At a recent event, the American Petroleum Institute (API) identified steps policymakers can take to “make, move, and improve” the oil and gas business while emphasizing the U.S. role as a global energy leader.
“In the past year, the global energy crisis, driven by surging post-pandemic demand outstripping supply and exacerbated by Russia’s invasion of Ukraine, has shown that the world needs American energy leadership now more than ever,” said CEO Mike Sommers earlier this month.
Accelerating LNG exports
In order to address the rising need in the post-Covid-19 period, Sommers urged the 118th Congress to remove prohibitions on natural gas and oil exploration in federal waters.
Frank Macchiarola, senior vice president (SVP) of Policy, Economics and Regulatory Affairs at API, joined him.
“We’re calling for solutions that help move American energy,” Macchiarola said. He emphasized supporting pipeline safety, concentrating on important infrastructure projects in the national interest, “accelerating LNG exports, and listing supply chain bottlenecks to ensure the free flow of energy and commerce.”
10 significant natural gas and oil infrastructure projects in Appalachia have been postponed or canceled over the past 15 years, according to the API, which released a 2023 State of American Energy Report at the event.
According to API, if these projects had been completed, they would have supported 4.6 Bcf/d of output and required around $34 billion in capital investments.
Even worse news for U.S. LNG permits, according to API’s report. However, API’s strategy to relocate LNG projects aims to streamline and speed up the procedure. “Amend the Natural Gas Act to streamline the review process for all LNG projects to a single approval by the U.S. Department of Energy,” the group urged Congress.
Political ups and downs
However, Sommers also noted that the governmental rhetoric from the Biden administration is worrying “about the fact that they don’t believe we’re going to need oil and gas in 10 years…Why would someone build a new facility if the government is saying that we’re not going to need these facilities in the future?”
However, as Macchiarola pointed out, the API was pleased by the outcomes of the Biden administration’s Inflation Reduction Act (IRA). The Gulf of Mexico (GOM) IRA leasing incentives may be excellent news for the sector. He mentioned how Sen.
Joe Manchin (D-WV) “ensured that we’d have two lease auctions this year,” one in March and one in the fall.
Due in part to more affordable drilling onshore, Federal GOM dry natural gas production has decreased in recent years. The U.S. Energy Information Administration claims that the GOM also has outdated wells and rising production costs (EIA).
As of late last year, the EIA predicted that new projects will only partially compensate for production declines in the future.
With the IRA, however, “We’re hopeful that the provision that ties wind lease sales to oil and gas lease sales, really pushes the administration to include more lease sales in the Gulf going beyond 2023,” Macchiarola said.
The extension of the Internal Revenue Service’s Section 45Q tax credit for carbon capture and sequestration is one of the industry’s other benefits under the IRA. However, API stated that more explanation is required.
According to API, the U.S. electricity generation sector has decreased by 60% as a result of power plants transitioning from coal to gas. Additional reductions could follow from the carbon capture incentives included in the IRA, provided that the tax credits are effectively administered.
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