Good morning from Houston, where I'm still at a big energy conference.
This week our intro tunes come from the great Texas-based movie "Dazed and Confused," so let's get started ...
1 big thing: Pompeo's petro-rallying cry
HOUSTON — Secretary of State Mike Pompeo told a room full of energy executives last night that the U.S. oil-and-gas boom is a vital diplomatic and commercial tool in support of the country's foreign policy goals.
Speaking at the big CERAWeek by IHS Markit event, Pompeo said...
"We’re not just exporting American energy, we’re exporting our commercial value system to our friends and to our partners."
"Our model matters now, frankly, more than ever in an era of great power rivalry and competition where some nations are using their energy for malign ends."
Why it matters: As Reuters and others pointed out, the speech was notable in its enlistment of the industry as an ally to advance U.S. geopolitical goals.
- It casts the U.S. rise into a petro-superpower as a check on Iran, Russia and elsewhere. He also talked up efforts to help allies develop their own resources.
Our thought bubble: Pompeo's speech marks the Trump administration's dueling continuity and rupture with the Obama administration.
- The idea of using U.S. LNG exports to weaken Russia's energy influence in Europe dates back to the Obama years.
- The fracking-driven U.S. oil boom gave the Obama administration leeway to bring other countries on board with sanctions against Iran that helped lead to the Iran nuclear deal.
But for the Trump administration, that oil surge is a leverage point for a very different strategy of trying to isolate Iran with new sanctions now that the U.S. has walked away from the nuclear agreement.
- "We’ll continue with sanctions until Iran behaves in the way normal nations do, without threatening assassination campaigns in Europe, conducting terror campaigns throughout Syria and Iraq, without underwriting Hizballah," Pompeo said.
And the speech was also noteworthy for the absence of emphasis on climate change and the environment, in contrast to State's diplomatic push — especially with China — during the Obama years.
2. Debating the future of EVs in oil country
HOUSTON — The rise of electric vehicles and autonomous tech is in focus at the conference.
The big picture: Major oil companies are boosting their investments in EV charging tech. The trajectory of EVs will also influence global oil demand growth (although they're just one of many factors like growth in petrochemicals, shipping, and aviation).
The intrigue: The long-term future of EV growth in the U.S. and worldwide is just soaked in uncertainty. There's huge divergence in forecasts for EV adoption rates.
- For instance, Bloomberg NEF sees EVs accounting for 55% of global light-duty vehicle sales by 2040, while several other major projections are more modest, some considerably so.
The most bullish remarks I heard yesterday came from Ulrich Spiesshofer, CEO of the Swiss industrial and tech giant ABB, which has EV charging and power grid equipment lines.
- “When you listen to people arguing about the EV space nowadays, I feel very strongly that the passenger car and the car industry is at a Kodak moment,” he said onstage, referring to the fast transition to digital photography.
- "I think the world will be surprised [by] what is happening with electric vehicles," Spiesshofer told me.
Another session here, on the EV battery supply chain, delved into real challenges for producing and procuring growing amounts of lithium, cobalt and other materials. But none of the panelists made the case that this would act as major brake on deployment.
But, but, but: On a separate panel, Marianne Kah of Columbia University's Center on Global Energy Policy pointed to a suite of forces that can limit growth rates — like "unrealism" about the timing of fleet turnover.
One wildcard in the U.S. is the future of policy. Derek Kan, the U.S. undersecretary of transportation for policy, was not shy about saying that the Trump administration is not pro-EV.
3. The counter-offensive to NOPEC
HOUSTON — In public and behind closed doors, OPEC officials are maneuvering here to prevent U.S. legislation targeting the cartel from gaining momentum.
Where it stands: Via Axios' Amy Harder, OPEC Secretary General Mohammed Barkindo said the bill aimed at allowing the U.S. to sue OPEC under anti-trust law would not serve America or its booming oil industry.
- He also said that President Trump's tweets targeting the cartel is one of "new additions to the recent uncertainties" in the market, though he added, "we welcome the president joining this dialogue."
The intrigue: Bloomberg reports that OPEC officials made their case against the "NOPEC" bill in a private meeting with Wall Street banks at the conference. Per the report...
"Suhail Mohammed Al Mazrouei ... told a group of U.S. financiers Monday that if the so-called NOPEC bill becomes law, the cartel would stop working and therefore every member would raise production to maximum capacity, causing a crash in oil prices."
Meanwhile, BP CEO Bob Dudley tells CNBC that the legislation would have "enormous unpredictable, unintentional consequences."
4. Chart of the day: U.S. export boom
This chart makes it easy to understand why analysts increasingly say it's really a question of when, not if, the U.S. becomes the world's top exporter of crude oil and petroleum products combined.
The big picture: "As a result of its strong oil production growth, the United States will become a net oil exporter in 2021, as its crude and products exports exceed its imports," the International Energy Agency said in a report this week that looks out to 2024.
- "Towards the end of forecast, U.S. gross exports will reach 9 [million barrels per day], overtaking Russia and catching up on Saudi Arabia," it states.
5. LNG player: Trump team slow on permits
HOUSTON — Amy reports that top natural gas executive, Charif Souki, praised the Trump administration’s rhetoric supporting natural gas but chided it for being slow out of the gate approving permits to export the fuel.
The big picture: Rhetoric matters, but action matters more, and here Trump has been slower than his predecessor.
The intrigue: When asked, Souki, co-founder of 3-year-old Houston-based Tellurian Inc., ranked the current administration’s handling of his export project so far. The scale was 1 to 10, 10 being great, and 1 being terrible.
- “In terms of attitude and intent for industry, probably an 8 or 9. Execution, a 5,” Souki said. “It’s like every new administration, it takes time to figure out how the system works.”
Where it stands: The Federal Energy Regulatory Commission, an independent agency whose regulators Trump appoints, late last month approved the first application to export LNG exports in 2 years, despite a backlog.
“The first two years of the administration, not a single permit was issued for a new LNG facility. Whatever you want to say in terms of attitude about the Obama administration, they got some liquefaction facilities permitted..."
"Do I think the Trump administration has learned from their first two years? Yes. Eventually they’ll get there.”— Charif Souki
Go deeper: Read Amy's full piece.
6. What the majors want on methane
Two pieces of news about the oil-and-gas industry's posture on dealing with the potent greenhouse gas methane caught my eye...
1. BP and the Environmental Defense Fund announced a 3-year partnership aimed to help cut emissions from the oil-and-gas industry, a major source of the planet-warming gas. Per the announcement...
- They're collaborating on methane detection and quantification technologies, including use of machine learning and artificial intelligence.
- They plan to work on projects that test "technologies and emerging strategies" that can be helpful to the industry as a whole.
- BP isn't paying EDF, but instead they are "working to identify third-party analytical and technological demonstration projects, and BP will assist with funding."
- BP has an existing target to bring its methane emissions intensity down to 0.2%.
2. A top Shell official tells Reuters that the EPA should regulate both existing and future sources.
- The comments underscore a split between parts of the industry and the Trump administration, which is abandoning Obama-era initiatives.