Pulitzer price-winning energy expert Daniel Yergin believes the new US administration will be hesitant to reduce domestic oil and gas production, despite President Joe Biden wasting no time in unleashing several green energy initiatives since taking office last month.
Speaking at oilfield services giant Baker Hughes’ annual forum on Monday, the vice president at analyst IHS Markit said he expects the White House to ramp up its climate initiatives, but stressed it remains to be seen how hard it will put pressure on the existing US oil and gas industry.
“There are a lot of economic advantages from shale production, and some foreign policy advantages, and Joe Biden is a foreign policy person,” Yergin said, adding that Biden has twice said he is not going to ban hydraulic fracturing.
“The US has to keep an eye on energy dependence, otherwise there could be severe economic consequences with a lot of money going out of the US,” he said, adding that eight presidents from Nixon to Obama had announced that energy independence would not be achievable.
Shale production key
Yergin said he expects a step up in US oil production from the second half of this year.
“US [oil] production has gone down 2 million barrels per day since its peak in February 2020. I think production will start growing again but not in the pace we saw in the last decade,” he said.
According to Yergin, although Biden has laid out his green credentials, it remains to be seen if the rest of the administration will support efforts to curb US oil and gas production.
“Remember, we don’t just have an administration, we also have a Congress, and they are going to have a say on this as well.
Yergin told the audience at Baker Hughes’ Energy Forward conference — held online this year — that the Washington administration will continue to swiftly implement its climate-conscious policy, but it is not going to be as green as the European Union.
He believes it will introduce policies for building charging stations and implementation of incentives for electric vehicles, with more regulatory measures set to be introduced for oil and gas production activities.
However, there are still questions around the scale of the measures, he said.
“One question is around drilling on federal lands, which is very important to some states. New Mexico, I think, some 40% of its revenues are from oil and gas,” Yergin said.
“Will there be permits for new LNG (liquified natural gas) facilities?” Yergin also asked, adding he believes it will be harder to complete infrastructure projects under the new administration, despite it being "in general in favor of infrastructure projects for job creation”.
Ryan Hassler, a shale analyst at Norway's Rystad Energy, said it was no surprise when Biden on 22 January suspended new leasing for fossil fuel production on federal lands and waters on, as well as the issuance of new drilling permits.
“The order thus far is temporary, but this appears to be the first step in a move to completely ban all fossil fuel development and the issuance of new permits on federal land,” he said.
According to Rystad, a fracking ban on federal land mostly impacts the Delaware sub-basin of the giant Permian basin, where the share of federal land to total leased acreage averages at 60-65% for most operators.
There is little or no permit activity on federal land in any basin outside of the Permian-Delaware.
“In 2020, there were historic levels of new permit activity on federal land in the Delaware, indicating considerable hedging positions for operators building up a significant inventory of federal acreage in considerable hedging positions for operators building up a significant inventory of federal acreage in anticipation of a change in administration," Hassler said.
He said that in the short to medium term, there will be no real implications for operators with large portions of their acreage position in the Delaware basin on federal land.
“Due to the prolific permitting activity that took place, there is enough approved inventory to last for the next three years at the current pace,” he said.