Industry trade

The Biden administration and the oil industry forge an uneasy alliance

“[U.S.] energy policy is, ‘How can we get re-elected?’ Charif Souki, pioneer in the liquefied natural gas industry and current executive chairman of Tellurian LNG, said in an interview. “It’s a question of the price at the pump.”

Biden officials, for their part, said they support the industry as it is set to add an additional 900,000 barrels of oil per day to overall production this year and on track to become the world’s largest exporter of LNG. But these officials are also steadfast in their long-term goal of advancing clean energy projects to better protect against future price shocks and climate change.

“I view this particular situation as a fire in the kitchen,” said Vinai Thummalapally, acting director and chief operating officer of the US Trade and Development Agency, which helps fund energy projects in the United States. ‘foreigner. “We’re going to turn it off. It will be off. We have to move on to managing the rest of what the house faces in terms of all the priorities. »

Amos Hochstein, the White House special envoy and coordinator for international energy affairs, echoed this point. The administration knows more oil and gas is needed to calm markets, but the country needs to ensure that “as we transition to renewable energy and green, clean technology, we don’t develop a new addiction that repeats the mistakes of the 20th century,” Hochstein said at the conference.

Hochstein and officials from the White House, State Department, Department of Energy and other agencies fanned out to meet with some of the 6,000 attendees at the CERAWeek energy conference in Houston to calm nerves about the wild swings in oil markets and the administration’s responses to the global energy supply crisis. White House Climate adviser John Kerry, Energy Secretary Jennifer Granholm, EPA Administrator Michael Regan, and a host of subordinates all met with leaders during the week.

Jack Fusco, managing director of LNG exporter Cheniere Energy, said in an interview after speaking with White House officials that the Biden team was focused on clean energy, but they recognized the need for more gas in the near term.

“The exchanges were fruitful. Helpful,” he said. “They asked about availability of supply, how they can help, how much more [gas] we can go to Europe.

Freeport LNG chief executive Michael Smith said more than two-thirds of the gas leaving its Texas facilities is headed to Europe. He spoke to Kerry on Monday and fielded calls from other administration officials during the week. “It was mostly about prizes,” Smith told reporters.

In an example of complex maneuvers typical of the global oil market, the White House could ease sanctions on Venezuelan crude oil, allowing exports to reach the market. These barrels would likely be purchased by China, freeing up other crude supplies for the entire market. But global supply routes are now shrouded in “the fog of war”, an industry executive said in an interview.

Industry executives gave their own mixed messages. Some have said the United States has plenty of oil and gas to replace shipments of Russian crude that traders are avoiding while sanctions are in place. Others have lamented that their production and shipping capacity is maxed out and that they are unlikely to see additional capacity for months or even years.

Amin Nasser, head of Saudi Aramco, the Saudi oil company, blamed the price shock on government officials around the world ignoring the advice of energy industry experts and sending “mixed signals” to try to move away from fossil fuels while wanting to keep current energy prices low.

“The global energy crisis has been hit by the tragic situation unfolding in Ukraine,” Nasser told the conference. “She laid bare the limits of current energy policies and is a stark reminder of the impact geopolitics can have on fragile energy transition plans. … The mixed signals only added to the chaos.

Company executives and analysts pointed out that an industry that in recent years has laid off workers and lost its luster on Wall Street is unable to dramatically increase production to deal with the situation. There is also uncertainty that current oil prices will accelerate the development of solar, wind and other renewable fuel projects in the United States and Europe and force developing countries to revert to building coal-fired power plants in a context of soaring natural gas prices.

And there are fears that a cold winter later this year could tighten markets even further, especially if buyers in Asia raise the price of oil and LNG and divert shipments from Europe.

Some industry officials and energy state lawmakers have blamed the administration’s pause on oil and gas lease sales for the higher prices. But a senior executive at an LNG company said the industry as a whole risked overplaying its hand by blaming the government for any problems with fossil fuel production, and what it really wanted from the Biden administration. amidst the chaos, it was “hugs”.

“I would still say the Biden administration is lagging behind” in understanding the magnitude of the potential supply shortage, said the person, who requested anonymity to speak candidly. “They are even more focused on 2050 than winter 2022.”

Granholm gave the industry a metaphorical hug on Wednesday, garnering two rounds of applause for a ballroom full of oil and gas executives. “At this time of crisis, we need more supply,” Granholm said, later promising to focus on reducing the time it takes to process permits.

But the dichotomy could be seen earlier today. Granholm met privately with oil ministers and top business leaders from Saudi Arabia, Qatar and Canada, all countries that could boost oil supplies to help calm markets. An executive from Chevron, a company that still operates in Venezuela, was also invited, as the Biden administration plans to source from that country. But the meeting was advertised as a forum for Net-Zero producers to work on reducing global carbon emissions and a department spokesperson declined to elaborate on what was discussed..