Daily Energy Standup Episode #236 – Insights into Transmission Challenges, Energy Transition Delays, and Major Industry Moves

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Invenergy’s 5-GW Grain Belt transmission project faces continued opposition at FERC

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Video Transcription edited for grammar. We disavow any errors unless they make us look better or smarter.

Michael Tanner: [00:00:14] What is going on, everybody? Welcome into another edition of the Daily Energy News Beat Stand up here on this gorgeous Tuesday, October 24th, 2023. As always, I’m your humble correspondent, Michael Tanner, coming to you from an undisclosed location here in Dallas, Texas, joined by the executive producer of the show, the purveyor of the show and the director and publisher of the world’s greatest website, EnergyNewBeat.com, Stuart Turley, my man, how are we doing today? [00:00:37][22.6]

Stuart Turley: [00:00:38] It’s a beautiful day neighborhood. And I mean, it is action packed. [00:00:41][3.3]

Michael Tanner: [00:00:41] Action packed. We’ve got a lot of climate stuff going on. Chevron decides to buy gas. We will cover all of that in a bag of chips here. Coming up. First up on the menu in energy, I don’t know what this is, but they’re a five gigawatt green belt transmission line project that faces continued opposition due to FERC. Next up, delaying the energy transition. Are micro-grid developers forced to wait for Transformers interconnections and clarification from the Fed. Next up, the embargo at 50 regulatory casualty versus the anti-oil narrative. Great article on the to do. We’ll dive into specifically what the parallels to 1973. And then finally we’ll fly over into the into Europe. Dutch Energy Minister admits that wind power agenda is pricier than anticipated in a move I’m only EMV listeners saw coming so you we saw that one come from a mile away here still then tossed out quickly cover what happened in the overall finance markets today overall markets fairly flat. We did see oil drop a little bit, but then the talk of the town obviously is Chevron’s $53 billion all stock deal to buy. HESS We will dive into kind of the implications all around that and opine maybe about what’s next because I think this solely sets their sites Shell and Conoco you’re up next folks before we do all of that, guys, as always, the stories and analysis you’re about to hear is brought to you by the world’s greatest website. www.EnergyNewsBeat.com The best place for all of your energy news. Stu the team do a great job of curating that site, making sure it stays up to speed on everything When it comes to the oil and gas business, you can email the show [email protected]. Hit the description below. You can also interact with the show that way. I see all the different details and we keep you up to speed in that description below. [email protected] The best place for all of your oil, for all your data news combo. Get that while you still can never know where it might go. I’m out of breath Stu. Where do you want to begin? [00:02:38][116.7]

Stuart Turley: [00:02:39] Well, I tell you what, let’s start with a green bell. And this is not the China’s Belt and Road Initiative. This one is Invenergy’s five gigawatt green Belt. Transmission faces continued opposition at the Federal Regulatory Commission. I’ll tell you, the Federal Energy Regulatory Commission, Michael, it took $3.7 billion to get the transmission lines from West Texas to East Texas in order to bring all of them wind farms on line two years. This is $7 billion. They think that they can bring it online. Oh, let me look at the date. Unbelievable. 800 miles of delivering wind power from western Kansas, as far east as Illinois. Here’s that group. It’s not an auspicious beginning to for an application to negotiate and be reasonable rates using a fair and impartial, impartial process. Michael, here’s the problem. There is wind farm after wind farm after wind farm and grid after grid is trying to raise their rates. Everyone knows that you can’t negotiate a price for electricity because costs go up. [00:04:08][89.0]

Michael Tanner: [00:04:09] You have to almost re reallocate or reforecast every year. [00:04:12][3.7]

Stuart Turley: [00:04:13] Yes. And not only as we’re going to talk about in the next one in the energy transition, there’s a shortage of materials to build a grid that long, an 800 mile long line. Holy smokes. Yeah, it it says the grain belt said it expects to transfer the remainder of phase one capacity to buyers and or leases via sales and leases of undivided interest in the transmission line, which will require separate f e, r c approval. What do we know about approvals on processes? [00:04:49][36.3]

Michael Tanner: [00:04:52] You’re going to be there a while. [00:04:53][0.7]

Stuart Turley: [00:04:54] And so delayed consideration of this filing could adversely impact the project’s anticipated financial close and construction timeline. Michael This reminds me of the California high speed rail that is been $15 billion and it needs. Another 75 to complete and they’ve not done anything on it. [00:05:17][23.6]

Michael Tanner: [00:05:19] Sounds like a money pit to me. Sounds like a project I’d like to be involved with. [00:05:22][3.2]

Stuart Turley: [00:05:22] Oh, yeah. [00:05:23][0.2]

Michael Tanner: [00:05:23] Money Pit, where I’m at the other end of a check. [00:05:24][1.6]

Stuart Turley: [00:05:25] Oh, yeah. We got to go do that. Here’s the backstory. [00:05:28][2.6]

Michael Tanner: [00:05:28] What’s next? [00:05:28][0.2]

Stuart Turley: [00:05:29] Next story. Delaying the energy transition. These are micro-grid developers forced to wait for Transformers Interconnection in the Air, a classification, the dreaded Inflation Reduction Act. This has got several pieces to this story, Michael. Number one is that there ain’t no parts. I believe we just talked about in the last one I’ve seen. This is a quote from workforce development and education. I’ve seen reports that interconnection can take many, many years, said Woody Hastings, program manager for the Climate Center. Beyond a couple of months, people want these things interconnected when they’re ready to be connected. It’s ludicrous to talk about a year to ten year wait. There’s two California bills that just Governor Newsom signed in, and these only have one or two paragraphs in them like we’ve seen before and other bills. They sign it and then next year they put in the language. That is absolutely amazing. They only put in the top things. So we’re going to reach our climate goals in California. We need the distribution system operation that expedites interconnection. Right now, when we come in here, the D.O.D., there’s a Department of Energy plan could exacerbate transformer shortages. You can’t buy this kind of fun in this article and the IRA uncertainty and what our government is doing to slow down all energy. It’s not just renewable, it’s everything. [00:07:20][110.3]

Michael Tanner: [00:07:21] So it’s truly legislation through regulation. And what’s hilarious is that it’s happening in our favorite state by our favorite governor, Gavin Newsom in California, where they theoretically want all the clean energy. So it’s, as you would say, energy hypocrisy at its finest. [00:07:37][16.7]

Stuart Turley: [00:07:38] You’re going to love the next one. You ready? Our constant theme, you can see our theme. I mean, this is a great theme. Let’s go to the next one, Michael. The embargo at 50 regulatory cars, casualities versus anti oil narrative. Here it is. The terms oil embargo and energy crisis have been burned in many people’s memory. Believe me. I remember them lines. You’re too young. Guess what? They may be back where the embargo was in 1973. OPEC did a 5% production cut, and then they had an oil embargo against the U.S.. Considering our current administration, they have been in everybody’s curios around the world. They may get this done again. So, Michael, in an energy crisis, we’re approaching an energy crisis of biblical proportions because of the other articles that we just talked about, the management, the printing of money. We’re now seeing pushback around the world about people not putting up with this anymore. So when they the bottom line of this article, the subtle point energy crisis is are not inherent to the natural workings of markets. They are governmental and thus preventable. Embargo in energy crisis would be far less known to history today if the free market had been in place in the seventies. And this is a lesson for today and tomorrow. Unbelievable. Great line. I mean, that is exactly what it is in the free market is not there in energy because of the printing of money, forcing people to go to these and forcing people to go to the renewable energy. [00:09:34][116.3]

Michael Tanner: [00:09:35] Yeah, I think that last paragraph that you read sums it up. Embrace the fact that when government gets involved and attempts to alter the path of the free market, we generally end up at suboptimal outcomes. Is the truth? [00:09:48][13.1]

Stuart Turley: [00:09:49] It is. Michael, let’s go to the next one and I think you can hit on the theme of today. Dutch Energy Minister admits that wind power agenda is pricier than anticipated or worse. Okay, let me give you a couple of bullet. Robert Jensen, he is the Dutch minister of energy, admits that wind power is facing. Serious financial headwinds. People are expecting their money. Bank and and regulatory agencies are not increasing energy because consumers can’t pay anymore. Consumers should expect substantially higher electricity prices than initially anticipated. Retro as the increased costs are not primarily linked to global market developments, but rather the extra €10 billion in order to connect offshore wind farms at sea to onshore infrastructure. I’m shocked, Michael. Are you shocked that it costs that much to put in a grid? [00:10:55][66.6]

Michael Tanner: [00:10:56] Absolutely. I’m I’m. I mean, what’s funny is companies that went all in on offshore wind, in my opinion, are going to see the same type of outcome that companies that went all in on shale oil and gas production in the early 20 tens. You know how many of those companies survived out of there? I mean, you think about, you know, we could name a list of 20 M.P. companies that drilled their way to bankruptcy. And in this case, the companies decided to spin off wind farms into bankruptcy. Now, if in a tax in a tax haven or somewhere where taxes are convenient. Sure, you can dump a lot of money into unprofitable cap CapEx and still makes your money, but the gravy train ones out assume. The Dutch seem to be taking it right now. [00:11:44][47.9]

Stuart Turley: [00:11:44] Absolutely. Let me read to this one little part here. Dutch offshore wind projects are now joining the global sector in facing negative financial news. Several major offshore wind producers, including Vattenfall in Sweden and Orsted in Denmark, have encountered financial difficulties primarily related to higher cost interest rate issues, PPA constraints or commercial factors making projects fiscally unfeasible. That is not renewable energy when it’s not physically capable. [00:12:22][37.5]

Michael Tanner: [00:12:23] Sounds like. Sounds like for the 40 V program. I was confused, which was who they were talking about in that one. [00:12:29][5.7]

Stuart Turley: [00:12:29] Yeah. And so what I think we’re seeing is the great awakening that I talked about last year and it is now here what. [00:12:36][6.7]

Michael Tanner: [00:12:37] I was just saying, Rise up The Great Awakening. [00:12:38][1.4]

Stuart Turley: [00:12:39] Oh, yeah. Oh, yeah. There you go. I thought you were talking about how good I am and intelligent. [00:12:43][3.9]

Michael Tanner: [00:12:44] No, not just for you and not just for you and Sparky. You go back and forth on. I’ll stay out of that one. What’s you got anything else? [00:12:50][6.5]

Stuart Turley: [00:12:51] No, but I think we had a great common thread. [00:12:53][2.2]

Michael Tanner: [00:12:54] Yeah, no. Great show in the news segment. We’ll quickly cover. I mean, finance segment, guys. S&P 500 down about a quarter of a percentage point. NASDAQ up about 3/10 of a percentage point. Crude oil sitting there, about 8601. That’s actually down about two percentage points. Brant Oil tumbles about the same percentage point in that gas, $2.91. I mean, again, we’re back in oil price being controlled by geopolitical news today. If it was off the fact that we had multiple humanitarian escalations in terms of the diplomatic efforts going on in the Middle East right now seemed to intensify, leading to that price decrease a little bit. Remember, you’re probably looking about somewhere between 5 to 10 barrels of of this oil price is currently geopolitical. So as things become more, you know, as we step closer or farther away from World War Three, so will oil prices go? Use that specifically as a benchmark. The big news in the oil and gas space today, Chevron decides to get in and follow Exxon making a huge all stock purchase of Hess Corporation, $53 billion in stock and assuming about another six, six and a half for about a year of debt for a total of about $60 billion. Again, it’s all it is an all stock deal. You know, this kind of came as a shock specifically because Hess is largest asset. The Guyana field is one where Chevron is the operator. So Chevron double Dip basically tells me two things. One, they’re not as bullish on the Permian as ExxonMobil is or there was a bidding war for Pioneer. We’ll never know that maybe somebody’s been involved in the conversations will know. But either there was a bidding war over pioneer for the last great Permian Basin Resources or Chevron made a strategic decision who said we’re going to double down on Guyana, which we know very well, and we’re going to double down on the Bakken. I think this is something to be left out. Hess is the one of the larger operators when it comes to the Bakken. We haven’t heard many deals up there in North Dakota. That’s right. But a smaller M&A deals. I think the unsung play for Chevron is they looked at the Bakken versus they looked at the Bakken plus Guyana and said we would prefer that over the Permian that or they didn’t want to get involved with Pioneer or they never even talked to Pioneer. But my guess is it was a strategic decision that happened from Chevron that said we’re going to go take double down on what we know. And I mean, for Chevron. Getting into the barking. Interesting. What it tells me to do is they this wasn’t a DNA led venture. They weren’t coming in here thinking synergies is going to help them out. And have you ever seen a merger and acquisitions? You see the word synergies. Think layoffs didn’t see the word synergies around here? No reason. You know the guy on it, yes, there’s synergies, but that’s just picking up an extra operator percentage. Hess is not actually having boots on the ground there. The fact that they’re taking over their Bobcat assets means probably most that Hess team is going to stay around, hop to deals, though. Speaking of this Pioneer and Hess deal, the real question now, Stu, is one, what do you think of the deal? Second, who’s next? [00:15:50][176.4]

Stuart Turley: [00:15:51] I like the deal. And more importantly, I like the deal for Guyana. Guyana is incredibly important for nat gas in exported capabilities of LNG. LNG, with all these contracts around are here to stay. And LNG for Africa in that area is the import facilities. It is a long term play and that’s going to put them right at the top of the pile. [00:16:18][27.4]

Michael Tanner: [00:16:19] Chevron CEO Michael Wirth here was his comment on the deal. We’ve got too many CEO’s per barrels of oil expectancy. I hope he’s not wrong. He’s not wrong. I think we also have to remember who are these two? You know, John Haas, CEO of Haas, cashing out a lot older, Scott Sheffield, pioneer, retired, the end of the year looking to cash out these I think, you know, hindsight being 2020, these are probably the two targets in which we should have thought of all along in order because they had motivated management. The real question is who next? I don’t think oxy’s on the table. I think they’re going to stay out of it. I think it’d be really interesting to see what EOG does. Do they allow themselves to merge and finding, you know, an equal among them. Do they go ahead and gobble up some of these smaller Permian players? I think now what you’re going to see is the scraps left in the Permian begin to get consolidated up. But guys, you can check it all out. Again, energy news B dot com for all of your break. [00:17:13][54.0]

Stuart Turley: [00:17:13] Let me let me ask this news in the Marcellus instead of the Permian, do you see things like AQ, T and C and X and others piling into this? [00:17:23][10.0]

Michael Tanner: [00:17:24] I don’t know, because the did the economics of natural gas right now, I don’t think don’t favor M&A. [00:17:27][3.9]

Stuart Turley: [00:17:28] That’s what I was. [00:17:29][0.4]

Michael Tanner: [00:17:29] Like you t you’ve probably have enough scale to where you’re more worried about optimizing your own assets versus trying to go out and make some, you know, deal. I mean, you know, your buddy over at CNN X, you call him up. See, I would think they you know, in that area in CNBC’s equity space they stay pat but you never know and it will be interesting to see but you’ll have to hit up your contacts over there. [00:17:51][21.7]

Stuart Turley: [00:17:52] Oh, you bet. I just thought I’d ask. [00:17:54][2.0]

Michael Tanner: [00:17:54] No, but anything else do we should be worried about this week. [00:17:57][2.5]

Stuart Turley: [00:17:57] Oh, just buckle up. It’s going to be a wild and crazy week. [00:18:02][4.3]

Michael Tanner: [00:18:03] As we inch closer to World War Three. We’ll keep the show going for as long as until I get drafted. So, you know, hopefully, hopefully we’ll see a new. [00:18:12][9.1]

Stuart Turley: [00:18:12] Course and you call. [00:18:13][0.8]

Michael Tanner: [00:18:13] Me, you know, which scares me. [00:18:14][1.2]

Stuart Turley: [00:18:15] You call me the pessimist. Holy smokes. You just you. Wow. You just you went right through that barrier. Here is Michael Tanner running through that brick wall. Kind of like the Kool-Aid, man. [00:18:28][13.2]

Michael Tanner: [00:18:29] Yeah, And that’s me. That’s me. All right, guys, with that, we’ll let you get out of here. Get back to work. Thank you for checking us out on this gorgeous Tuesday, October 24th. For Stuart Turley, I’m Michael Tanner. We’ll see you tomorrow, folks. [00:18:29][0.0][1065.2]

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