained world depends on technically feasible but prohibitively expensive technology that captures emissions from coal power plants. That technology, in turn, has become politically and inextricably linked to coal, despite the fact that most of it right now is used for purposes separate from coal.

Why it matters: Coal has been a popular topic here at a global climate conference hosted by the United Nations precisely for its unpopularity among many of the thousands of political leaders, activists and experts attending. On Thursday, over 15 nations announced plans to phase out coal by 2030 and that number is growing. Meanwhile, the capture technology itself is getting caught up in the political theater.

The UN's scientific body concluded in its most recent assessment of climate science in 2014 that if this technology isn't widely deployed, it would be 138% more expensive to keep global temperatures below a roughly 2-degree Celsius rise over the next century.

Reality check: Today, only 17 such projects exist around the world, according to a report released at the conference this week by the Global CCS Institute, which was founded in 2009 and funded by fossil fuel companies and others to more widely deploy the technology. Just two of those are capturing carbon from coal, the dirtiest fossil fuel that needs the technology the most.

Click here for the rest of the story in the Axios stream.

He would drive 500 miles: Elon Musk unveils his semi-truck

It's here: Over in the Axios stream, Steve LeVine offers info and analysis on Tesla's prototype electric semi-truck unveiled last night in California.

Buzz: One key takeaway from the ceremony is that the Tesla claims the semi-truck has 500 miles of range per charge – far more than expected.

Musk said the average truck trip is less than 250 miles, which meant that a driver could do a round trip without recharging. Still, Musk said the truck's battery pack, built into the floorboard, can be charged to 80% of capacity in 30 minutes.

Costs: Musk did not offer an overall price, but that the cost per mile would be $1.26, compared with $1.51 for a diesel-operated truck. If the semi-truck is operated in a convoy, he said, the efficiencies took the operating cost below $1 a mile, and made them cheaper than moving freight by train.

Big picture: If he is able to deliver the semi-truck as described, it seems likely to shake up the freight market just as he has the car business. Experts expect semi-truck traffic to surge in the coming decades as the global population grows to 9 billion people.

Yes, but: Don't forget that the truck prototype arrives came as Musk is confronting doubts about his ability to pull off arguably his most important project of all — the scale-up of the Model 3, the flagship mainstream-priced electric vehicle that he has touted as Tesla's route to the mass market. Production has ramped up far slower that Tesla initially forecast.

Oil employment's lagging recovery

A new presentation from the Dallas Fed (which puts out lots of interesting oil-and-gas data analysis) has a chart that caught my eye.

It shows how employment in one key part of the industry — extraction and supporting activities — has not bounced back alongside U.S. production, which fell sharply in 2015 after prices collapsed but has been moving up again for a year and heading for record levels.

What's going on: Kunal Patel, a senior research analyst with the Dallas Fed, offered some insight in an email exchange with your Generate host...

"There are likely a variety of factors causing employment to not keep up with rising production. Primarily, efficiency gains (faster drill times and more production output per well) are allowing operators to produce more with less people," Patel said.

  • Some evidence: He notes that the oil rig count as of November 10 was 738, which is slightly under half of the 2014 average, yet production has risen by by about a million barrels per day over the last year to the current level of roughly 9.6 million barrels per day.

Tech's influence: "Additionally, greater use of technology is likely leading to automation of some tasks and allowing operators to be streamlined and more efficient. Big data has also allowed the industry to be more efficient," Patel said.

Go deeper: He highlighted this Bloomberg piece on industry adoption of advanced tech and data analysis, and this Dallas Morning News story on industry employment trends and technology.

The Bonn coal phaseout pledges in context

Let's return to Bonn and coal for a moment. One of the splashier announcements at the climate talks has been the rollout of the Powering Past Coal Alliance — a pledge by roughly 20 countries (so far) to phase out use of coal in power generation by 2030.

  • The countries include Canada, the U.K., several other European nations, New Zealand and more.

Reality check: The chart above compares coal use in the countries that have adopted the pledge against global coal consumption in 2015 as reported by the U.S. Energy Information Administration. (It does not include pledges by some provincial governments or the U.S. states of Washington and Oregon.)

  • It shows that the pledge currently covers slightly over 2% of global coal use. The New York Times, using a separate dataset based on BP's big annual report on energy statistics, arrives at roughly the same tally.
  • The absence of dominant coal users China, the U.S., and India — and to a lesser extent Germany, Russia, Japan and some others — means that for now, the pledge only covers a small amount of the world's use of the fuel.

Why it matters: Coal currently accounts for around 40% of worldwide power generation. Cutting emissions from coal — the most carbon-intensive fossil energy source — is vital to eventually ensuring the steep global greenhouse gas cuts that scientists call necessary to avoid the most dangerous levels of global warming.

What's next: The organizers of the pledge say they plan to add many new partners ahead of the next big UN summit a year from now. Stay tuned.

Oil-and-gas notes: LNG, Keystone spill, Aramco IPO

Divestment: Bloomberg looks at the ramifications of yesterday's news that Norway's massive sovereign wealth fund plans to dump oil and gas holdings, noting that the proposal "rattled equity markets."

  • From their story: "Norway's proposal to sell off $35 billion in oil and gas stocks brings sudden and unparalleled heft to a once-grassroots movement to enlist investors in the fight against climate change."

OPEC decision: Via Reuters, "The world will still have a surplus of oil by end-March next year, Saudi Arabia's energy minister said on Thursday, signaling a willingness to extend output cuts when OPEC meets at the end of November on whether to extend caps well into 2018."

Saudi Aramco IPO: New York? London? Why not both? Business Insider chatted with Mihir Kapadia, CEO of Sun Global Investments, who believes Saudi Arabia's state-owned oil giant could use multiple exchanges for the massive IPO tentatively planned for next year.

Curveball: A new report from Columbia University's Center on Global Energy Policy explores how the global LNG market has been evolving in unexpected ways. It looks at the unexpected emergence of a group of a dozen countries — such as Egypt, Thailand, Pakistan — as new or growing LNG importers.

  • Why it matters: "Largely flying under the radar, the aggregate impact of these emerging importers has been the most important factor keeping the physical LNG market tighter than expected since 2014, absorbing an extraordinary amount of global supply growth and keeping the long-awaited global LNG surplus at bay," the study notes.

Spill: A leak from the existing Keystone oil pipeline spilled 210,000 gallons of oil — or roughly 5,000 barrels worth — in South Dakota, according to a suite of press reports.

  • One reason it matters: Via the Washington Post, "The spill comes just days before a crucial decision next Monday by the Public Service Commission in Nebraska over whether to grant a permit for a new, long-delayed sister pipeline called Keystone XL, which has been mired in controversy for several years. Both are owned by Calgary-based TransCanada."

Trump administration news and notes

Pruitt on the record: The controversial EPA administrator chatted with the Washington Post. He said, among other things, that Trump has weighed in personally on Superfund policy.

  • "He's actually presented some things to me on the Superfund sites on how to improve our approach there. It was very instructive," Pruitt said.
  • Speaking of Pruitt: via The Hill, he's expected to face public grillings from lawmakers twice in the next two months when he appears before separate congressional committees.

Trouble: NBC News reports that opposition from two GOP senators means "serious jeopardy" for Trump's nominee to be the nation's top chemicals regulator at EPA.

Zinke under the microscope: "Interior Secretary Ryan Zinke failed to properly document his travel, the agency's watchdog said Thursday, preventing it from determining whether he had violated government rules," Politico reports.

Still a mystery: Judith Garber, a senior State Department official, told the UN climate conference in Bonn yesterday that the U.S. remains "open to the possibility" of staying in the Paris deal under "more favorable" conditions. But she offered no hint as to what those conditions might be.